US President Donald Trump’s WeChat ban may cause annual iPhone shipments to decline by up to 30%, Apple analyst Ming-Chi Kuo said in a report released Sunday.
President Trump on Thursday signed an executive order prohibiting US companies from doing business with WeChat, which will take effect in 45 days after the date of the order.
The US government’s ban on WeChat may have the biggest impact on the iPhone among Apple hardware products as Apple may be forced to remove WeChat from its US app store, wrote Kuo at TF International Securities, a financial services group in the Asia-Pacific region.
“Apple removed WeChat from the app store in India in response to a government request,” Kuo wrote. “Therefore, we won’t be surprised if the US government asks Apple to do the same thing.”
The worst-case scenario would be for Apple to remove WeChat from its global app store. “We estimate that annual iPhone shipments will therefore drop by 25-30%,” Kuo wrote in the report.
The optimistic scenario is that Apple removes WeChat only from its US app store. “If this happens, it may have a negative impact mainly on WeChat users in the United States. We estimate that iPhone shipments will dip by 3-6%.”
In March, Tencent reported that WeChat had nearly 1.2 billion monthly active users.
“WeChat is a daily necessity for Chinese, integrating functions such as messaging, payments, e-commerce, social networking, news and productivity. If the worst-case situation occurs, we believe that Apple’s hardware product shipments in the Chinese market will decline significantly,” Kuo wrote.
China accounts for about 20% of Apple’s iPhone sales, so removing WeChat from the App Store “would be a serious hindrance,” said Anand Srinivasan, an analyst with Bloomberg Intelligence, reported by Bloomberg.
According to Trump’s Thursday order, a ban would apply to “any transaction that is related to WeChat” made by any person or “any property” subject to the jurisdiction of the United States.
It’s unclear how the companies will implement the executive order. Both Google and Apple have removed apps from their marketplaces in certain countries in the past in response to foreign government requests, including TikTok and WeChat in India earlier this year, reported by CNBC.
Between July 2018 and June 2019, Apple removed 851 apps from its platforms in certain regions after legal requests from countries including China, Russia, Norway, and Saudi Arabia.
Kuo recommended investors reduce their holdings of certain Apple supply chain stocks to reduce portfolio risk
He added that in theory, the US government should not make decisions unfavorable to Apple. But as the US presidential election is approaching, Trump may use more aggressive tactics for the election, including requiring Apple to delete WeChat from its global app store.