Key points in this equity note
- China’s initial ban on iPhone use in various government agencies and rumours of bans coming including China Mobile is not going to stock the upcoming iPhone 15 are the worst possible news stream ahead of Apple’s launch of the new iPhone 15 next week.
- Next week the Arm IPO will become the largest initial public offering since Rivian in October 2021 riding the immense AI hype. The Arm IPO comes with an excessive valuation eclipsing Nvidia while juggling China risks and a recent stagnating business.
- Adobe earnings next Thursday after the US market close will be a key test of whether generative AI can be commercialized at this point or whether the AI hype is just a gold rush without any gold mine.
China bans hit Apple stock ahead of iPhone 15 launch
This week’s announcement by Chinese authorities that iPhones would be banned across some government agencies hit Apple shares by 2.9% on Wednesday with the decline extending another 2.9% yesterday as rumours indicated that the Chinese government could possibly extend the ban all government agencies including state-owned enterprises. In that case, Apple would a considerable amount of business in its Greater China segment which in the FY22 (ending September 2022) delivered $74.2bn (around 19% of total revenue).
The negative news around the iPhone in China got worse today as reports indicated that China Mobile, the largest mobile carrier in China, will not have the iPhone 15 available to its customers. The series of events come on the back of US media reporting about significant Chinese breakthroughs in the latest Huawei smartphone using advanced chips produced by the mainland Chinese semiconductor manufacturer SMIC which is under US sanctions; the US is looking into whether SMIC violated US sanctions on semiconductor technology. It is becoming more and more clear that the world is fragmenting along the semiconductor industry and the pace is accelerating with Apple moving a larger part of its production to India from China.
The negative news around the iPhone in China comes at the worst possible time for Apple scheduled to introduce its new iPhone 15 on Tuesday at 10 a.m. PT. with the Apple website at one point teasing the name Wonderlust (this has since been removed and replaced with Apple Event). With three weak quarters of iPhone revenue year-over-year a lot is at stake for Apple and its share price with events in China and the consumer reception of the new iPhone.