Of America’s five biggest tech companies, Apple looks to be the most vulnerable to the current tumult in trade between China and the US.
And now one technology analyst says the next six months could be “choppy,” as the high stakes trade war between the U.S. and China intensifies.
“It’s a big deal, and it’s going to take longer than people realize, to work itself out,” said Gene Munster, Managing Partner, Loup Ventures, said to me, during an interview this morning.
Munster said he’s spoken with several former US trade officials, who have perspective and context on the brewing US-China trade battle. Munster expects it will take 6-24 months before the two sides iron out their differences.
Munster added that he’s heard China was surprised by the Trump administrations tariff policy and its aggressive stance against China’s Huawei. Munster said the US-China row has gotten much more political, and the Huawei actions have “made it more personal.”
While China may suffer more in the short-term, Munster said of the U.S. five biggest technology companies, it is Apple, which is “no doubt, most vulnerable.” While Amazon and Microsoft have some cloud operations in China, Google and Facebook have largely been locked out of the Chinese market.
So as Apple potential investors and current shareholders digest the current U.S.-China trade war, Munster sees the impact on Apple as “measurable, but manageable.”
Munster points out that mainland China accounts for between 10 to 15 percent of Apple’s overall revenue. That’s a lot more exposure to what’s going on in and with China, than any of the other Big Tech companies.
Munster said there is a possibility that Apple’s China revenues could be closer to 5 to 10 percent if the US-China trade tariff battle continues for a prolonged period of time. And there become serious questions, how exactly does Apple CEO Tim Cook figure out how to boost revenues in other areas of its business to compensate for the potential loss of sales from China.
Apple CEO Tim Cook in a recent interview with CBS News said that he did not “anticipate” his company would be targeted in the event that China escalated the trade fight.
If you had put a dollar into Apple shares a year ago, your investment is basically flat. If you put a dollar into Apple on January 1, 2019, your investment is up over 22 percent. And if you invested in Apple just a week ago, you would be up over 7 percent.
Yet, Apple shares are still off 8 percent from its recent peak, and 16 percent off its record back last October. And it’s been awhile, since Apple’s market cap eclipsed $1 trillion for the first time in August 2018. Apple’s market cap today is $886 billion.
“Apple is still the world’s greatest company and my excitement outweighs the concerns over China. I’m particularly excited about Apple’s opportunity around 5G, which we could see kick-in by the fall of 2020,” Munster added.
“Apple benefits the most among the big tech companies from the 5G cycle,” Munster said. He added the new 5G phones and networks will generate “instantaneous” applications and services.
Munster also said Apple is positioned to provide a variety of augmented reality applications with value to customers, and a variety of new visual data, gaming, and business workflow mobile services.
From augmented reality, we shifted our discussion to the topic of artificial intelligence, and how big that is to not only Apple, Amazon, Google and Facebook, Microsoft and the U.S. government, but to the Chinese government, as well.
Munster said that China sees its future in “artificial intelligence, telecommunications, and aerospace” and it’s military and economic power will be defined by its “technology power.”
Just as there are concerns about Chinese industrial spying, there are fears surrounding how China could potentially utilize its massive investment in artificial intelligence for economic warfare, industrial theft and espionage and also the use of military applications for national security advantage.
There is speculation in the markets, that President Trump will jack up tariffs on Chinese goods, if Chinese President Xi Jinping does not meet the U.S. President at the G-20 meeting scheduled for the end of June in Osaka, Japan.