The US ban on WeChat, a messaging, social media, and electronic payment application owned by the Chinese company Tencent Holdings Ltd, can impact Apple business up to worth $28 billion, a report said on Monday.
Apart from the ban order on Chinese short-video-making app TikTok, US President Donald Trump also issued another similarly-worded executive order against WeChat. "The WeChat ban could impact up to $28 billion in iPhone/iPad sales in China as well as related impacts to Service revenue," reports Seeking Alpha. China is Apple's third-largest market where it amassed about $44 billion in net sales in 2019.
Effects of Trump's Executive Order
The ban puts the Chinese market for Apple devices, primarily iPhones and iPads, at high risk if a full crackdown occurs. Apple, along with Ford, Walmart and Disney have called on the Trump administration to end the executive order seeking the ban of WeChat.
China is still a very important market for Apple products, as the third-largest revenue driver and the second largest contributor to net income on an operating margin basis. "If 75 percent of iPhone/iPad sales in China vanish because of this (ban), that estimates a decline of $21 billion in net revenues aside from a related drawdown in services, which could add $4-5 billion to that decline estimate," said the report.
A Projected Loss of Sales
If 50 percent of iPhone/iPad sales vanish, that would estimate a decline of $14 billion in net revenues, and services associated could add another $2-3 billion to that decline. According to famed analyst Ming-Chi Kuo, the executive order to ban WeChat from the Apple App Store could lead to a 25-30 percent drop in iPhone shipments in the Chinese market.
At least 95 percent of the 1.2 million Chinese Apple users said that they would rather switch to an Android device than use an iPhone without WeChat. China, with its population of 1.44 billion people, accounted for about 15 percent of Apple's total June quarter revenue. WeChat is a popular Chinese messaging application that is especially successful in China.
