Last week, President Trump announced a ban on transactions with TikTok parent ByteDance and Chinese tech juggernaut Tencent (OTC: TCEH.Y), indicate national security concerns regarding the collection of user data. There are many lingering questions about exactly how the ban will be implemented or what types of transactions will actually be included, especially since Tencent holds investments in a wide range of U.S. companies, among others. Tesla, Activision Snow hunting, en Snap, among others.
The ban could also have potentially devastating effects Call (NASDAQ: AAPL).
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shipping from iPhone could decrease by 25% to 30%
Tencent’s WeChat messaging platform is ubiquitous in China, delivering everything from communications to digital payments to local e-commerce to news aggregation. Users can even use the service to pay their monthly utility bills for water as electricity or use customer ratio (CRM) features for their business. The comprehensive list has made WeChat indispensable for many Chinese consumers and businesses.
Transactions with WeChat could potentially neutralize the iPhone in the world’s largest smartphone market, according to a recent note by much-followed TF International Securities analyst Ming-Chi Kuo (via MacRumors). This can result in decimated volume of iPhone units.
“Since WeChat is very critical of Chinese users, integrating communications, payments, e-commerce, social software, news reading and productivity features, we believe the move will fuel iPhone sending in the Chinese market,” Kuo wrote in a research note to investors over the weekend. “We estimate that worldwide iPhone shipments will decrease by 25-30%.”
In addition, shipments of other product categories could also take a hit from 15% to 25%, according to Kuo, because Apple gadgets weighed heavily on each other to create an ecosystem of products and services. That would include AirPods, iPads, Macs, and Apple Watch.
There are a variety of theoretical outcomes, as details about the ban remain unclear. The Secretary of State for Commerce has until September 20 to define what types of transactions should be banned, according to the executive order, and it is still possible that the order could have been withdrawn before then. If WeChat is banned only in the US App Store, then worldwide volumes of iPhone devices could decrease by only 3% to 6%, according to Kuo. The impact on other products would be less than 3% in that scenario.
China is one of Apple’s most important markets, accounting for about 16% of the Cupertino tech giant’s 12-month (TTM) total revenue. Apple is no stranger to being caught in the crossfire of escalating geopolitical tensions with China. So far, the Mac maker has done a very good job of navigating these challenges, including diversifying its supply chain and scoring exemptions for tariffs in exchange for agreeing to produce the Mac Pro in the US
Can Apple escape relatively unscathed again?
