China's government iPhone ban could get even worse for Apple

Hot on the heels of a report this week that the Chinese government has banned its employees from using iPhones and other foreign-made devices for work, a second new report has revealed that the country is considering expanding this ban even further.

On Wednesday, a WSJ report revealed that China has banned the use of iPhone for government officials at work, building on rules that have been in place for some time. According to that report, “central government agencies” workers have been ordered not to use foreign-branded devices for work. In fact, the ban precludes workers from even bringing such devices into the office.

Apple’s share price has fallen sharply by more than 3.5% in the wake of the news, and now it just got even worse. According to a new report from Bloomberg early on Thursday, China plans to extend this ban to “government-backed agencies and state companies,” a move described as an “unprecedented blockade” on a foreign technology provider.

Apple’s China headache

Building on yesterday’s report, Bloomberg says, “In addition, Beijing intends to extend that restriction far more broadly to a plethora of state-owned enterprises and other government-controlled organizations.”

Bloomberg describes the move as “ the culmination of a yearslong effort to root out foreign technology use in sensitive environments, coinciding with Beijing’s effort to reduce its reliance on American software and circuitry,” and warns it could “erode” Apple’s market position in the country.

That’s bad news for Apple considering it gets nearly a fifth of its revenue there and has a lot of close manufacturing ties. All of Apple’s major products, including its best iPhones, are manufactured primarily in China.

As of right now, the ban appears to still be confined to work devices, with the report noting there has been “no formal or written injunction as yet” on personal devices. Bloomberg further indicates that the ban will likely be enforced in affected organizations with varying levels of strictness. While some might simply bar them from the workplace, “others could bar employees from using them entirely.”

The news is more alarming for Apple when you consider that a huge proportion of China’s economy and infrastructure is state-owned. A Yahoo Finance report from January reveals that 71% of China’s Fortune 500 companies are state-owned enterprises, and there are more than 150,000 SOEs in China, 98 of which are owned directly by the central government. Statista estimates that in 2021 “the number of employed persons in Chinese state-owned units in urban regions amounted to around 56.3 million.” Banning that many people from owning iPhones for work purposes could put a huge dent in Apple’s bottom line, and intense strain on its relationship with the country.