Apple, which has deep roots in China, will be hit hard by Trump's WeChat ban

Beijing time, August 10 morning news, because Tencent has invested in many American companies, Trump's executive order to ban WeChat may have a wide impact on the entire technology industry. But in addition, Apple, which has been deeply involved in the Chinese market, is also likely to suffer a huge impact.

Apple has a broad user base in China, and its important manufacturing and assembly partners are located there. Trump may not only force Apple to remove WeChat from the App Store, but also destroy Apple's Chinese smartphone business, which will in turn affect the way the company produces and sells new products in the future.

WeChat’s place in the Chinese market cannot be overstated. Analyst Ben Thompson wrote in 2019: “There is no market analogy, especially Facebook’s assets (Facebook, Messenger and WhatsApp) are often compared to WeChat. They are all for communication and killing time: WeChat is the same, but it can also read news, take a taxi, pay the bill (try to pay cash after a meal in China, people will think you are a freak), access government resources, and do business. In every sense, WeChat is equivalent to your mobile phone. And mobile phones mean much more to Chinese people than anywhere else.”

For hundreds of millions of Chinese, an iPhone without WeChat isn’t even really a phone. If Apple removed WeChat from its app store because of Trump’s ban, its business in China would evaporate almost overnight.

In this sense, Apple has dug a trap for itself with its closed platform policy. Google's Android, a more open system, allows users to install WeChat on their own. Open systems are not ideal for Apple, but at least they allow Chinese users to continue using iPhones.

However, the impact of the WeChat ban on Apple goes beyond this. The tariff issues caused by it may also have an impact on its costs. And because Tim Cook, then Apple COO, promoted just-in-time production in 2005, Apple is now almost entirely dependent on Chinese manufacturers such as Foxconn. It is worth mentioning that when the factory was closed due to the COVID-19 pandemic, it had a major impact on Apple's entire supply chain, and may even lead to a delay in the release of the iPhone 12 this fall.

Although Apple has recently expanded its supply chain in India in the hope of reducing its dependence on China, it is only a drop in the bucket.

Apple is highly dependent on the Chinese market. It is estimated that the company earned a total of $44 billion in revenue from China last year, more than any other American company. In the latest quarter, China also became Apple's third largest source of profit, contributing 15% of its revenue. And unlike European and American countries, Apple's iPhone and Mac market share in those markets has basically stagnated, while China still has great growth potential. After all, Apple's share of the Chinese smartphone market is only about 9%.

It's not just the iPhone itself that's affected. Chinese users spent $1.53 billion on the App Store alone in April this year, and this figure doesn't even include other services such as iCloud or Apple Music.

As the growth rate of mobile phone sales has slowed down, Apple has found it difficult to maintain its high growth momentum in the Chinese market in recent years, and the temporary store closures during the COVID-19 pandemic have made the situation even worse.

Most of Apple's paid services, including the iTunes Store, Apple Books, and Apple TV Plus, are not available in China. This is also a big problem for Apple, as the company hopes to make up for the saturation of the iPhone market share with subscription services.

Apple's huge success under Cook's leadership has largely relied on the expansion of the Chinese market, including the expansion of its production base and the expansion of its customer base. Trump's WeChat ban could undermine this once solid foundation.