In a worst-case scenario, annual iPhone shipments to Apple could fall by 25-30% if forced to remove WeChat from the App Store worldwide, according to a new research note by analyst Ming-Chi Kuo viewed by MacRumors. The removal could be due to a recent executive order aimed at banning U.S. transactions with WeChat and the largest company Tencent.
Kuo sets out optimistic and pessimistic scenarios, depending on whether Apple is only required to remove WeChat from the App Store in the United States or whether the ban would apply to the “App Store” in all countries.
WeChat is hugely popular with Chinese mobile device users, essentially operating as its own platform on top of iOS and Android for many users, and Kuo argues that a worldwide ban on WeChat in the “Appp Store” would be devastating due to the size of the Chinese market.
Because WeChat has become a daily necessity in China, integrating features such as messaging, payment, e-commerce, social networking, news reading and productivity, if this is the case, we believe Apple hardware shipments in the Chinese market will fall significantly. We estimate that annual shipments of ipPhone will be reviewed by 25-30%, and annual shipments of other Apple hardware devices, including AirPods, iPad, Apple Watch and Mac, will be reviewed by 15-25%.
According to his optimistic scenario, in which WeChat is removed only from the USBAApp Store, Kuo predicts that phone shipments will be affected by 3-6% with other Apple products being affected by less than 3%.
Apple did not break down its shipments of iPhones, but overall, Greater China accounted for just over 15% of Apple’s total revenue during the June quarter, making it a significant part of Apple’s business.
Kuo recommends that investors reduce their holdings of companies in Apple’s supply chain such as LG Innotek and Genius Electronic Optical because of the risks of a WeChat ban. However, it remains to be seen what will happen as the bans set out in the executive order do not take effect until September 20th. As a result, there is still time for the order to be clarified, modified, or revoked.
Update 10:36 pm This article originally said the 30% drop was in relation to total Apple shipments, but the research note is not entirely clear whether it refers to global or Chinese shipments. Given Apple’s Chinese share of total sales, it seems more likely to refer to Chinese shipments.
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