There is no question that WeChat is a very popular app. Tencent’s “everything platform” (Facebook, LinkedIn, Uber, Instagram and others rolled up into one) has a very strong appeal among Chinese device users, both in the home country and abroad. The following quotes, even if anecdotal, may help to explain how attached to the platform some WeChat users seem to be:
It is precisely this platform, used by over 1 billion people each month and responsible for 30% of mobile internet time spent in China, that is at risk of being removed from Apple’s App Store by US Presidential order.
No doubt, demand for Apple’s devices could suffer, should the company cease to offer the WeChat app. The problem is that, in my view, the impact has been blown out of proportion.
Notorious Apple analyst Ming-Chi Kuo, of TF International Securities, says that global iPhone shipments could drop up to 30% if WeChat is banned entirely from Apple's App Store. The number, already large on the surface, seems absurd when put in perspective.
The most disruptive event in Apple’s history?
To understand what 30% of global iPhone shipments represents, let’s start with last year’s numbers. In 2019, Apple sold about 185 million units, according to Wedbush. Therefore, the number of iPhones at risk due to the WeChat ban, according to Ming-Chi Kuo, is 55 million.
I assume, hopefully correctly, that Greater China would be disproportionately impacted by the WeChat issue – understanding that there are other users of the platform elsewhere in the world. According to Canalys, only 27.5 million iPhones were shipped in mainland China in 2019. Worse yet, this number will likely dip in 2020, as the most recent quarter has suggested, regardless of the WeChat ban.
What this means is that, for Ming-Chi Kuo to be correct in his worst-case 30% drop prediction, Apple would need to:
- Stop selling iPhones in China altogether for a whole year, all the way down to zero;
- Lose at least as many sales outside mainland China, which would represent a whopping 18% decline in “world ex-China” iPhone shipments.
Clearly, this scenario is highly unlikely. For reference, the worst ever year-over-year drop in global iPhone unit sales was 8% in 2016. In all other years through 2018, iPhone sales always increased. The WeChat ban would need to be the most disruptive event in Apple’s history, by far, for a new record decline in iPhone sales to be set – and that just doesn’t pass my smell test.
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