A WeChat ban imposed by President Donald Trump could cost Apple more than $25 billion per year, claims a report published Monday.
Those numbers are based on the idea that 75% of iPhone and iPad sales could dry up in China. Apple would lose money not just from the missing device sales, but also from the resulting decline in its subscription services.
The Seeking Alpha report claims:
“If 75% of iPhone/iPad sales in China vanish because of this, that estimates a decline of ~$21 billion in net revenues aside from a related drawdown in services, which could add $4-5 billion to that decline estimate.
If 50% of iPhone/iPad sales vanish, that would estimate a decline of ~$14 billion in net revenues, and services associated could add another $2-3 billion to that decline.
Those are just rudimentary estimates based on the mix of iPhone/iPad and service revenues compared to overall revenues, but under those, only ~10% of annual revenue would vanish in a scenario of 75% of iPhone/iPad sales disappearing.”
China is one of Apple’s biggest markets, bringing in some $44 billion in net sales for 2019. While that is down from $51 billion in 2018, Apple CEO Tim Cook has said China is likely to be Apple’s future biggest market.
WeChat is China’s most important app
From a western perspective, it might seem crazy that a ban on WeChat could cause three-quarters of iPhone customers to switch allegiances to Android. Perhaps it is an overly pessimistic view of how people in China use their smartphones. But a U.S. ban on WeChat would undoubtedly have a big impact.
WeChat is more like an operating system than an app. Along with messaging, WeChat is also a social network and a replacement for email. People in China also use the app for payments, accessing their bank accounts and more. There really is no comparison in America. Furthermore, because WeChat is the operating system people are using, they are less likely to be tied to iOS or Android. The WeChat interface is the same on both, and people will go wherever WeChat is.
This is not the first report that underlines how impactful a Trump ban on WeChat would be. Respected TF International Securities analyst Ming-Chi Kuo recently said that kicking WeChat out of the App Store could drive down worldwide iPhone shipments by up to 30%. With China making up about 25% of Apple’s revenue, that would seem to bear out Seeking Alpha‘s doom predictions. Or even make them not so doomy after all.
Tump’s WeChat crackdown
Trump’s possible WeChat ban — and his crackdown on TikTok — is related to supposed security risks associated with the popular Chinese apps. Trump has been battling China for much of his first presidential term.
The specifics of Trump’s WeChat crackdown remain clear. It would make sense for an executive order like Trump’s to only apply to apps within the United States. While a small number of customers use WeChat in America, this number is very small. But an executive order could also theoretically compel Apple — an American company — to not allow WeChat in any of its international App Stores, including China’s.