While Tencent (OTCPK:TCEHY) is playing down the recent moves by Washington, saying soon to be banned WeChat (for international users) and key revenue driver Weixin (for mainland Chinese customers) are two separate products, more action from the U.S. may be on the table.
The executive orders against TikTok (BDNCE) and WeChat could be “broader” than just those two apps, according to Secretary of State Mike Pompeo, adding that “American data will not end up in the hands of an adversary like the Chinese Communist Party.”
That could have far reaching consequences. If Apple (NASDAQ:AAPL) is forced to remove WeChat from its global app stores, iPhone annual shipments will decline 25% to 30%, TF International Securities analyst Kuo Ming-chi wrote in a research note.
Go deeper: More than a dozen major U.S. multinational companies raised concerns over the WeChat order in a call with White House officials this week, including Ford (NYSE:F), Walmart (NYSE:WMT), Disney (NYSE:DIS), Procter & Gamble (NYSE:PG), Intel (NASDAQ:INTC), MetLife (NYSE:MET), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), UPS (NYSE:UPS) and Merck (NYSE:MRK).
The recent trade war, which has spiraled into a tech war, has also seen a shakeup of the global supply chain.
Hon Hai Precision Industry, a key supplier to Apple that is also known as Foxconn (OTC:FXCOF), is gradually adding more capacity outside of China. The proportion outside the country is now at 30%, up from 25% last June, and the ratio will increase as the company seeks to avoid escalating tariffs on Chinese-made goods headed to U.S. markets.
“No matter if it’s India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each,” Chairman Young Liu told investors, saying that while China will still play a key role in Foxconn’s manufacturing empire, the country’s “days as the world’s factory are done.”
WeChat ban challenges Apple’s $44B market in China – Seeking Alpha