Investors’ fears that China could crack down on official iPhone usage has knocked 200bn off Apple’s market value. This casts a shadow on next week’s release of Apple’s latest smartphone.
Beijing’s reported restrictions on government iPhones and a resurgent Huawei threaten to derail Apple’s momentous victory: the overthrow of Samsung as the leader of the smartphone market.
Analysts had predicted, before the China chaos, that Apple would become the world’s largest smartphone manufacturer by volume with the iPhone 15.
Apple shares fell by around 6 percent over the last two days as investors worried about the fate of Apple in China. China accounts for about a fifth (or more) of Apple’s revenue.
Ben Wood, an analyst at CCS Insight, said that a decade ago it was inconceivable for Apple to take the top spot away from Samsung. But it’s possible that we are on the verge of this milestone. The Chinese market will play an important role.
This week, several reports emerged claiming that Beijing had ordered officials of certain government departments to refrain from using iPhones or any other foreign devices at work.
Bank of America estimates that China is responsible for 50mn iPhones sold annually and that a ban on the sale of iPhones could cost Apple between 5-10mn iPhones per year.
The Chinese government has not yet issued an official statement on this issue. Apple refused to comment on the ban reported first by The Wall Street Journal. Apple faces the return of Huawei, its most formidable rival in China.
Last week, China’s “national champion” released a new flagship smartphone, the Mate 60 Pro. It appears to be capable of delivering speeds up to 5G despite Washington’s efforts designed to prevent Huawei from sourcing advanced chips.
The sanctions imposed by Washington against the Chinese telecoms company since 2019 have been devastating. Huawei’s market share for smartphones in China dropped from 29 percent in mid-2020 down to 7 percent two years later.
The Mate 60 Pro, which is priced at Rmb 6,999 (about $970), has been flying off of the shelves in the last week. Analyst Ming-Chi Kuo from TF International Securities estimates Huawei could ship 6mn units by the end of this year, bringing its 2023 shipments up by 65 percent to 38mn.
In 2023, the overall smartphone market will decline for the second year in a row, reaching 1.145bn devices, which is the lowest level in over a decade. Apple’s market share in the world has increased from 15% to 20% over the last decade as Huawei’s competition declined.
Apple will release four new iPhone 15 versions on Tuesday. The new model is expected to have incremental improvements, including a switch to standard charging ports – a move forced by Brussels’ new rules for device makers.
Analysts on Wall Street predict that there will be enough iPhone users among Apple’s 1.2 billion customers who are looking to upgrade to allow Apple to sell up to 78mn units in the busy quarter of December. This would be an 8 percent increase from last year, when Covid-19 protests disrupted iPhone manufacturing in China.
According to analysts at Counterpoint Research, this could be enough to allow Apple outsell Samsung in terms of unit volume. Apple would then be able to claim the top spot in global smartphone sales for the first 16 years since the iPhone was introduced. Counterpoint estimates that both smartphone manufacturers are expected to sell a little under 230mn in 2023. This makes the race to the unveiling of the new iPhone too close to call.