(Bloomberg) — China plans to expand a ban on state-backed agencies and state-owned companies from using iPhones, underscoring Apple Inc’s growing challenges in its large foreign market and global product base.
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Several agencies have begun instructing employees not to bring iPhones to work, people familiar with the matter said, confirming an earlier report from the Wall Street Journal. Beijing also plans to extend that restriction more widely to various state-owned enterprises and other state-controlled organizations, the people said, asking not to be identified on a sensitive issue.
If Beijing moves forward, the unprecedented ban would be part of a years-long effort to root out the use of foreign technology in sensitive areas, as Beijing tries to reduce its reliance on American software and circuits. Apple threatens to erode its position in a market that generates about a fifth of its revenue, and from which most of the world’s iPhones are made in sprawling factories that employ millions of Chinese workers.
It’s unclear how many companies or agencies may eventually adopt restrictions on personal devices, and there is no formal or written order yet, the people said. State organizations or organizations vary in how strictly they enforce such restrictions, with some banning Apple devices from the workplace while others may ban employees from using them entirely.
China’s state-owned enterprises, such as the giant PetroChina, employ millions of workers and control the centrally planned economy. Apple has historically been seen as relatively safe from government restrictions in China, given its ties to Beijing and its importance to the economy, KeyBanc capital markets analyst Brandon Nispel said in a report Wednesday. “Is the government changing its position?”
A representative for Cupertino, Calif. Apple did not respond to a request for comment. The State-Owned Assets Control and Management Commission and the State Council Information Office did not respond to faxed inquiries.
Hopes of China cracking down on Apple kept investors away Wednesday. Shares slid 3.6% in New York, their biggest one-day decline since Aug. 4. Apple has gained 46% this year before falling, part of a broader rally for tech stocks.
The company is widely popular in China, despite growing resentment over America’s efforts to take over the Asian nation’s technology industry. Apple iPhones are among the top sellers in the country and are common in both the public and private sectors.
But the ban on the equipment coincides with efforts to develop domestic technology that can match or even surpass American innovation. Last week, the release of Huawei Technologies Co.’s smartphone with an advanced Chinese-made processor caused a stir on both sides of the Pacific Ocean. State media celebrated an early victory against tough U.S. sanctions, with a U.S. lawmaker calling for an investigation into possible violations of those sanctions.
Foreign tools have long been discouraged in sensitive agencies, especially as Beijing has stepped up its campaign in recent years to reduce its reliance on technology from China’s geopolitical rival, the US.
Employees at “some” central government regulators have received instructions to stop bringing such gadgets into the office in chat groups and meetings, the Journal said, citing people familiar with the matter. He said it was unclear how far the orders had been released.
Read more: China govt orders government firms to dispose of foreign PCs
In the year By 2022, Beijing has ordered central government agencies and state-backed corporations to replace foreign-made personal computers with domestic alternatives within two years, one of the most aggressive efforts to weed out overseas technology in their most sensitive parts.
The Biden administration, meanwhile, has tried to limit shipments of semiconductor equipment to China. And China’s top chipmaker, Semiconductor Manufacturing International Corp., is being monitored for supplying components to Huawei — a company the U.S. has blacklisted.
Read more: SMIC’s Huawei chip may violate sanctions, US lawmaker says
Even as US-China relations falter, Apple remains heavily dependent on the Asian country — both as a manufacturing partner and as a market for its products. CEO Tim Cook called that relationship “symbiotic” during a trip to China earlier this year.
China was one of Apple’s strongest performers last quarter, helping to offset a generally slower period. The company is gearing up to launch its new iPhones next week in preparation for the holiday quarter, its biggest sales period of the year.
–With assistance from Mark Gurman, Jing Zhao and Jessica Sui.
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