If the US kills Huawei, will China retaliate against Apple?

Since the US does not have a strong telecommunications equipment company like Huawei, China has to find another audience, which is Apple. This is the comment of Mehdi Hosseini, an analyst at Susquehanna.

In August, the US banned any chip maker using American technology from supplying Huawei without obtaining a special license. The ban, which took effect from September 15, threatens the survival of China’s technological flag. Huawei may run out of semiconductor chips used in smartphones and 5G devices by early 2021.

Meanwhile, Apple is in the position most vulnerable to retaliation. Unlike fellow companies banned by China, the presence of “defective apples” in this market is extremely large. Not only is China a huge consumer market, but China is also a key production location for Apple. 75% of Apple suppliers open at least one factory here.

China has never publicly threatened as a way of retaliation against the US for its suppression of Huawei. However, the domestic media and the floating “embargo list” suggest the Chinese government is ready to attack Apple. During a press conference on June 1, 2019, the Chinese Ministry of Commerce said it had prepared a list of companies that could not be trusted, which could seriously damage the rights and interests of Chinese businesses. The press conference was held just days after the US put Huawei on the Entity List blacklist, banning Huawei from buying components from the US.

More than a year later, China has yet to publish a list. However, in May, the Global Times called Apple, Cisco, Qualcomm and Boeing as “candidates” for the death list. After the US announced the latest ban targeting Huawei, the Global Times once again reiterated that China is “ready to retaliate” against those companies if the US blocks Huawei’s chip supply.

In its official statement, the Chinese Foreign Ministry defended Huawei but did not pose any specific threats to Apple or other US companies. “The Chinese government will continue to take necessary measures to protect the legitimate rights and interests of the Chinese company,” Foreign Ministry spokesman Zhao Lijian said at a press conference on Aug. 18 after the ban. America.

Officially or not, Apple will be threatened if China tries to retaliate. Jeffrey Towson, an investor in Beijing, said “apple defect” is definitely the target discussed. Apple’s weakness is the result of CEO Tim Cook putting everything in China, especially manufacturing.

According to The Wall Street Times, Apple employs nearly 3 million people here, whether directly or indirectly through contractors like Foxconn. In recent years, the dependence is on the rise. Reuters points out that between 2015 and 2019, Apple opened more factories in China than any other location in the world combined. Nearly half of its materials come from China.

However, China has not taken any extreme measures to cut down the supply chain for Apple because the country itself cannot avoid casualties. China could completely ban Apple from assembling phones at its Zhengzhou factory, which makes almost half of the world’s iPhones, or ban the domestic company from supplying Apple components.

Any decision will do enormous damage to China as a trusted partner in global supply chains. China attaches great importance to the high-tech manufacturing ecosystem and the jobs that Apple brings to the country. Closing assembly plants or cutting off supplies only encourages Apple and foreign businesses to move elsewhere, hindering efforts to consolidate domestic production capacity.

However, that doesn’t mean Apple will be safe. China has many other tools for implementation. For example, they could add more factory or store licensing regulations for Apple or urge users to boycott Apple products, as they did with Hyundai in 2017.

In the May 2019 article, investor and chairman of research firm River Twice Zachary Karabell suggested that China has the ability to squeeze the App Store even further, forcing Apple to delete more apps or restrict the location of Apple. open the Apple Store.

If the United States continues to control Huawei’s chip supply, China will strengthen legal regulations and investigate Apple’s business in China, including investigating senior leaders at the company. Such measures will limit the ability to increase sales by reducing the attractiveness of iPhones and other products to domestic users. Currently, the iPhone accounts for 8.5% of the Chinese smartphone market, while Huawei’s 45%. IPhone sales on the mainland account for a large proportion of Apple’s global sales. The most recent quarter, the rate is 15%.

According to Towson, Apple needs China. China is the world’s most dynamic consumer market, Apple’s electronics manufacturing base, and a global hub for innovation in smart devices and mobile apps.

Another reason Beijing is “cautious” in dealing with Apple is that it has always followed Beijing’s request. John Zhang, director of the Wharton China Center at the University of Pennsylvania, asked, “If such an exemplary Western company cannot survive in China, who will have the chance?”

In February, Tim Cook said Apple removed more than 1,000 apps from the App Store at the request of the Chinese government. Before that, the company also “obeyed” China to remove the New York Times application after the newspaper published an investigation into China’s relations with Foxconn, Apple’s largest contractor.

Zhang predicts that at this point, Beijing will not go against Apple to retaliate against the United States for the value that Apple offers them. Even so, the cease-fire could continue if the iPhone maker persisted in front of Beijing.

According to Fortune