China is reportedly barring government officials and employees at state-owned enterprises from using iPhones.
The Wall Street Journal on Thursday reported that Beijing had issued a directive barring central government officials from using the Apple devices.
On Friday, Bloomberg reported that the ban also covered government-backed agencies and state companies and would be expanded to a wide range of government-controlled organisations.
China’s moves, which have not been announced on official channels, are the latest salvo in the ongoing trade and tech war between Washington and Beijing.
Why ban the iPhone and why now?
While bad news for Apple and a potential omen for Western tech companies generally, the bans have not come as a total surprise to China watchers.
The United States and China have taken steps to reduce their economic reliance on each other as the two sides increasingly prioritise alleged national security concerns over investment and trade.
Beijing has ramped up efforts to lessen its dependence on foreign technology and prop up domestic companies, including Shenzhen-based Huawei, whose new $1,200 Mate 60 Pro has been described by tech analysts as giving the iPhone a run for its money.
Bank of America has noted the “interesting” timing of the iPhone ban given the recent launch of the Mate 60 Pro.
China and the US view each other’s tech companies as potential security risks that could provide backdoor access to sensitive data and government infrastructure.
In May, Montana became the first US state to ban Chinese-owned TikTok over data privacy concerns, with a number of other states mulling similar moves.
US federal agencies and many state governments have already banned the app on government-issued phones.
Washington has also banned US companies from doing business with numerous Chinese tech firms, including Huawei, and restricted US chipmakers from selling China advanced tech.
The release of the Mate 60 Pro, which is powered by the advanced Kirin 9000s processor, has raised questions about the effectiveness of these export controls.
US National Security Adviser Jake Sullivan said last week that the administration of President Joe Biden was seeking more information about the “character and composition” of the smartphone to determine if the law had been circumvented.
What does the iPhone ban mean for Apple and other Western tech firms?
Apple’s stock price tumbled nearly 6 percent between Wednesday and close of business on Friday, wiping nearly $200bn off the value of the world’s most valuable company.
The ban has also sent a chill through Western companies operating in China generally, amid questions about how welcome foreign firms are in the world’s second-largest economy.
Even as some Chinese officials stress that China is back open for business post COVID-19, police raids on foreign firms, including the Mintz Group, and recently enacted anti-espionage laws have underscored the difficulty of doing business and accessing information.
The increasingly tense security environment comes on top of a host of challenges facing foreign firms, including the fallout of the pandemic, intellectual property theft, government discrimination in favour of domestic competitors and regulatory issues.
The latest restrictions on Apple could add to doubts about doing business in China, especially as the California-based tech giant, until recently, had a relatively good relationship with Beijing.
Apple, which generates about 20 percent of its global sales in China, has historically been happy to comply with Beijing’s demands for control, such as by removing virtual private networks (VPNs) from its Chinese iOS store to prevent users from evading internet censorship.
As recently as March, Apple CEO Tim Cook met with Chinese Premier Li Qiang in Beijing.
Bill Bishop, author of the popular newsletter Sinocism, said on Friday that “the confidence many had that Apple is able to navigate US-China tensions to avoid any material blowback could be increasingly misplaced”.
What does the iPhone ban mean for China?
The ban will not prevent everyday Chinese citizens from buying the soon-to-be-released iPhone 15 and other Apple products.
But it does emphasise the growing tension between Beijing’s desire for control and China’s economic future.
Companies including Apple were already shifting production and investment away from China but the ban and other recent events may accelerate that trend.
US Commerce Secretary Gina Raimondo said last month that foreign tech companies were starting to see China as “uninvestable” due to the increasingly hostile business environment.
The souring sentiment threatens to exacerbate the challenges facing China’s post-pandemic recovery, which is faltering amid deflation, slowing exports, a real estate crisis and high youth unemployment.