TikTok is not the only application by a Chinese company that is the subject of an executive order from President Donald Trump affecting mobile device users in the US Trump has banned US companies from doing business with WeChat. For those of you unfamiliar with it, WeChat is a messaging, social media and mobile payment app launched by Tencent in 2011. Seven years later it became the most widely used standalone app with more than 1 billion people that rely on “super app.”
Executive order against WeChat could attack Apple, help Huawei
WeChat shares its user data with the Chinese government and censors certain topics of a political nature. And while the order would prevent transactions made by WeChat with US corporations, it could have an unintended effect; the order prevents Apple from distributing WeChat through the App Store. This can result in lower iPhone sales in China, where the app is used for many things like email, browsing, shopping and payment.
WeChat has over one billion active users
Companies and consumers use WeChat to connect with businesses, friends and family. WeChat is an integral part of life in China that if removed from the App Store would lead to a riot. For example, an online forum used by investors in China asked subscribers if they would give up their WeChat or iPhone if Apple were forced to remove the app from the App Store. By a margin of 20 to 1, forum users said they would drop the iPhone. Noting that China accounts for 20% of global iPhone sales, Anand Srinivasan, an analyst with Bloomberg Intelligence, said WeChat’s departure from the App Store “would be a serious hurdle” for him Apple.
Moreover, there are fears that Chinese consumers will retaliate against the executive order by disrupting Apple’s supply chain and its production. Apple designs its products in the US and most are assembled in China. The latter may limit the amount of products that Apple is allowed to export from China and even limit the number of materials that Apple receives from the country. As an example, Bloomberg Intelligence Srinivasan mentions the rare earth metals used in the iPhone. While Apple wants to shift a large chunk of iPhone production outside of China, it can now only produce a small amount of handsets in India, but not enough to make up for any shortage of China.
There really is a big irony here. If the ban goes into effect and Apple can’t figure out a way to keep WeChat in the App Store, we could see a large number of Chinese consumers switch to a Huawei handset. This is the same Huawei that the US government is shutting down its US supply chain including Google. A rule set by the US will also make it harder for the Chinese manufacturer to get chips at the end of this year. So if all goes well and Apple is forced to remove WeChat from the App Store, we could see lower iPhone sales and higher Huawei phone sales in the world’s largest smartphone market. Despite everything the US threw at the US, it is now the largest carrier of smartphones around the world, albeit by a marginal sum.
The executive order takes effect in 43 days, and a suggestion made in the Bloomberg report suggested that Apple could find a way to allow apps to be installed on iOS without going through the App Store. But that would cost Apple the 30% reduction it receives from in-app purchases and would be a drastic change for a company known for its walled gardens. And while you may notice that WeChat is available in the Google Play Store, the Play Store is banned altogether Google’s other Android apps in China. Huawei has the first part of the app store where users can install WeChat from.
Unlike the executive order banning TikTok in the US, which can be crashed with a US purchase of operations of the app, there does not seem to be a simple way around the WeChat command. There are 43 days left and they are counted.