What you need to know
- The Trump administration has a new executive order that will ban Apple from working with Tencent, owner of WeChat.
- Apple could take a huge hit if it' forced to remove WeChat from Apple Stores worldwide.
- Analyst Ming-Chi Kuo is projecting a fall in worldwide shipments of as much as 30%.
Against a background that has recently seen President Trump put in place an executive order that bans U.S. companies from dealing with Tencent, Apple could be in a particularly bad situation in China. Tencent owns WeChat, and much of daily life in China runs through it. The loss of WeChat on iPhone could be huge for Apple, with analyst Ming-Chi Kuo suggesting it could hurt the company in one key area – iPhone shipments.
In a new note seen by iMore, analyst Kuo says that he believes Apple's worldwide iPhone shipments could fall as much as 30% if WeChat is pulled from the iPhone. He notes that Chinese users run their lives through the app, whether they are making payments, catching up on news, or using the more obvious messaging features.
It isn't just iPhone, either. Kuo predicts that AirPods, Apple Watch, and iPad could also be hit to the tune if a 25% shipment downturn. However, things could be notably better if Apple is allowed to keep WeChat running on Chinese iPhones – if it only has to remove it from its U.S. App Store – but there will still be a hit. Kuo's numbers suggest iPhone shipments may only be impacted around 3% while other products will fare even better.
As a result of the uncertainty, Kuo is telling investors to get out of companies that make up key parts of Apple's supply chain, including LG Innotek and more. Kuo believes that companies may find it more difficult to win Apple's orders if fewer devices are needed. And those who do win orders will potentially see reduced numbers, too.
The suggestion that a WeChat ban could be catastrophic isn't news, but it's important to understand the impact it could have. Not only on Apple but its users and suppliers as well.