HECTOR RETAMAL
- China is unlikely to push Apple out of the country, Shehzad Qazi of China Beige Book told CNBC.
- Despite the iPhone ban last year, Apple is likely doubling down on China, Wedbush's Dan Ives said.
Apple is unlikely to be among US firms ousted by China, even as officials in Beijing look to reduce the country's exposure to certain American companies, Shehzad Qazi of China Beige Book told CNBC on Monday.
According to Qazi, the country's leadership is setting up restrictions on US business as a way to limit security risk.
"In sectors where they think reliance on American firms — software, hardware, anything talked about — is going to become a national security threat, they want American companies out. Extricated. Gone," he said.
For instance, Beijing banned US semiconductor firm Micron last year, while Intel and AMD chips are barred from being used in state computers as of Monday.
For Apple, such scrutiny has already sparked friction with China, as iPhones were banned for government officials in 2023. But the smartphone giant is too important for China to mandate full-blown disinvestment, Qazi said.
That's as China remains the manufacturing heart of Apple, with roughly 95% of its products made in the country.
"Where China has an advantage, whether it's in terms of jobs or access to technology, retaining a critical position in the supply chain, it certainly wants those firms there," Qazi noted, adding that the same logic applies to why US pharmaceutical companies are still welcome in the country.
Meanwhile, though geopolitical tensions have clouded Apple's relations with China, the company is standing firm on its presence as a manufacturer and a retailer in the country, Wedbush Securities analyst Dan Ives said in a Monday note.
That's apparent as CEO Tim Cook took part in the China Development Forum this week, which Ives considers an olive branch on part of Beijing.
"In essence Apple needs China and China needs Apple despite all the noise," he said. "With 90% of the supply chain cemented in China Apple will over time move some manufacturing to India, Vietnam, and other regions. However, the vast majority of its iPhone production and suppliers will remain in China and this trip was Apple essentially doubling down on China."
Its retail footprint is also growing, and the firm opened its second-largest store in Shanghai on Thursday.