UPDATE- 3:00 AM PT on August 10th
Following Ming-Chi Kuo’s report revealing the devasting impact that a WeChat ban would have on Apple, multiple suppliers stocks plunged in Hong Kong on China as they opened on Monday. As the South China Morning Post reports:
Apple suppliers in Hong Kong and China plummeted on Monday, after analysts predicted Donald Trump’s ban on WeChat could lead to a sharp drop in iPhone shipments, as the American technology giant may have to remove the popular app from its App Store.
On the mainland, Shenzhen-listed Luxshare Precision Industry, which derives 55 per cent of its income from Apple, plunged by as much as 7.7 per cent in early trading, before paring some of the losses, to end the morning session down 3.1 per cent at 52 yuan. GoerTek, a producer of the AirPods wireless earbuds, fell 4.7 per cent to 36.83 yuan.
Hong Kong-listed AAC Technologies, which counts on Apple for 40 per cent of its revenue, dived 5.7 per cent to HK$57.75. AAC makes acoustic components for Apple’s iPhones, iPads and watches.
Handset assembler BYD Electronic International, which analysts expect to start supplying Apple as soon as this year, plummeted 9.7 per cent to HK$30.25. Sunny Optical Technology, a maker of camera modules also expected to become an Apple supplier, retreated 3.3 per cent to HK$140.
In a brand new note to investors seen by Apple Terminal, Apple analysts Ming Chi-Kuo says that a WeChat ban from the App Store would negatively impact Apple’s sales in nearly every product category in China.
Kuo in his notes calls WeChat a “necessity,” and that a ban of the app from the App Store would impact Apple’s status in the country. In specific, Kuo says that his pessimistic outlook is that iPhone sales would drop 25-30%, optimistically speaking Kuo says around 3-6%.
AirPods, iPads, Apple Watch, and Mac sales would drop 15-25% in the case of a ban. Under the current executive order signed by President Trump on August 6th, it isn’t clear whether Apple would be required to remove the app from its international App Store. The order bans any American business or resident from making any “transaction” with WeChat’s and TikTok’s owner.
Under its current meaning, Apple via its App Store and Tencent (WeChat’s owner) paying developer fees would be conducting some forms of “transaction” with the company. Now, if Apple is only required to remove WeChat from the App Store in the United States, which some believe is the most likely possibility, Kuo says iPhone sales would drop 3-6%, while other products only by 3% or lower.
Given the situation, Kuo advises investors to “reduce their holdings” of stocks in certain Apple suppliers. Kuo points out supplier Yujingguang which Kuo recently reported as to have been lagging behind in the production of the iPhone 12’s 7P wide-angle lens. Kuo says that the supplier continues to lag behind Largan, another supplier working on the iPhone 12 line. Kuo also advises investors to hold off in stocks in supplier LG Innotek.