Shares of Apple Inc have dropped by 6.4% in two days after China reportedly banned employees of central government agencies from using iPhones for security reasons. The surprise ban marks the latest escalation of the US-China tech war, a move that could seek to boost Huawei’s new Mate60 Pro phone over the iPhone in local markets.
China’s government has ordered its officials not to bring iPhones into the office or use them for work, the Wall Street Journal reported on September 6. Those bans could next be extended to state-owned enterprises (SOEs), which employ millions of workers, agencies reported on September 7.
The news caused Apple’s market valuation to fall by US$200 billion over those two days of trading.
The ban notably coincided with Chinese state media’s campaign to promote the launch of Huawei Technologies’ Mate60 Pro, which is equipped with Kirin 9000s, a 7 nanometer chip produced by the local Semiconductor Manufacturing International Corp (SMIC).
Lyu Tingjie, a professor at the School of Economics and Management of Beijing University of Posts and Telecommunication, told China Central TV that the launch of Kirin 9000s is a milestone for the development of China’s chip sector. He said the nation’s chip technology gap with the West has now been narrowed to about three to five years.
Apple will launch its latest iPhone 15 model on September 12 while Huawei will hold its marketing event for the Mate60 Pro on the same day. The A17 chipset inside the new iPhone is expected to be a 3nm processor, which is about two to three generations more advanced than 7nm processors.
On September 6, US Representative Mike Gallagher, chair of the House Select Committee on China, called on the US Commerce Department to end all technology exports to Huawei and SMIC.
The US Commerce Department said the next day it is working to get more information on the Mate60 Pro’s purported 7nm chip.
“Export controls are just one tool in the US government’s toolbox to address the national security threats presented by the People’s Republic of China,” said a Commerce Department spokesperson. “The restrictions in place since 2019 have knocked Huawei down and forced it to reinvent itself – at a substantial cost to the PRC government.”
The Chinese Foreign Ministry, meanwhile, said on September 8 that US sanctions against Chinese firms will only strengthen China’s capability to seek self-reliance and technology innovation.
‘Technological Cold War’
Back in August 2020, when the Trump administration banned US government agency employees from using TikTok and WeChat, China said it might ban the use of iPhones in retaliation.
But Beijing refrained from doing so over the intervening years as many Apple products are actually made in China. The situation seems to have changed, however, after Taiwan’s Foxconn relocated some of its production lines from China to Vietnam and India over the past two years.
Officials at central government agencies have now been banned from bringing foreign-branded phones, including iPhones, into offices or using them for government work. China seeks to reduce its reliance on foreign technology, strengthen cybersecurity and prevent leakage of sensitive data, according to the recent Wall Street Journal report.
“If this is true, the US government should only blame itself for taking the lead in issuing official bans on Chinese electronic products and causing a spiral of national security vigilance between China and the US,” Hu Xijin, former editor-in-chief of the state-run Global Times, says in a social media post on September 8. “This will hurt the commercial interests of both countries. But if this trend continues, the US will suffer more.”
Hu says the scale of American electronic product use in China is much bigger than that of Chinese electronic products in the US. He also says the number of staff of government and public institutions in China is substantially more than in the US.
He said on September 8 that the US won’t be able to find any reason to sanction Huawei further as the Kirin 9000s chip does not use US technology.
In an article published on September 8, a Guangdong-based writer describes the conflicts between China and the US as a “Technological Cold War.”
She says China’s restrictions on the use of Apple’s products and Tesla’s cars are retaliation against the US sanctions imposed on Huawei in May 2019.
“To a certain extent, these measures can reduce US firms’ market shares in China and mitigate the impact of US technology sanctions on China,” she says. “They can also increase Chinese people’s trust and acceptance of domestic technology products and boost the competitiveness of China’s technology industry.”
She adds that although a technological competition between China and the US has begun, both countries can still cooperate and use technologies on climate change, epidemic control and social development issues.
Since May 2021, Tesla cars have been banned from entering Chinese government compounds due to security concerns over cameras installed on them, media reported.
‘National destiny’
After US Commerce Secretary Gina Raimondo told Chinese Commerce Minister Wang Wentao on August 28 that there is no room for the US to compromise or negotiate on matters of national security, the China side seemed to have given up on discussing the issues with the US and moved on to other topics.
On August 29, Huawei commenced the sale of its Mate60 Pro. Research firm TechInsights has since found that the phone’s Kirin 9000s was made by SMIC using its N+2 technology.
“There are a lot of ways to increase Chinese people’s economic expectations, but boosting people’s confidence in the long-term technological development is a much more difficult task,” a pro-Beijing vlogger says in a video. “Many people believe that whether China can advance its technology will affect its national destiny.”
He says the launch of Kirin 9000s has helped boost Chinese people’s confidence.
The China Youth Network, a news website operated by the Communist Youth League of China, said that the launch of Mate60 Pro, symbolically during Raimondo’s China trip and ahead of the iPhone 15’s debut, proved that Chinese firms have the ability to innovate. It said the US will only hurt itself with its tech and chip curbs against China.
However, Calvin Choy, a Hong Kong commentator, says that SMIC actually did not innovate anything as it only adopted its N+2 technology, which had been achieved by Taiwan’s TSMC back in 2017. He says it’s unlikely that Huawei and SMIC can make further breakthroughs if they can’t obtain extreme ultraviolet (EUV) lithography tech used for making high-end chips.
Read: SMIC bypasses US curbs to make 7nm chips
Follow Jeff Pao on Twitter at @jeffpao3