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Trump’s WeChat Ban Threatens Apple’s $44B Market in China, Tencent Downplays Risks

UTC by Bhushan Akolkar · 3 min read
Trump’s WeChat Ban Threatens Apple’s $44B Market in China, Tencent Downplays Risks
Photo: Shutterstock

With Donald Trump’s executive order to ban WeChat, smartphone giant Apple needs to make a decision whether or not to ban WeChat from its global App Store. This could also possibly have a big impact on Apple’s business ambitions in China.

Last week, U.S. President Donald Trump issued an executive order to ban U.S. companies from doing business with China’s WhatsApp rival WeChat. This has certainly added to the worsening trade relations between the two economic giants.

The recent ban by the Trump administration has got all eyes on Apple Inc (NASDAQ: AAPL) which has a whopping $44 billion market in China. This comes just a time when Apple registered its strongest sales in China for Q2 2020 for its newly launched iPhone SE. After Trump’s last week’s executive order, iPhone loyalists in China are re-considering their attachment for the device.

The ban will come into effect roughly by the end of September. However, it is still not clear whether WeChat’s ban will be limited only to the U.S., or will go worldwide. WeChat is the most popular app in China and integral to the daily lives of the Chinese locals. Hong Kong resident Kenny Ou said that without WeChat, iPhone would be just another expense “electronic trash” for the locals.

Trump’s WeChat ban could really spell trouble for Apple if it has to remove the service from its global App Store. Despite intense competition from local smartphone giants like Huawei, Apple has massive popularity in China. But if the Trump order forces Apple to remove WeChat from its global App Store, the iPhone annual shipments can decline 25-30%. Similarly, shipments for other devices like Mac computers, iPad, Apple Watch, AirPods, can decline by 15%-25%, reports Bloomberg.

China’s Twitter equivalent – Weibo – conducted a recent survey asking people to choose between WeChat and iPhone. The survey had over 1.2 million responses with 95% saying that they would give up their devices and choose to use WeChat.

Tencent Downplays Risks of WeChat Ban by Apple in China

Tencent Holdings – the parent company of WeChat said that Donald Trump’s executive order to ban WeChat will have a limited impact on its business if it is only outside China. Speaking on an investors’ call, Tencent‘s chief financial officer, John Lo said:

”The executive order is focused on WeChat in the United States and not other businesses in the U.S. We are in the process of seeking further clarification from bipartisan parties in the U.S.”

Post the earnings report on Wednesday, the Tencent executives explained the difference between WeChat and Weixin. While WeChat is Tencent’s service used worldwide, Weixin is its local equivalent in China. This distinction is important because Tencent’s majority of the revenue comes from Weixin. Trump’s executive order specifically names WeChat and not Weixin.

Well, Apple hasn’t responded so far on this matter as of now. Apart from Apple, it will be interesting to see even whether or not Google removes WeChat from its Android operating system.

Another Chinese micro-video application TikTok is facing major heat. Reportedly there are talks of Microsoft Corporation (NASDAQ: MSFT) announcing a deal to buy out the application. The Trump administration has set a deadline of September 14 for the Microsoft deal. If no decision comes by then, the Donald Trump government will proceed ahead with the ban.

Business News, News
Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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