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Apple Inc., the tech giant headquartered in Cupertino, California, was hit hard by a disturbing slump that wiped out nearly $200 billion of its market value within a span of two days. The company’s stock plummeted nearly 3% on Thursday, contributing to its most significant two-day slump in a month.
China’s Role in Apple’s Downfall
This devastating financial blow to Apple was primarily ignited by China’s plan to broaden its ban on the use of iPhones, extending it to state firms and government-backed agencies. The second-largest economy in the world, China, has been grappling with a prolonged crisis in its real estate market, leading to a slump that threatens demand for products ranging from commodities to consumer electronics.
With China being Apple’s largest foreign market and global production base, the ripple effects of the economic downturn in China are being felt strongly in Apple’s financial performance.
“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.” – Edward Moya, Senior Market Analyst at OANDA
Impact on the Tech Sector
This news has sent shockwaves through the markets, leading to investors offloading everything from chips, mega-cap technology to US-listed Chinese stocks. The tech-heavy Nasdaq 100 Index was also affected, trading lower by about 1%. Simultaneously, the Philadelphia Semiconductor Index, encompassing several Apple suppliers, was down 2.5%.
The Timing of the Ban
Bank of America Corp. analyst Wamsi Mohan pointed out that the timing of the potential ban is intriguing, given the recent launch of Huawei Technologies Co.’s high-end 5G-capable smartphone.
The Huawei Factor
The Huawei Mate 60 Pro, powered by Semiconductor Manufacturing International Corp.’s 7nm chips, is Beijing’s first step in its nationwide push to circumvent US efforts to contain its ascent. This development could have profound implications for several other US technology companies that rely heavily on sales and production in China.
Apple Suppliers across Continents Affected
As multiple reports confirmed China’s latest changes, Apple suppliers across continents were trading lower on Thursday.
Analysts’ Take on the Situation
Despite the bearish sentiments, some analysts believe that the impact of the iPhone ban is being exaggerated. Daniel Ives from Wedbush Securities is of the opinion that the ban would affect less than 500,000 iPhones out of the roughly 45 million he expects to be sold in the country over the next 12 months.
“Despite the loud noise Apple has seen massive share gains in China smartphone market” – Daniel Ives, Wedbush Securities
Conclusion
The impact of Apple’s $200 billion downfall in a mere 48 hours is a serious concern for the tech sector. The situation is a stark reminder of the interdependencies in the global tech supply chain and the potential repercussions that geopolitical decisions can have on the financial performance of global tech giants like Apple.
