A sell-off in international IT stocks on Friday was exacerbated by China’s expanding restrictions on iPhone usage by government employees, feeding concerns that Apple and its suppliers would suffer as a result of escalating Sino-U.S. tensions and growing Huawei rivalry.

Following rumours that Beijing had just forced some central government officials to stop using iPhones at work, Apple shares fell 6.4% over the last two days, wiping $190 billion off its market capitalization.

Huawei unveiled two new smartphones, the Mate X5, a foldable, and the Mate 60 Pro+, a new member of the range that garnered notice for its ability to withstand American sanctions, adding pressure on Apple in one of its key markets.

Camera lens manufacturer Largan Precision, an Apple supplier, slumped more than 4% in Taipei, and contract chipmaker TSMC declined 0.6%.

The stock price of China’s Luxshare Precision Industry, which produces AirPods, MacBook and iPhone connector cables, as well as has plants that can produce iPhones, dropped 2%. The Huawei rollout last week also hurt its shares.

According to some analysts, Huawei’s actions could mark the start of a comeback by China’s “national champion” to take on Apple.

“We believe Huawei’s activity this time was well-prepared and not sudden,” said Ivan Lam, an analyst at Counterpoint, whose outlook for the new products exceeds previous estimation.

“It can manage the psychological expectations of the target consumer group before Apple’s press conference.”

Since Huawei’s smartphone company was destroyed after the U.S. restricted tech exports to it in 2019, China has been Apple’s lone bright light in a difficult period for iPhone sales.Huawei’s recent advantages were extended in contrast to the blow to Apple suppliers.

The sophisticated chip in Huawei’s new smartphone is thought to have been manufactured by Semiconductor Manufacturing International Corp, whose shares increased 1% along with the overall semiconductor market in China.

The extent of China’s iPhone restrictions were not immediately obvious, although a worker at a capital city state-owned company (SOE) stated they applied to tourists.

“Anyone, including business visitors, who enters our work area cannot bring in their iPhones,” said the source, one of two SOE employees who said they were told of the ban in recent weeks.

The source, who spoke on the condition of anonymity, claimed that the business was offering staff a 100–200 yuan ($13–$26) subsidy to switch to local brands. However, other employees at other SOEs told Reuters they had not been prohibited from using iPhones.

Although the number of central government personnel is not known, Bank of America said that such a restriction might reduce China’s yearly iPhone sales of up to 50 million units by 5 million to 10 million.

In contrast, Ming-Chi Kuo, an analyst at TF International Securities, said that Huawei’s smartphone sales, driven by the new Mate 60 Pro, may increase by 65% this year to 38 million if certain “non-commercial risks” are not present.

However, Huawei could pose a greater danger to indigenous rivals like Honour, which benefited from Huawei’s troubles, according to Canalys analyst Nicole Peng.

The limits, according to a number of Wall Street experts, demonstrated that even a business with strong ties to the government and a sizable presence in the second-largest economy in the world was vulnerable to escalating animosity between the two countries.

This conflict has been worse recently as Beijing seeks to rely less on American technology and Washington attempts to restrict China’s access to important innovations like cutting-edge chip technology.

According to a statement on Thursday, the U.S. Commerce Department is looking for more details on the “character and composition” of a new Huawei chip that might be in violation of trade restrictions.

“The restrictions … since 2019 have knocked Huawei down and forced it to reinvent itself – at a substantial cost to the (Chinese) government,” it added.

“We are continually working to assess and, when appropriate, update our controls based on the dynamic threat environment and we will not hesitate to take appropriate action to protect U.S. national security.”

The Mate 60 Pro contains more China-made chip components than earlier versions, according to a TechInsights breakdown, an indication of Beijing’s advancement.

(Adapted from Investing.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Uncategorized