| 2 October 2023, Monday |

Apple suppliers slide on China anxiety, threat from Huawei

China’s tightening restrictions on iPhone usage by government employees fueled a sell-off in global tech equities on Friday, as investors worried that Apple (AAPL.O) and its suppliers would be hurt by escalating Sino-US tensions and expanding competition from Huawei.

Apple shares have dropped 6.4% in the previous two days, knocking $190 billion off its market valuation, after Beijing ordered certain central government officials to cease using iPhones at work in recent weeks.

Several Wall Street analysts said on Friday that the selloff was excessive, and that any revenue loss for Apple would be minimal given the phone’s popularity in China. After two days of falls, Apple shares were up 0.9% in early Friday trade.

Apple is facing stepped-up competition from China’s Huawei, which launched two new smartphones – the foldable Mate X5 and the Mate 60 Pro+ – that drew global attention for showcasing resilience to U.S. sanctions.

Some analysts believe Huawei’s moves could be a first step in comeback efforts by China’s “national champion” to rival Apple after it took some market share following U.S. sanctions rolled out four years ago. Apple is set to roll out a new iPhone on Sept. 12 following a weak quarter for sales of its flagship product.

“We believe Huawei’s activity this time was well prepared and not sudden,” said Ivan Lam, an analyst at Counterpoint, whose outlook for the new products exceeds previous estimation. “It can manage the psychological expectations of the target consumer group before Apple’s press conference.”

China has been a bright spot for Apple, its third-largest market behind the Americas and Europe, in an otherwise tough period for iPhone sales. Huawei’s smartphone business was decimated after the United States curbed tech exports to it in 2019.

Apple’s sales in China this year have been helped by rare deals launched by its third-party retailers in February that offered discounts on its iPhone 14 Pro by as much as 10%. However, analysts told Reuters that those discounts could end up undermining sales of Apple’s new products set to launch in coming days.

In Taipei, Apple supplier Largan Precision (3008.TW), which makes camera lenses, dropped more than 4%, while contract chipmaker TSMC (2330.TW) fell 0.6% on Friday. China’s Luxshare Precision Industry (002475.SZ), owner of factories capable of making iPhones, fell 2%.

U.S.-based Apple suppliers stabilized on Friday, with Qualcomm (QCOM.O) down 0.1% and Broadcom (AVGO.O) up 0.2%.

Huawei suppliers extended recent gains. Shares in Semiconductor Manufacturing International Corp (SMIC) , which is believed to have made the advanced chip in Huawei’s new smartphone, rose 0.7%.

  • Reuters