In the worst case scenario, China’s annual shipments to China in China could fall by 25-30% if they are forced to remove WeChat from their app stores around the world, according to a new study 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 parent company Tencent.
Kuo sets 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 will apply to the App Store in all countries.
WeChat is extremely popular among Chinese mobile users, essentially operating as its own platform on top of iOS and Android for many users, and Kuo argues that banning WeChat in the ppApp Store worldwide would be detrimental due to the size of the Chinese market,
As WeChat has become a daily necessity in China, integrating features such as messaging, payments, e-commerce, social networking, news reading and productivity, if so, we believe that Apple’s hardware supply to the Chinese market will decline significantly. We estimate that iPhone’s annual shipments will be overhauled by 25-30%, and annual shipments of other Apple hardware devices, including AirPods, iPad, Apple Watch and Mac, will be revised by 15-25%.
According to his optimistic scenario, in which WeChat was removed only from the “App Store” in the US, Kuo predicts that the supply of “iPhone” will be affected by 3-6%, while other Apple products are affected by less than 3%.
Apple doesn’t break down its iPhone deliveries by region, but overall, Greater China accounted for just over 15 percent of Apple’s total revenue in June, making up a significant portion of Apple’s business.
Kuo recommends investors reduce their shares in Apple supply chain companies 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 in the executive order take effect by September 20th. As a result, there is still time for the order to be clarified, amended or revoked.
Update 10:36 This article initially stated that the 30% decline was related to Apple’s total iPhone supply, but the study note did not make it clear whether it was global or Chinese shipments. Given China’s share of Apple’s total sales, it seems more likely to be talking about Chinese shipments.
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