Apple (AAPL) – Get Free Report is a consumer electronics company goliath. Its focus on user-friendly designs – a major focus of founder Steve Jobs – has created some of the most loyal customers on the planet.
Apple’s iPhone commands 56% of the smartphone market in the United States, but it’s also widely used overseas, given its global market share of 27%. Last year alone, Apple shipped over 225 million iPhones worldwide – a truly jaw-dropping figure.
A big reason behind Apple’s iPhone success has been increasing sales in China, the company’s third largest market behind the U.S. and Europe. Last quarter, China contributed nearly $16 billion to Apple’s revenue, approximately 20% of its total haul.
The opportunity to sell more of its devices in China is big. However, its reliance on China for such a large proportion of revenue could cause headaches for CEO Tim Cook. The U.S. and China often don’t see eye to eye, and as a result, the two countries have been at loggerheads over the use of each other’s technologies.
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China takes aim at Apple
Apple devices are common in China, and it manufactures most of its iPhones there. Yet, that hasn’t stopped government leaders in Beijing from turning up the heat on the Cupertino, Calif.-based company.
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This week, the Wall Street Journal reported that employees in roles privy to sensitive government data should stop bringing their iPhones to work. The move is the latest escalation in an ongoing feud between the U.S. and China over technology access.
Previously, the U.S. banned many companies from selling products to China that can be used in next-generation technology, including artificial intelligence.
President Biden signed an executive order curbing U.S. individuals and companies’ investments in semiconductors, quantum computing, and some artificial intelligence systems there last month. China’s foreign ministry responded, saying it “resolutely opposes the U.S.’s insistence on introducing investment restrictions on China.”
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It’s unclear if China’s decision regarding Apple is a tit-for-tat. In the past, it’s signaled an interest in divorcing itself from reliance on U.S. companies for next-generation software and hardware.
China’s latest decision to selectively ban the use of iPhones amps up that rhetoric. No formal written policy appears to have been written yet, but worry is increasing that bans could spread to workers throughout China’s local and state governments.
Technology analyst Dan Ives calls risks “overblown”
Apple’s stock fell by nearly 6% between the close on Sept. 5 and Sept. 7. The drop has shaved $107 billion off Apple’s nearly $3 trillion market cap.
That’s a lot of money, but not everybody is convinced that investors should be selling Apple’s shares, including Wedbush Securities’ long-time technology analyst Dan Ives.
On the recent China news over the last few days we believe in a worst case scenario any China government agency iPhone ban is way overblown as to quantify its less than ~500k iPhones of roughly 45 million we expect to be sold in China over the next year. iPhone 15 on deck 🍎📱
— Dan Ives (@DivesTech) September 7, 2023
The relatively small proportion of phones impacted by China’s Apple ban suggests it’s unlikely to move the needle negatively for Apple. It remains to be seen whether carry-over impacts are associated with any tightening restrictions, but Apple iPhones have been winning, not losing market share there.
Ives states Apple’s market share has jumped by “roughly 300 basis points (3%) over the past 18 months. That momentum could continue following the expected launch of Apple’s newest phones soon.
Apple plans to highlight its upcoming iPhones in a widely-watched presentation on Sept. 12. Ives expects the iPhone 15 Pro and Pro Max will boast new chips and battery technologies and a higher price than last year’s models, while the base iPhone will likely see its price unchanged.
Ives’ Apple stock price target remains $230.
