If President Trump goes through with his ban on WeChat -- the Chinese chatting app owned by Tencent (OTC:TCEH.Y) -- Apple (NASDAQ:AAPL) could see as much as 30% of its shipments evaporate if it is forced to remove the app from its App Store.
Because 1.2 billion mostly Chinese people use the app worldwide, and many see it as critical to staying in touch with family and friends, the iPhone could quickly fall out of favor with them.
Hanging up on the iPhone
TF International Securities analyst Ming-Chi Kuo told clients in a note seen by MacRumors that in addition to the massive hit leveled against iPhone sales, other Apple products would also be hurt from WeChat's removal:
Because WeChat has become a daily necessity in China ... We estimate that the annual iPhone shipments will be revised down by 25–30%, and the annual shipments of other Apple hardware devices, including AirPods, iPad, Apple Watch and Mac, will be revised down by 15–25%.
A lot of the downdraft depends on whether Apple is forced to remove the app just in the U.S. or everywhere it is available. If it's only here, the damage done will be significantly less, with just a 3% to 6% decline in iPhone shipments, and a less than 3% drop in other devices.
WeChat is the dominant platform in China because it bundles messaging, social networking, payments, and more into one app, but also because Beijing banned Facebook, Google, and Twitter to be able to control what its people saw and said.
The forecast, though, comes just as KeyBanc analysts say iPhone sales showed recovery in July despite Apple closing its stores again following new COVID-19 outbreaks. Channel checks show demand for the tech stock's smartphone is slightly above expectations.