What you need to know
- China has been threatening U.S. companies including Apple with countermeasures over the treatment of Huawei.
- Measures threatened could include investigations and restrictions.
- Experts have said that Apple is too important to China and its economy for this to occur.
Experts have stated that it is unlikely China will take any concrete action against Apple after it threatened measures in retaliation to its perception of the U.S. government's treatment of Huawei.
A report last week from Global Times stated:
China is ready to take a series of countermeasures against a US plan to block shipments of semiconductors to Chinese telecom firm Huawei, including putting US companies on an "unreliable entity list," launching investigations and imposing restrictions on US companies such as Apple and suspending the purchase of Boeing airplanes, a source close to the Chinese government told the Global Times.
Now, in a new report from CNBC, experts have said that it is unlikely any of these threats will materialize:
Apple is unlikely to face backlash from the Chinese government over a new U.S. rule designed to target Huawei, experts told CNBC, despite threats from state-backed media.
The report notes that in the wake of COVID-19, Apple has started looking beyond Chinese shores to diversify its manufacturing arm and that China wouldn't want to accelerate this shift if it somehow came under fire from Beijing. Counterpoint Research's Neil Shah stating:
"China is already facing headwinds as companies such as Apple look to diversify their manufacturing base... So it could be a double whammy if China targets Apple in China and indirectly Foxconn, it would further accelerate the manufacturing to outside of China."
Shah further noted Apple's enormous contribution to China's economy, both directly and indirectly. Other experts noted that Apple has a very good relationship with authorities in Beijing, and that whilst we might see some brand boycotting effort, we wouldn't see "major moves against high profile companies like Apple that have very good relationships with local governments and Beijing."
The report notes that some companies may come under scrutiny for anti-monopoly behavior and compliance with cybersecurity laws:
"Based on what Chinese officials have been saying, at a minimum there will likely be investigations of U.S. companies for anti-monopoly behavior and for compliance with the provisions of the cybersecurity law. But this gives Beijing a lot of flexibility in terms of reacting to satisfy Chinese social media activists demanding a strong response, but not further poisoning the business environment in China for foreign, particularly U.S. firms"
It seems that measures will likely be targeted at companies that are already given more limited market access. The upshot is that any action Beijing does take will more likely be symbolic, rather than having a material impact on any U.S. businesses operating within its borders.