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Apple shares fell 2.9% on Thursday following reports that China is considering extending a ban on the use of iPhones to government-backed agencies and companies.
Investors are worried about the ability of the world’s most valuable public company to do business in the world’s second-largest economy.
Apple (AAPL) on Wednesday posted its biggest daily decline in more than a month. The company lost about $200 billion in two days and its stock is currently the worst performing stock on the Dow Jones Industrial Average.
The bans could be a worrying sign for Apple.
China is the biggest overseas market for the company’s products, and Chinese sales accounted for about a fifth of the company’s total revenue last year. Apple does not disclose iPhone sales by country, but analysts at research firm TechInsights estimate that there were more iPhone sales in China than in the United States last quarter. Apple also produces the majority of its iPhones in Chinese factories.
Based in Cupertino, CA Apple also plays an important role in Beijing’s economy, KeyBanc Capital analyst Brandon Nispel wrote Wednesday. For this reason, the company “has always been considered relatively immune to government restrictions in China.” These reported bans raise an important question, he writes: “Is the government changing its position?
On Wednesday, The Wall Street Journal reported that China had banned the use of iPhones by central government officials and that officials informed staff of the ban via focus groups or meetings.
On Thursday, Bloomberg reported that those bans had been extended to state-backed companies, including energy giant PetroChina, which employs millions of workers and controls large swaths of China’s economy.
Bank of America analysts wrote in a note on Thursday that the potential iPhone ban follows a new high-end flagship smartphone launched by Chinese manufacturer Huawei. The timing is “interesting” according to analysts.
The US government announced on Tuesday that it was investigating the new smartphone. National Security Adviser Jake Sullivan told a White House press briefing that the United States needs “more information about precisely his character and composition” to determine whether the parties have circumvented US restrictions on semiconductor exports to create the new chip.
Tech companies fell on the news, the Nasdaq Composite fell around 0.9% on Thursday and the semiconductor sector fell more than 2%.
CNN contacted Apple and the Chinese Ministry of Foreign Affairs, but received no response.
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