Analyst Ming-Chi Kuo has warned investors that the administration’s decision to ban U.S. companies from entering into business relationships with companies including WeChat could have a significant impact on Apple’s sales worldwide.
In a research note seen by AppleInsider, Kuo warns that the ban means that WeChat will be removed from the App Store worldwide. Even if the ban only meant removal for users in China, the massive popularity of WeChat there would mean a drop in iPhone sales.
“Since WeChat is very critical of Chinese users, integrating communications, payments, e-commerce, social software, news reading, and productivity features,” Kuo writes, “we believe the move will bring iPhone shipments into the Chinese market.”
Kuo has previously been one of the most trusted sources for information on future Apple hardware products. He is less known for price or software issues, however, in this case he sees the potential impact as serious enough to warn readers of his investment notes.
At present, the wording of the Executive Order prohibiting links with specific Chinese companies is open to interpretation. “We think it’s implicit that Apple will have to remove WeChat from the App Store,” Kuo says. “Apple removed WeChat from the App Store in India in response to a request from the government. Therefore, we will not be surprised if the US government asks Apple to do the same.”
“[So] According to the executive order, Apple may have to remove WeChat from the worldwide App Stores, because the order prohibits Apple from making transactions involving WeChat, “he continues.” However, the order does not clearly define how broad the ban will be. Maybe the US government will ask Apple to remove WeChat from the US App Store only. ”
The ban takes effect on September 20, 2020. When it comes to removing WeChat from the entire App Store, Kuo thinks Apple will see a drop of as much as 30% of its iPhone shipments worldwide.
Best-case scenario
“The best case scenario is that Apple will only remove WeChat from the App Store in the US,” Kuo continues. “If this is the case, it will have a negative impact on WeChat users who are primarily in the US. We estimate that worldwide iPhone will decrease by 3-6%. Global shipments of other Apple hardware products, including AirPods, iPad, Apple Watch, and Mac, will decrease by less than 3%. ”
Kuo’s remark is specific to investors and in it he suggests that they “reduce specific shares of Apple’s supply chain to reduce risks, including Genius and LG Innotek.”
“Theoretically, the US government will not hurt Apple,” he explains. “The US presidential election is approaching, however, and we are thinking [President] Trump may adopt more aggressive strategies ahead of the election, including asking Apple to remove WeChat from the worldwide App Stores. ”
Kuo has concentrated on WeChat because of its enormous popularity in China, but the US ban also affects TikTok. While WeChat has not commented publicly, the owners of TikTok have said they intend to prosecute for revoking the ban.
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