Apple’s stock has dropped by 6.7% over the past two days following reports that the Chinese government has banned the use of iPhones at government-backed agencies and companies.
The company’s stock has so far lost $200 billion and is currently the worst performer on the Dow Jones Industrial Average. Its loss also impacts the broader stock market, with investors selling off stocks of U.S.-listed Chinese companies, mega-cap technology, and chip companies.
“The Nasdaq is sinking as one bad Apple spoils a bunch of mega-cap tech stocks,” said Edward Moya, senior market analyst at OANDA. “Apple’s growth story is heavily reliant on China, and if the Beijing crackdown intensifies, that could pose a big problem to the bunch of other mega-cap tech companies that rely on China.”
The ban was initially imposed on central government officials but later expanded to include state-backed businesses. One of them is PetroChina, a powerful player that employs millions of workers and has significant sway over the Chinese economy.
Chinese government’s decision hints at a murkier future for Apple as China is one of its largest markets in the world and accounted for a fifth of its revenue last year. The situation is even more challenging for Apple because the iPhone, its flagship product, reportedly had more sales in China than in the United States.
The news comes on the heels of the launch of a high-end flagship smartphone by China-based Huawei that has been made using Semiconductor Manufacturing International Corp.’s 7nm chips. The U.S. government is investigating the new Huawei smartphone to determine if any companies bypassed its semiconductor export restrictions to facilitate the manufacturing the chip used in the device.
While the ban represents a significant blow to Apple’s business, some bullish analysts believe that the company is unlikely to see any significant impact.
“Despite the loud noise, Apple has seen massive share gains in China smartphone market,” said Wedbush Securities’ Daniel Ives, adding that the ban is likely to impact less than 500,000 iPhones of the nearly 45 million projected to be sold in China next year.