The world is strange. In the past, the war between superpowers used bombs and missiles, then it started to be done with cyberattacks and today smartphone applications are used as ammunition. As such, to reach China, the United States wants to ban a number of applications of Chinese origin, but the one who could lose a lot from this is the American giant Apple. Now in the crosshairs is the WeChat chat app.
According to analyst Ming-Chi Kuo, Management’s decision to ban US companies from having business relationships with companies including WeChat, could have a significant impact on Apple’s sales in China.
After TikTok, WeChat is on target in the USA
The United States is waging a close war on China's interests in the world. After Huawei and other Chinese companies, the target is now applications for smartphones. TikTok is still in the sights, but the next one is WeChat. However, as Apple market analyst Ming-Chi Kuo warns, this ban on placing the app on the App Store could mean a loss of millions in iPhone sales in China.
As WeChat is very important for Chinese users, as it integrates communications, payments, e-Commerce, social software, news reading and productivity functions, we believe that this action will sink iPhone sales in the Chinese market.
This analyst has been a reliable source of information related to Apple products and services to be launched on the market. In spite of the fact that his action is more focused on hardware, the analyst has a closer view of the Chinese market with regard to these operational issues.
WeChat under fire for several months
This software has been identified as being controlled by the Chinese regime. According it was newslast May the information that this social network is monitored in real time by the authorities of China came to public. As such, U.S. Secretary of State Mike Pompeo said in an interview that the country would also ban the famous WeChat messaging service.
We think it implies that Apple will have to remove WeChat from the App Store. Apple removed WeChat from the App Store in India in response to a government request. So we won't be surprised if the U.S. government asks Apple to do the same.
Said the KGI Securities analyst.
Apple may be required to remove the app from the United States App Store, or it may even have to remove it from all of its stores.
According to the executive order, Apple may have to remove WeChat from worldwide App Stores because the order prohibits Apple from allowing transactions involving WeChat. However, the order does not clearly define the scope of the ban. Perhaps the U.S. government will ask Apple to remove WeChat only from the U.S. App Store.
Huge losses, at best
The ban goes into effect on September 20, 2020. Thus, if the order is to remove WeChat from the entire App Store, Kuo believes that Apple will see a drop of up to 30% in its iPhone sales in China.
The best possible scenario is if Apple just removes WeChat from the US App Store. If this is the case, the negative impacts will be on WeChat users who are mainly located in the USA. We estimate that the global iPhone will decrease by 3-6%. Global shipments of other Apple hardware products, including AirPods, iPad, Apple Watch, and Mac, will decrease by less than 3%.
Said the analyst.
Kuo's note is specifically for investors and it is suggested that they “reduce specific stocks in Apple's supply chain to lessen risks, including Genius and LG Innotek”.
Theoretically, the US government will not harm Apple. However, the American presidential elections are approaching, and we think the [Presidente] Trump may adopt more aggressive strategies for the elections, including asking Apple to remove WeChat from worldwide App Store stores.
Kuo has focused on WeChat due to its huge popularity in China, but the US ban also affects TikTok. Although WeChat did not comment publicly, TikTok owners said they intend to sue for the ban to be lifted.