Apple will face an impact of up to $28 billion in iPhone / iPad sales in China as well as related impacts to service revenue due to the US ban on WeChat, reports Seeking Alpha.
WeChat is the messaging, social media, and electronic payment application owned by the Chinese company Tencent Holdings. US President Donald Trump issued an executive order against WeChat.
China is Apple’s third largest market where it generated about $44 billion in net sales in 2019.
The ban puts the Chinese market for Apple devices, primarily iPhones and iPads, at high risk if a full crackdown occurs.
Apple, along with Ford, Walmart and Disney have called on the Trump administration to end the executive order seeking the ban of WeChat.
China is still a very important market for Apple products, as the third largest revenue driver and the second largest contributor to net income on an operating margin basis.
If 75 percent of iPhone / iPad sales in China vanish because of the ban, that estimates a decline of $21 billion in net revenues aside from a related drawdown in services, which could add $4-5 billion to that decline estimate,” said the report.
If 50 percent of iPhone/iPad sales vanish, that would estimate a decline of $14 billion in net revenues, and services associated could add another $2-3 billion to that decline.
According to analyst Ming-Chi Kuo, the executive order to ban WeChat from the Apple App Store could lead to 25-30 percent drop in iPhone shipments in the Chinese market.
Apple shipped 7.7 million iPhones in Q2 2020 in China, registering growth of 25 percent sequentially and 35 percent annually, driven by rising online sales and its lower priced portfolio, Canalys report said.
At least 95 percent of the 1.2 million Chinese Apple users said that they would rather switch to an Android device than use an iPhone without WeChat.
China, with its population of 1.44 billion people, accounted for about 15 per cent of Apple’s total June quarter revenue.
