Chinese iPhone shipments could decline up to 30 per cent if Apple is forced to remove WeChat from its App Store, an analyst has predicted.
The removal of the massively popular chat platform, owned by Chinese tech giant Tencent, could adversely impact iPhone sales in the country.
Annual shipments of other Apple hardware devices, including AirPods, iPads and Mac computers, could also fall by a quarter.
The prediction follows US President Donald Trump’s decision to ban WeChat in the US with an executive order, which takes effect from mid-September.
As a result of the decision, the US firm Apple may be forced to remove WeChat from its App Store.
A ban on China’s WeChat could have a huge effect on iPhone sales in the country. The app has become ‘a daily necessity’ for Chinese smartphone users, an analyst said
Chinese consumers could be put off from buying an iPhone if it doesn’t support the app, which has become an integral part of millions of Chinese phone users’ lives.
Last quarter, Greater China accounted for about 10 per cent, or around $6 billion, of Apple’s total revenue, meaning Trump’s ban could backfire by depriving the US economy.
WHAT IS WECHAT?
WeChat is one of the most popular social media sites in China.
It boasts 1 billion active monthly users and aggregates key features like messaging, social media, and mobile payments.
The app is owned by China’s largest company, Tencent, which owns myriad internet services and products
‘WeChat has become a daily necessity in China, integrating functions such as messaging, payment, e-commerce, social networking, news reading, and productivity,’ said analyst Ming-Chi Kuo in a research note seen by MacRumors.
‘If this is the case, we believe that Apple’s hardware product shipments in the Chinese market will decline significantly.
‘We estimate that the annual iPhone shipments will be revised down by 25–30 per cent, and the annual shipments of other Apple hardware devices, including AirPods, iPad, Apple Watch and Mac, will be revised down by 15–25 per cent.’
There is the possibility that WeChat is only removed from the US version of Apple’s App Store, rather than all App Stores globally, including China.
In this former scenario, iPhone shipments would be impacted by somewhere between 3 to 6 per cent and other Apple products would be affected by less than 3 per cent.
Last week, Trump’s orders banned any US transactions with WeChat owner Tencent, a major Chinese company that owns shares in Tesla, Snap Inc and Reddit.
Trump signed the orders using national emergency powers, which bar WeChat from the US after 45 days, as well as popular Chinese-owned video app TikTok.
TikTok is reportedly planning to sue the Trump administration over the president’s executive order banning the Chinese app from the US (file photo)
The order does not take effect until September 20, however, leaving time for the order to be modified or rescinded.
According to Trump, the apps represent national security threats, which mirrors his reasoning for adding other Chinese companies – most notably Huawei – to its ‘blacklist’ of companies prevented from trading with US businesses.
The ban moves further away from the long-promoted American ideal of a global, open internet and could encourage other countries to follow suit, other analysts said.
‘It’s really an attempt to fragment the internet and the global information society along US and Chinese lines, and shut China out of the information economy,’ said Milton Mueller, a Georgia Tech University professor and founder of the Internet Governance Project.
Daniel Castro of the Information Technology and Innovation Foundation said the US actions suggest ‘a serious risk of internet fragmentation’ if carried out.
‘The United States should be careful about arguing that there is an inherent national security risk of using technologies from foreign companies,’ Castro said.
‘If other countries apply that same logic, US tech companies will be locked out of many foreign markets.’
US social media platform Twitter has approached TikTok’s Chinese owner ByteDance to express interest in acquiring the US operations of the video-sharing app.
Trump said he would also support Microsoft’s efforts to buy TikTok’s US operations if the US government got a ‘substantial portion’ of the proceeds.
HOW CHINA COULD TARGET APPLE AND OTHER US COMPANIES IN RETALIATION FOR HUAWEI BAN
China could retaliate against America for its treatment of Huawei in a number of devastating ways – the most likely would be to targeting US companies that do business in the region, such as Apple. Greater China ranks third among the regions that generate the most revenue for the company, behind the US and Europe.
Additionally, the majority of Apple’s supply chain consists of Chinese companies that manufacture key components like sensors, OLED displays and other parts used in the iPhone.
If Apple can’t rely on Chinese manufacturers, it may be forced to move to suppliers in the US or elsewhere, which could result in an increase in iPhone prices.
Additionally, some Chinese consumers have already latched onto a growing ‘Boycott Apple’ movement in retaliation, which means Apple may suffer lasting damage to its brand in the region as a result of the Huawei ban.
Apple isn’t the only US firm that’s likely to feel an impact. Tech companies that rely on Huawei as a major will also be hurt.
‘The announced tariffs, if implemented, will be the gut punch for tech companies and its suppliers,’ said Wedbush Securities analyst Dan Ives.
Intel, Microsoft, Qualcomm Broadcom and Micron provide components or services that are used in Huawei products, while Corning glass and Dolby speakers are used in Huawei phones.
What devices could be impacted by the decision?
Existing and new Huawei phones will be hurt the most when it comes to security updates.
These devices will no longer be able to access over-the-air security updates supplied by Android, as well as new software versions, like Google’s upcoming Android Q.
Google ships Android security updates to device owners automatically.
But Huawei devices will be forced to use the open source version of Android, which means the firm will learn of security updates the day they’re issued and, as a result, will have to ship them out to users manually.
This could leave Huawei devices vulnerable to attacks or other security flaws in the time that it takes to download new security updates.
Huawei would also be left out of future Android software updates. Since it’s using an open source version, it can’t legally market its phones as being Android devices.
The ban will most likely affect Huawei’s line of Mate laptops as well.
Huawei’s computer business relies heavily on chips made by Intel, Qualcomm and others, as well as Microsoft’s Windows operating system.
Since these companies aren’t doing business with Huawei, it’s not yet clear what this means for future laptops made by the firm.