Apple declines and drags down tech markets as worries about Chinese iPhone restrictions escalate

Reuters, September 7 - Following news that China has expanded restrictions on iPhone use by government employees in one of the key markets for the American corporation, Apple lost over 4% on Thursday and caused a selloff in IT stocks.

The market capitalization of the most valuable company in the world (AAPL.O), which saw its largest single-day decline in more than a month on Wednesday, was expected to decline by almost $100 billion.

Suppliers to Apple and businesses with significant exposure to China, including as Broadcom (AVGO.O), Qualcomm (QCOM.O), and Texas Instruments (TXN.O), experienced declines ranging from 1.4% to 4.7%. The three major U.S. stock indices were affected by the iPhone maker's decline as well.

Earlier in the day, Reuters reported that Beijing had recently ordered some central government departments to forbid their staff from using Apple mobile devices while on the job.

The alleged action fueled growing concerns about the financial cost of the escalating hostilities between Washington and Beijing.

In recent years, the United States has limited China's access to critical technologies, such as cutting-edge electronics, while Beijing has attempted to lessen its reliance on American technology and has curtailed shipments from American companies, such as planemaker Boeing (BA.N).The restrictions on the iPhone, according to a number of Wall Street experts, demonstrate that even a business with positive ties to the Chinese government and a sizable presence in the second-largest economy in the world is not immune to escalating Sino-U.S. tensions.

Beijing's actions also come at a time when Apple is dealing with a drop in iPhone sales, with China being one of the few bright spots in what was otherwise a dismal quarterly earnings report released last month.
"The limitations may cause Apple's sales growth in China to stall. This might provide the business with a new problem, according to D.A. Davidson analyst Tom Forte.

The new Huawei Mate 60 Pro smartphone, which is powered by a sophisticated chip produced by the Chinese contract chipmaker SMIC (0981.HK) and represents a breakthrough for the pair targeted by U.S. sanctions, has also sparked sales warnings from some analysts.

The penalties severely impacted Huawei's domestic sales and gave Apple an opportunity to overtake the market leader.

"We see the Mate series phone as an opportunity for Huawei to increase its shipments and regain its market share," experts at Bofa Global Research said. Huawei has the capacity to deliver and scale its in-house Kirin 9000S (chips).

However, with an event next week where it is anticipated to introduce its iPhone 15 line-up as well as new smartwatches, Apple may experience an increase in demand.