In March, Tim Cook was among the first foreign executives to land in Beijing to try senior officials after pandemic-era restrictions were lifted. The Apple boss praised how the company and China have grown together in a “symbiotic relationship.” .

Six months later, that relationship is under strain. Apple faces new competitive pressures in a country that is not only its largest manufacturing center but also its largest international market, accounting for nearly 20 percent of its sales last quarter.

A stock sale this month reduced Apple’s market capitalization by nearly $200 billion after news that various government agencies had imposed bans on the use of Apple products in government agencies and state-owned companies. The State Department on Wednesday denied any formal ban, but cited iPhone-related “security incidents” and urged smartphone makers to comply with the law.

A spokesman for the White House National Security Council responded that the U.S. was “watching with concern,” adding that China’s actions appeared to be consistent with retaliatory measures against other U.S. companies as tensions rose between the two superpowers. Apple declined to comment.

So far, the company has maintained a high profile in China, avoiding the fate of other U.S. tech giants, including Google, Meta, Twitter and Micron, whose products have been restricted or banned entirely.

Cook, chief executive since 2011, is credited as the “architect” of Apple’s manufacturing shift to China after he was originally hired by Steve Jobs in 1998 to run global operations. Under Cook’s leadership, through years of investment, marketing and careful corporate diplomacy, Apple managed to build a manufacturing powerhouse while generating more profit in China than any other company, Western or Chinese.

Paul Triolo, associate partner at consulting group Albright Stonebridge, said the company has “invested heavily in its relationships with both the head office and the head office.” . and local governments, particularly in Zhengzhou,” where it partnered with Foxconn and created hundreds of thousands of jobs. He added that Apple has been “very careful” to comply with local regulations and remove politically sensitive apps.

In addition to concerns about possible restrictions on Apple products, a new competitive threat has emerged with the unexpected launch of a new Huawei smartphone in China at the end of August. The Mate 60 Pro sold out instantly on a patriotic wave of excitement when teardown experts revealed it had advanced Chinese chips inside. U.S. sanctions against Huawei had previously hit the performance of its handsets and allowed Apple to dominate sales of high-end smartphones in China.

Apple shares continued to fall following the underwhelming launch of the iPhone 15 series on Tuesday, but industry experts said recent declines due to events in China were exaggerated.

Gene Munster, managing partner at Deepwater Asset Management, said a “worst case scenario” is that the ban within the government would reduce global iPhone sales by 2 percent and overall revenue by 1 percent in 2024. The use of Apple devices by employees goes back several years.

“Beijing will be very reluctant to take further actions that weaken Apple’s position in China as this would have a very negative impact on the business climate,” Triolo said.

The relationship between Apple and China has been a “win-win situation” for both sides, he added. Apple had improved Chinese manufacturers’ production standards and processes while protecting its intellectual property by diversifying its supply chain to ensure that no single supplier could reproduce its products.

Three former Apple employees with experience in China suggested the company was unlikely to be concerned, suggesting that Beijing appears to be implementing some sort of countermeasure to counter the US’s toughened anti-China policies.

“This shot across the bow wasn’t really for Apple,” one of the people said. “It went to the US government. This is China’s flexibility.”

China’s lack of any public direction against Apple also contrasts with its explicit stance when it banned U.S. memory chip maker Micron from key infrastructure in May, saying it posed “serious network security risks.”

Still, Cook faces a “delicate balancing act” to diversify production outside China while maintaining close ties with Beijing, said a former executive at Foxconn, the Taiwanese company that assembles most of Apple’s iPhones in China.

Apple has 14,000 direct employees in China, but experts estimate that the company supports more than 1.5 million jobs in the country. Under pressure from tensions between the US and China, Apple has begun moving parts of its production to Vietnam and India.

With that in mind, experts said Beijing was keen to support domestic alternatives to Apple such as Huawei – which was briefly the world’s top-selling phone maker before US sanctions barred it from accessing certain foreign components and forced it to stop selling its 5G to set smartphones.

The Shenzhen-based company’s China sales are now bolstered by its perceived “national champion” status among consumers, but even its top-of-the-line Mate Pro still lags behind the iPhone in technical aspects.

“Huawei delivered something that was a generation ago. They will have a long time to catch up,” said Ivan Lam, an analyst at Counterpoint Research in Hong Kong, adding that Apple has 80 percent of the market for phones priced above $800.

“It will be very difficult or even impossible for Huawei to switch back to 50:50.”

Additional reporting by Joe Leahy in Beijing

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