The list of important Chinese companies that the United States has banned or likely will ban has grown longer recently. The largest and most notable of them until last month was telecom giant Huawei. Its 5G network products were likely to power the ultra-high-speed wireless standard in the United States, and most if not all Western nations. The United States banned it from America and pressed close allies to do so as well. Huawei will lose billions of dollars.
Much more recently, TikTok, a social media service that allows the sharing of short videos, was shut down in the United States for at least 45 days. The Chinese government may well hit back at one or more U.S.-founded and based corporations. Among the most obvious is Apple Inc. (NASDAQ: AAPL), perhaps the most visible American company that does business in the world’s largest wireless market. It is also the most valuable American company based on market cap.
If the threat of a ban of U.S. products in China was not risky enough for American companies, the tension was ratcheted up again just days ago when the White House banned the use of WeChat, owned by massive China tech company Tencent. WeChat is an important app for Chinese iPhone users. In fact, it may be the most widely used app among Chinese iPhone owners. The ban on WeChat will hurt Apple’s sales all by itself, without the need for a ban on sales in China.
However, blocking iPhone sales in China would be the most visible way to attack the United States for its series of bans. Much of Apple’s sales comes from what it calls Greater China. Apple’s revenue in the most recent quarter was $59.7 billion. Of that, $9.2 billion was from the region. And Apple sells apps in China as well.
The TikTok saga is not over. The government ban may be dropped if its U.S. base is sold to an American company. Its parent ByteDance has sued the U.S. government. Among its arguments is that TikTok does not undermine national security via collecting data on individuals who use it. TikTok has had 180 million downloads here. The American operations might be sold, most likely to Microsoft Corp. (NASDAQ: MSFT). The price could be as high as $30 billion. ByteDance, though, permanently will be shut out of the U.S. market.
China has several ready targets if it wants to increase trade tensions with America. Telecom network provider Cisco Systems Inc. (NASDAQ: CSCO) is on the list. So is Amazon Web Services, the cloud operation of Amazon.com Inc. (NASDAQ: AMZN). Even Microsoft has huge operations in the People’s Republic. However, Apple stands alone for its visibility.
Apple has about 10% of China’s smartphone market, which puts it in fifth place by that measure. All the companies ahead of it are Chinese: Huawei with 40%, Vivo with 17%, Oppo with 15% and Xiaomi with 11%. A ban would help improve the sales of these four companies.
The financial harm of a ban on the iPhone and other Apple hardware and software in China would be grim. Today, Apple’s market cap is $1.9 trillion. A Chinese ban would put hundreds of billions of dollars of market cap at risk. That would send the American government an unparalleled message.
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