By Brenda Goh and Ben Blanchard
SHANGHAI/TAIPEI (Reuters) – China’s growing crackdown on iPhone use by government workers fueled a sell-off in global tech stocks on Friday, fueling concerns that Apple and its suppliers could be hurt by rising Sino-U.S. tensions and growing competition from Huawei. .
Apple shares have fallen 6.4 percent in the past two days, wiping $190 billion off their market capitalization after Beijing ordered some central government employees to stop using iPhones at work in recent weeks.
Increasing Apple’s pressure in one of its biggest markets, Huawei has launched two new smartphones – the foldable, Mate X5 and Mate 60 Pro+, which has drawn global attention to demonstrate its ability to withstand US sanctions.
Apple supplier Largan Precision, which makes camera lenses in Taipei, fell more than 4%, while contract chipmaker TSMC fell 0.6% on Friday.
China’s Luxshare Precision Industries, which owns factories that make iPhone and MacBook connector cables as well as AirPods and iPhones, fell 2 percent. The shares were also hit by Huawei’s launch last week.
Some analysts feel that Huawei’s move could be the first step in a comeback effort by China’s “national champion” Apple.
Counterpoint analyst Evan Lam said, “We believe that Huawei’s move at this time is well-planned and not accidental.”
“Before Apple’s press conference, the target group of consumers can manage the psychological protection that they expect.”
China has been a bright spot for Apple amid tough iPhone sales as Huawei’s smartphone business has slowed since the US halted technology exports to it in 2019.
Unlike the hit to Apple’s suppliers, Huawei’s extended recent acquisitions.
Shares in Semiconductor Manufacturing International Corp (SMIC), believed to make the advanced chip in Huawei’s new smartphone, rose 1 percent, while China’s semiconductor sector gained 1 percent.
Curb’s boundaries are unclear
It was not immediately clear how extensive China’s iPhone bans were, but an employee at a state-owned company in the capital said they had reached out to visitors.
“Anyone who comes into our workplace, including business visitors, cannot bring their iPhones,” said one of two SOE employees who said they had been told of the ban in recent weeks.
The source, who asked not to be named, said the company is offering workers 100 yuan to 200 yuan ($13 to $26) in subsidies to switch to domestic brands. However, some employees at other SOEs were not banned from using iPhones, they told Reuters.
While the number of central government workers has not been disclosed, Bank of America estimates that such a ban could cut iPhone sales by 5 million to 10 million units a year from China’s annual total of up to 50 million.
In contrast, TF International Securities analyst Ming-Chi Kuo said Huawei’s smartphone sales, led by the new Mate 60 Pro, could jump 65% to 38 million this year, barring some “non-commercial concerns.”
However, Canalys analyst Nicole Peng said Huawei could pose a greater threat to its domestic peers, such as Honor, who have benefited from Huawei’s troubles.
Several Wall Street analysts said the ban showed that even a company with good ties to the government and a large presence in the world’s second-largest economy is not immune to tensions between the two countries.
That conflict has escalated in recent years as Washington tries to limit key advances, including China’s key chip technology, and Beijing looks to reduce its reliance on American technology.
The US Commerce Department wants more information about the “characteristics and composition” of a new Huawei chip that could violate trade restrictions, it said on Thursday.
“The sanctions … have crippled Huawei from 2019 and forced it to reinvent itself – at a huge cost to the (Chinese) government,” he added.
“We are continually working to review and update our controls as necessary based on the evolving threat situation, and we will not hesitate to take appropriate action to protect America’s national security.”
A teardown by research firm Tech Insights revealed more Chinese-made chip components in the Mate 60 Pro than previous models, a move Beijing has made.
($1=7.3482 Chinese Yuan Renminbi)
(Additional reporting by Shanghai Newsroom, Jenny Cao in Taipei, David Kirton in Shenzhen, Jason Xu in Shanghai, Yelin Mo and Ellen Zhang in Beijing and Sam Nusse in Tokyo; Writing by Myung Kim; Editing by Clarence Fernandez)
