President Trump’s trade war threatens to divide the world’s smartphone makers

“During an earnings call last May, Apple Chief Executive Officer Tim Cook told investors he wasn’t worried about President Donald Trump’s trade war with China,” Joshua Brustein writes for Bloomberg Businessweek. “The world’s two superpowers were too intertwined, Cook argued, for either one to try to seriously damage the other. ‘China only wins if the U.S. wins, and the U.S. only wins if China wins,’ he said. ‘And the world only wins if China and the U.S. win.'”
“Just after the market closed on Jan. 2, Cook had a different message. For the first time in 15 years, Apple Inc. cut its revenue projections,” Brustein writes. “The CEO explained that the Trump administration’s trade policies had hurt demand for iPhones in China.”
MacDailyNews Note: Here’s are Tim Cook’s actual words regarding China in his letter to Apple investors dated January 2, 2019, verbatim:
While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.
China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp.
Despite these challenges, we believe that our business in China has a bright future. The iOS developer community in China is among the most innovative, creative and vibrant in the world. Our products enjoy a strong following among customers, with a very high level of engagement and satisfaction. Our results in China include a new record for Services revenue, and our installed base of devices grew over the last year. We are proud to participate in the Chinese marketplace.
Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline. In fact, categories outside of iPhone (Services, Mac, iPad, Wearables/Home/Accessories) combined to grow almost 19 percent year-over-year.
While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be. While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, US dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements.
“There’s no escaping geopolitics. Huawei Technologies Co. and ZTE Corp., the big Chinese phone and equipment manufacturers, have been under intense pressure from the Trump administration, which is seeking to limit China’s control of fifth-generation, or 5G, wireless networks. The new technology will power not only smartphones but also autonomous vehicles and connected infrastructure,” Brustein writes. “Chinese dominance over such a vital new technology poses a potential security risk, at least according to U.S. intelligence agencies.”
“The fear is that the Chinese government would force these big companies to include back doors in their equipment, a notion that the Trump administration has used to lobby allies against granting contracts to Huawei or ZTE,” Brustein writes. “On Jan. 2, Elizabeth Warren, the Massachusetts senator and likely presidential candidate, blasted ZTE for its connections to the Chinese government… As her comments suggest, many American policymakers have already made up their minds on China’s tech companies. At a congressional hearing in May, Representative Anna Eshoo, a Democrat from California, asked Samm Sacks, a senior fellow at CSIS, what it would cost to eliminate Chinese equipment from U.S. telecommunications altogether.”
In April 2018 the Trump administration imposed a seven-year ban on ZTE working with U.S. suppliers, then announced ‘on May 13 that he’d reached a deal with President Xi to save ZTE. ‘Too many jobs in China lost,’ he tweeted. ‘Commerce Department has been instructed to get it done!'” Brustein writes. “ZTE had been spared, but the message was clear: Trump, if he wants to, has the power to cripple or even kill China’s biggest telecoms.”
Read more in the full article here.
MacDailyNews Take: It seems fairly logical that communications equipment and/or devices like smartphones, especially insecure Android phones, could be used to surveil. Both sides of the aisle here in the U.S. are therefore concerned.
Sowing more seeds of Fear, Uncertainty, and Doubt about Apple, Bloomberg is. — MacDailyNews, December 12, 2018
Regardless, it’s always darkest before the dawn. A better balance will come.
I’m cognizant that in both the U.S. and China, there have been cases where everyone hasn’t benefited, where the benefit hasn’t been balanced. My belief is that one plus one equals three. The pie gets larger, working together. — Apple CEO Tim Cook, March 24, 2018

The United States is insisting that all countries that have placed artificial Trade Barriers and Tariffs on goods going into their country, remove those Barriers & Tariffs or be met with more than Reciprocity by the U.S.A. Trade must be fair and no longer a one way street!
— Donald J. Trump (@realDonaldTrump) June 24, 2018

At least half of the popular fallacies about economics come from assuming that economic activity is a zero-sum game, in which what is gained by someone is lost by someone else. But transactions would not continue unless both sides gained, whether in international trade, employment, or renting an apartment. — Thomas Sowell, June 14, 2006