In the worst case scenario, Apple’s annual iPhone shipments in China could drop 25–30% if they are forced to remove WeChat from the App Store worldwide, according to a new study from analyst Ming- Chi Kuo. MacRumors. This deletion is likely due to a recent executive order that prohibits US transactions with WeChat and its parent company Tencent.
Kuo offers upbeat and pessimistic scenarios depending on whether Apple is only being asked to remove WeChat from the App Store in the US or if the ban would apply to App Store in all countries.
WeChat is extremely popular with Chinese mobile device users, essentially acting as their own platform on iOS and Android for many users, and Kuo argues that a worldwide ban on WeChat in App Store be very dire given the size of the Chinese market.
Since WeChat has become a daily staple in China, integrating functions such as messaging, payments, e-commerce, social media, news reading and productivity, if so, they I believe that the shipments of Apple hardware products in the Chinese market will decrease significantly. We estimate that annual shipments of iPhone will be adjusted down 25–30% and that annual shipments of other Apple hardware devices, including AirPods, iPad, Apple Watch, and Mac, will be 15–25% reduction.
According to his optimistic scenario in which WeChat is only removed from the US App Store, Kuo predicts iPhone shipments will be affected by 3–6% while other Apple products suffer less than 3%. .
Apple doesn’t break down its iPhone shipments by region, but overall, Greater China accounted for more than 15% of Apple’s total revenue in the sixth quarter, making it a major part of Apple’s business.
Kuo recommends investors to reduce holding shares of Apple supply chain companies such as LG Innotek and Genius Electronic Optical due to the risk of the WeChat ban. However, it remains to be seen what will happen as the restraints given in the executive order do not go into effect until September 20th. Hence, there is still time for the order to be clarified, modified or cancel.
Update 10:36 pm This article initially stated that the 30% drop was related to Apple’s iPhone total, but the research note is not entirely clear whether it refers to global or Chinese shipments. Given China’s share of Apple’s total sales, it seems more likely it is referring to Chinese shipments.
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