China Ban Threatens Apple’s 40% Surge

Apple (AAPL) shares fell 4% Wednesday after a report that China banned its government officials from using the company's iPhones for work, as part of Beijing's effort to reduce its reliance on foreign technology and strengthen cybersecurity.

News of the ban was first reported by the Wall Street Journal, whichinterviewed several people familiar with the matter. The ban is part of Chinese President Xi Jinping's effort to reduce the country's reliance on foreign technology and enhance cybersecurity, amid increased geopolitical tensions with the U.S.

Apple and its devices enjoy widespread popularity in China, among both the private sector and government officials alike. China serves as both a key consumer market and manufacturing hub for the tech giant.

Apple employs millions of people to make iPhones—the majority of which are made in China—and other flagship products through its network of contract manufacturers and suppliers. The company earns just under one-fifth of its revenue from China, with sales in the country for the quarter ending July 1 totaling $15.76 billion, up 8% from a year earlier.

The ban mirrors similar actions taken by the U.S. government against Chinese tech companies and apps, including Huawei and TikTok.

Since last year, the federal government, along with 26 states, took action to restrict or ban the use of TikTok in government offices. The government entities argued the Chinese government could use the app to spy on U.S. citizens and collect sensitive personal information. The Biden administration also considered the possibility of cutting off Huawei from U.S. suppliers, with a decision on the matter still pending.

Apple is no stranger to government scrutiny, whether at home or abroad. The company, along with other tech giants like Amazon (AMZN), Google (GOOGL), Meta Platforms (META), or Microsoft (MSFT), have been targeted by regulators in the U.S. and Europe for alleged uncompetitive business practices and monopoly status.

The European Union (EU) today designated Apple and five other technology companies as ‘gatekeepers' that must abide by the bloc's Digital Markets Act (DMA), a comprehensive effort to rein in big tech.5

Apple shares fell more than 4% Wednesday, but are up 40% so far this year.

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Originally published on Investopedia.com