Apple's profit could take more than a quarter if China bans the iPhone in retaliation for US restrictions on Huawei, analyst says
- Cowen analyst said the ban on a China iPhone could cut Apple revenue by 26% in FY2020
- Trade tensions escalated after the US imposed sharp restrictions on Huawei in the US
- Apple is one of the companies most vulnerable to Chinese retribution
- But analyst Krish Sankar believes that banning an iPhone is a & # 39; extreme case & # 39; would be
- China represented 18 percent of Apple's net sales for the last quarter
An analyst from investment firm Cowen said that a total ban on iPhone sales in China could cut Apple's revenue by 26 percent in 2020.
Apple is one of the US companies vulnerable to Chinese reprisals after the US trade department recently placed Huawei on its & # 39; entity list & # 39; US companies were unable to sell their technology without government permission.
Federal agencies and contractors are also excluded from using Huawei equipment due to security concerns, a law that the Chinese technology giant was taking to court this week.
Cowen analyst Krish Sankar wrote in a recent note that a ban on Chinese iPhone is a & # 39; extreme case & # 39; was for the way in which the trade war could go, according to Bloomberg.
People visit an Apple store in Shanghai earlier this month. A new research letter predicts that a total Chinese ban on iPhones could lower Apple's profit in fiscal year 2020 by 26 percent
The more likely outcome, Sankar wrote, is that Apple has a & # 39; material but manageable & # 39; hit would see in the winnings.
& # 39; Apple & # 39; s iPhone, iPad, and Mac systems run the risk of experiencing demand cancellation as a result of additional damage caused by the sales ban to Huawei & # 39 ;, Sankar wrote.
Sankar wrote that, even without an official government ban on iPhones, Chinese consumers can take revenge if patriotism leads them to support domestic brands while products and services from American companies fall out of favor & # 39; if they feel that Huawei & # 39; is being unfairly punished & # 39; by the US
Apple shares fell slightly in trading before the stock market on Wednesday, after losing nearly 4 percent during the past five trading days.
A one-year view of Apple's share price this month shows a dip under the tension in trade with China
In the past quarter, Apple's net sales in China decreased by 22 percent compared to the same period a year earlier.
The company said in financial documents that the falling iPhone sales have contributed to the Chinese slump and blamed the currency's headwind.
For the quarter ending March 30, & # 39; Greater China & # 39; 17.6 percent of Apple's net sales, according to financial records.
Huawei is the largest global maker of network equipment and has a head start in 5G or fifth generation technology. It is also the number 2 maker of smartphones.
The Trump administration claims that the company can use its equipment to spy on behalf of the Chinese government and thus poses a threat to international cyber security.
Apple's net sales per geographic region can be seen for the last quarter. China represents 17.6%
"Huawei is an instrument of the Chinese government," said Secretary of State Mike Pompeo in an interview with Fox Business Network on Wednesday.
& # 39; They are deeply connected. It is something that is hard for Americans to understand. & # 39;
On Tuesday, Huawei filed a motion for interim relief in its lawsuit against the US ban on agencies and contractors using their equipment.
Pompeo did not comment on the court case in the interview, which was recorded on Tuesday, but emphasized what the US government says is the threat to national security from the company.
& # 39; Our companies are working with the United States government. That is, they comply with our laws. But no president runs an American private company. That is very different in China. They simply operate under a different set of rules. & # 39;
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