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Apple could lose ~20M iPhone shipments in 2024 due to China ban, Huawei competition - analysts

Published 09/07/2023, 06:22 AM
© Reuters.  Apple could lose ~20M iPhone shipments in 2024 due to China ban, Huawei competition - analysts
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Nasdaq 100 futures declined 0.5% in early New York trade on Thursday as Apple (NASDAQ:AAPL) stock selloff continued for the second consecutive day.

Shares in the tech behemoth fell 3.6% yesterday on the WSJ report that China is expanding its ban on iPhones to state-owned firms and government agencies.

Apple stock is down a further 2.7% in premarket Thursday.

China Government Ban

The situation in China has developed as the government ordered officials at central government agencies not to use iPhones and other foreign-branded devices for work or bring them into the office. These instructions were reportedly communicated to staff by their superiors in workplace chat groups or meetings, the WSJ report noted.

The potential expansion of the iPhone ban in China could have significant implications for foreign brands operating in the country, including Apple.

China is crucial for Apple, and the company relies on this market for approximately 19% of its overall revenue.

“China accounts for roughly 40-50mn iPhone units for Apple. We estimate up to a 5mn to 10mn-unit headwind if such a ban were to go through and subsequently be enforced. Additionally, if iPhones are banned from being carried into official workplaces (the Journal article suggests this as well), the impact could be higher given the high propensity of Chinese consumers to own and carry multiple phones,” BofA analysts wrote in a client note.

“We estimate that every 1mn iPhones translates to about a penny in EPS. The prior foreign branded laptop ban announced in 2022 allowed for a 2-year time frame to comply. It remains unclear what the timing of this potential ban would be.”

Increased competition

Moreover, Apple’s China rival Huawei introduced a new smartphone capable of ultrafast data connectivity. This, in addition to the government ban, could weigh on Apple’s iPhone sales in China.

“The government ban and the new Huawei phone will be material events for the iPhone,” said analysts at Oppenheimer. “The two combined will drive more Android users to upgrade to the Huawei, or iPhone users going back to Huawei.”

According to the analysts, Apple could lose 10 million iPhone shipments in 2024 because of the new Huawei phone. Coupled with lost shipments due to the government ban in China, Apple could be looking at 15-20 million in lost iPhone shipments for the next year.

The launch of the Mate 60 Pro, priced at $960 for presale, comes just a few days before Apple is scheduled to release its iPhone 15 lineup.

BofA analysts added that the timing of the potential ban is “interesting” as it coincides with the launch of Huawei's new high-end smartphone.

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