Shocking iPhone Ban in China: Does It Actually Matter?

Yesterday, a Wall Street Journal article hinted at the possibility that the Chinese government has imposed a ban on government officials carrying or using iPhones while at work. Consequently, Apple's faced a significant setback, plummeting by 3.6%, marking its steepest drop in a month, and this had a ripple effect on related supply chains in Korea/Taiwan/Hong Kong market this morning, likely exacerbated by overall weak market sentiment.

What is the news?

Reports indicated that Chinese government authorities have prohibited their employees from using iPhones and other foreign-branded devices during work hours. Employees at certain central government regulatory agencies have been directed, both in chat groups and meetings, to refrain from bringing such devices into their workplace. The extent of these directives remains unclear, but since China played a pivotal role in Apple's positive performance last quarter, this news cast a shadow of pessimism over the company's prospects.

So… what is the actual impact to Apple

Generally, I believe that the overall impact of this situation may be relatively limited.

According to available data, it is estimated that the Chinese government employed approximately 7 million government officials back in 2015. If we multiply this figure by Apple's roughly 20% market share in China, the overall unit impact is approximately 1.4 million units. When spread over an average three-year replacement cycle, this translates to roughly 500,000 units per year. This would be a minor percentage of Apple's annual shipment of 210-220 million units.

Even if we consider a wider group of employees (including teachers, doctors, cleaners etc.) on government payrolls, the number is estimated to be approximately 40-50 million people. Using Apple’s 20% market share again, the estimated potential impact is roughly 10 million units. Once again, when distributed over a three-year replacement cycle, this could equate to approximately 3 million units per year, which is about 1.5% of the total annual iPhone volume.

Either way, it does not appear that this issue will have a significant impact on Apple, and it certainly does not justify the extent of Apple’s share price decline.

Apple should be okay

Recently, there have been some concerns about iPhone production for the second half of 2023, with forecasts being adjusted from around 80-85 million units down to approximately 77 million units due to Sony's CIS production issues. However, this is likely a short-term supply issue and not indicative of a broader demand problem, as iPhone users tend to be patient and willing to wait for their devices.

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