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(Bloomberg) -- China plans to expand a ban on the use of iPhones in sensitive departments to government-backed agencies and state companies, a sign of growing challenges for Apple Inc. in its biggest foreign market and global production base.
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Several agencies have begun instructing staff not to bring their iPhones to work, people familiar with the matter said, affirming a previous report from the Wall Street Journal. In addition, Beijing intends to extend that restriction far more broadly to a plethora of state-owned enterprises and other government-controlled organizations, said the people, who asked not to be identified discussing a sensitive matter.
If Beijing goes ahead, the unprecedented blockade will be the culmination of a yearslong effort to root out foreign technology use in sensitive environments, coinciding with Beijing’s effort to reduce its reliance on American software and circuitry. It threatens to erode Apple’s position in a market that yields about a fifth of its revenue, and from where it makes the majority of the world’s iPhones through sprawling factories that employ millions of Chinese.
It’s unclear how many companies or agencies could eventually adopt restrictions on personal devices, and there’s been no formal or written injunction as yet, the people said. State firms or organizations will likely vary in how strictly they enforce such bans, with some forbidding Apple devices from the workplace while others could bar employees from using them entirely.
Chinese state firms like oil giant PetroChina Co. employ millions and control vast swathes of a centrally planned economy. Given Apple’s relationship with Beijing and its importance to the economy, it “has historically been viewed as relatively safe in China from government restrictions,” KeyBanc Capital Markets analyst Brandon Nispel said in a report Wednesday. “Is the government changing its stance?”
A representative for Cupertino, California-based Apple didn’t respond to a request for comment. The State-Owned Assets Supervision and Administration Commission and the State Council Information Office didn’t respond to faxed requests for comment.
Apple shares fell 2.9% Thursday in New York, following a 3.6% decline on Wednesday — their biggest single-day drop since Aug. 4. European chipmakers, including Apple supplier STMicroelectronics NV, also declined on Thursday.