(Bloomberg) -- President Donald Trump’s order banning U.S. companies from doing business with Chinese messaging app WeChat could damage iPhone sales in one of Apple Inc.’s most important markets.
The order would block all transactions involving WeChat, which would prohibit Apple from distributing WeChat to mobile devices through its App Store. WeChat is central to digital life in China. It’s the go-to app for a billion people for shopping, payments, email, web browsing and all forms of business and personal communications. Many Chinese don’t use phone numbers or emails. Visitors to the country have to download the app and load it with money or risk not being able to pay for even small purchases.
Without access to WeChat, consumers would likely balk at buying an iPhone in China and other parts of Asia. An online forum popular with stock investors asked users if they would give up their iPhones or WeChat if Apple eliminated the app from its store: They voted to ditch their phones by a margin of 20 to one.
China accounts for about 20% of Apple’s iPhone sales, so pulling WeChat off the App Store “would be a serious hindrance,” said Anand Srinivasan, an analyst with Bloomberg Intelligence.
While Google’s app store is banned in China, there are alternative ways of installing apps on Android software that powers the rest of the world’s smartphones. A spokesperson for Apple did not return a request for comment.
Trump’s order could also prompt China to retaliate, damaging Apple even further. Much of the Cupertino, California-based company’s manufacturing is done in China, and if the country targets Apple’s exports that would impact its business globally, Srinivasan said. China could also restrict the supply of materials, such as rare earth metals, that are key ingredients of iPhones.
“This is a war with battles on multiple fronts and the battle has now escalated into software,” he said.
Apple’s shares were down 1% Friday in New York after closing at a high of $450.85 on Thursday. Apple has gained 53% this year.
Trump’s executive order goes into effect in 45 days, but there are many outstanding questions and plenty could happen between now and then. The president has been known to walk back or introduce exceptions to his proclamations after the fact. Apple could also open its operating system to let users download apps without going through the App Store, but that would be a major change for a company that has always carefully guarded access to its ecosystem and takes a 30% fee from many apps.
If the ban does go ahead and Apple doesn’t have a workaround, Chinese consumers who have the money to buy an iPhone will likely turn to the country’s home-grown, high-end smartphone maker: Huawei. In that way, the order could end up benefiting a company that Trump has sought to squeeze out for years.
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The order would block all transactions involving WeChat, which would prohibit Apple from distributing WeChat to mobile devices through its App Store. WeChat is central to digital life in China. It’s the go-to app for a billion people for shopping, payments, email, web browsing and all forms of business and personal communications. Many Chinese don’t use phone numbers or emails. Visitors to the country have to download the app and load it with money or risk not being able to pay for even small purchases.
Without access to WeChat, consumers would likely balk at buying an iPhone in China and other parts of Asia. An online forum popular with stock investors asked users if they would give up their iPhones or WeChat if Apple eliminated the app from its store: They voted to ditch their phones by a margin of 20 to one.
China accounts for about 20% of Apple’s iPhone sales, so pulling WeChat off the App Store “would be a serious hindrance,” said Anand Srinivasan, an analyst with Bloomberg Intelligence.
While Google’s app store is banned in China, there are alternative ways of installing apps on Android software that powers the rest of the world’s smartphones. A spokesperson for Apple did not return a request for comment.
Trump’s order could also prompt China to retaliate, damaging Apple even further. Much of the Cupertino, California-based company’s manufacturing is done in China, and if the country targets Apple’s exports that would impact its business globally, Srinivasan said. China could also restrict the supply of materials, such as rare earth metals, that are key ingredients of iPhones.
“This is a war with battles on multiple fronts and the battle has now escalated into software,” he said.
Apple’s shares were down 1% Friday in New York after closing at a high of $450.85 on Thursday. Apple has gained 53% this year.
Trump’s executive order goes into effect in 45 days, but there are many outstanding questions and plenty could happen between now and then. The president has been known to walk back or introduce exceptions to his proclamations after the fact. Apple could also open its operating system to let users download apps without going through the App Store, but that would be a major change for a company that has always carefully guarded access to its ecosystem and takes a 30% fee from many apps.
If the ban does go ahead and Apple doesn’t have a workaround, Chinese consumers who have the money to buy an iPhone will likely turn to the country’s home-grown, high-end smartphone maker: Huawei. In that way, the order could end up benefiting a company that Trump has sought to squeeze out for years.
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.
