TikTok is not the only app of a Chinese company that is the subject of an executive order of President Donald Trump that affects mobile device users. Trump has banned U.S. companies from doing business with WeChat. For those of you unfamiliar, WeChat is a messaging, social media and mobile payment app launched by Tencent in 2011. Seven years later, it became the most used standalone app with over 1 billion people rely on the “super app.”
Execution order against WeChat could backfire to hurt Apple, Huawei help
WeChat shares its user data with the Chinese government and censors certain topics of a political nature. And while the order would prevent transactions that WeChat has made with U.S. corporations, it could have an unintended effect; the order prevents Apple from distributing WeChat through the App Store. This may result in lower iPhone sales in China, where the app is used for many things like emailing, browsing, shopping and making payments.
WeChat has more than one billion active users
Businesses and consumers use WeChat to connect with businesses, friends and family. WeChat is such an integral part of life in China that if it were removed from the App Store, a riot would ensue. For example, an online forum used by investors in China asked subscribers whether they would give up WeChat or their iPhone if Apple were forced to remove the app from the App Store. By a margin of 20 to 1, forum users said they would drop the iPhone. Noting that China accounts for 20% of global iPhone sales, Anand Srinivasan, an analyst with Bloomberg Intelligence, said removing weChat from the App Store “would be a serious obstacle” for Call.
In addition, there are fears that Chinese consumers will retaliate against the executive order by restricting Apple’s supply chain and its manufacturing. Apple designs its products in the US and has assembled the majority in China. The latter could limit the amount of products that Apple is allowed to export from China and even limit the number of materials that Apple gets out of the country. As an example, Bloomberg Intelligence’s Srinivasan mentions the rare earth metals used in the iPhone. While Apple wants to relocate a large portion of iPhone production from China, it can currently only produce a small number of handsets in India, but not enough to compensate for a shortage from China.
There’s actually an enormous irony here. If the ban is implemented and Apple can not find a way to keep WeChat in the App Store, we would be able to switch a large number of Chinese consumers to a Huawei handset. That’s the same thing Huawei that the U.S. government has banned its U.S. supply chain including Google. A regulation by the US will also make it harder for the Chinese manufacturer to get cut chips later this year. So if all goes well and Apple is forced to remove WeChat from the App Store, we could see lower iPhone sales and higher sales of Huawei phones in the largest smartphone market in the world. Despite all that the US has thrown at Huawei, it is now the largest shipper of smartphones around the world, albeit a marginal amount.
The executive order goes into effect in 43 days and one suggestion made in the Bloomberg report suggested that Apple could find a way to install apps on iOS without going through the App Store. But that would cost Apple the 30% cut it gets from in-app purchases and would be a drastic change for a company known for its walled gardens. And while you may notice that WeChat is available in the Google Play Store, the Play Store is banned along with it Google’s other Android apps in China. Huawei has its own app storefront where users can install WeChat from.
Unlike the executive order banning TikTok in the US, which can be reversed with a purchase of the app’s US operations, there does not seem to be an easy way to circumvent the WeChat order. There are 43 days left to count.
