The wave originated from India with the ban of 59 Chinese apps seems to have its ripple effect all across the globe. Most recently, it engulfed US operations of Tencent owned Chinese ubiquitous app, WeChat.
This anti-China sentiment would significantly impact many Chinese-Americans and Chinese citizens working in the US. It would cut off millions of Americans staying in China; from their friends, family, and clients. In China, WhatsApp, Facebook, and Twitter are banned. So WeChat is the only app that serves as the medium of communication between America and China.
Currently, WeChat boasts more than 1.2 billion monthly active users, out of which 90 percent are from China. The figure seems to be more than three times the entire population of the United States of America.
In 2016, WeChat registered traffic higher than China’s telecom companies. WeChat has become an all-encompassing browser for mobile websites. Retailers, banks, and fashion brands have rushed to open up a digital presence on the giant platform. The must-have also app integrates business communications, payments, e-Commerce, social software, news reading, and accessing government resources as well.
Having gained such incredible traction and reach, WeChat has undisputedly become the most important channel in China. WeChat is much more than just a social media platform, it has become their way of life.
On August 6, President Donald Trump issued a pair of Executive Orders against Chinese technology companies, WeChat and TikTok. The ban which will go into effect in 45 days, is seemingly a response to the security concerns over data sharing with the Chinese Government.
However, most of the immediate focus has been on TikTok, but the WeChat ban could have a far more unpredictable impact. Tencent is one of the largest tech companies in the world. It is bigger than ByteDance, with significant ownership stakes in Snap, Blizzard, Spotify, and others, it is far more embedded in the global tech industry.
Statistically, the repercussions of the ban will be more on many US-based businesses that manufacture and assemble their products in China, than on the company itself.
Ban Consequences on Apple
For instance, Apple has a significant Chinese customer base. About 20% of its iPhone sales originate from China itself. The ban will force Apple to remove WeChat from its App Store. This will positively destroy the Chinese smartphone market for Apple.
Apple’s annual iPhone shipments in China could be decreased by 25-30% if it’s required to remove WeChat from its App Stores around the world. Sales of other Apple-related devices like Apple Watches, iPads, AirPods, and Macs could be reduced by 15-25%. If Apple can’t offer WeChat on the iPhone, then much of its Chinese business will almost certainly evaporate overnight.
Furthermore, nearly all of Apple’s critical manufacturing and assembly partners are based out of China. In today’s date, Apple is almost exclusively dependent on Chinese manufacturers like Foxconn. It is so important for Apple that when factories shut down from COVID-19, it caused hiccups down Apple’s entire supply chain.
And if China escalates the trade war to retaliate it could existentially change how Apple builds and sells new products in the future. Apple has already started to feel the initial ramifications as its shares fell 2.5 percent to close at $444.45 on Friday, August 7 in New York.
Chinese consumers are likely to switch to Huawei, the country’s home-grown, high-end smartphone maker. In a way, the order could end up benefiting a company that Trump has tried to squeeze out for years.
Google Left Unaffected
Google’s Android, on the other hand, would be immune to the WeChat ban. In China, people are already habitual to their Android Phones not having direct access to the WeChat app. Hence the WeChat ban will not fluctuate the Chinese smartphone market for Google.