Apple, the world’s most valuable company, is facing increasing pressure from regulators in Europe and China, who are tightening their rules on the tech giant’s online services and products. The company’s stock price has dropped by more than 4% in the past two days, as investors weigh the potential impact of these developments on Apple’s future growth and profitability.
EU Names Apple as a “Gatekeeper” of Online Services
On Wednesday, the European Commission (EC) named Apple as one of six tech companies that act as “gatekeepers” of online services, along with Alphabet, Amazon, ByteDance, Meta, and Microsoft. These companies have been identified as having a significant impact on the digital economy and society, and are subject to new obligations under the Digital Markets Act (DMA), which came into force last November.
The DMA aims to ensure fair and open competition in the digital sector, and to protect consumers and businesses from unfair practices by dominant platforms. According to the EC, a gatekeeper is a company that provides a core platform service, such as an app store, a social network, or a search engine, that has more than 45 million monthly active users in the EU and a market capitalization of more than 65 billion euros.
Under the DMA, gatekeepers have to comply with a set of rules that include:
- Making their messaging apps interoperable with other platforms
- Allowing users to choose which services to pre-install on their devices
- Providing access to data generated by their services to third-party providers
- Not using data obtained from their services to compete unfairly with other businesses
- Not discriminating between their own services and those of their rivals
The EC has given the six companies six months to report on how they will comply with these rules, or face fines of up to 10% of their annual global turnover.
China Bans iPhones for Government Workers
Meanwhile, Apple is also facing challenges in China, its second-largest market and its main production base. According to a report by the Wall Street Journal on Wednesday, China has banned government employees from using iPhones while at work, citing risks to national security. The ban extends to all iPhones, regardless of whether they are made in China or elsewhere.
The report said that some government workers had already faced iPhone restrictions depending on which agency they worked for, but the latest measure applies more broadly. The ban is seen as part of China’s efforts to reduce its reliance on foreign technologies and to promote its own domestic alternatives.
China has also tightened its regulations on online platforms and content providers in recent months, cracking down on issues such as data privacy, antitrust, and cybersecurity. Apple has complied with some of these rules, such as removing thousands of apps from its App Store in China that violated local laws or policies.
However, Apple has also faced criticism from some Chinese users and media outlets for allegedly allowing apps that promote separatism or undermine national sovereignty, such as those related to Hong Kong or Taiwan. Apple has denied any political bias and said that it follows the laws and regulations of every country where it operates.
How Will Apple Respond to These Challenges?
Apple has not commented publicly on the latest regulatory developments in Europe and China, but analysts have expressed mixed views on how they will affect the company’s performance and prospects.
Some analysts have argued that Apple has enough resources and resilience to overcome these challenges and maintain its competitive edge and loyal customer base. They have pointed out that Apple has a diversified portfolio of products and services, such as the iPhone, the iPad, the Mac, the Apple Watch, AirPods, Apple TV+, Apple Music, Apple Pay, and more, that generate strong revenue streams and high margins.
They have also noted that Apple has invested heavily in innovation and research and development, creating new features and functionalities that enhance its user experience and differentiate its offerings from those of its rivals. They have also highlighted that Apple has a strong brand reputation and image, as well as a loyal fan base that values its quality, design, privacy, and security.
Other analysts have warned that Apple could face significant headwinds and risks from these regulatory challenges, especially in China, where it faces fierce competition from local players such as Huawei, Xiaomi, Oppo, Vivo, and others. They have argued that Apple could lose market share and revenue if it fails to adapt to the changing regulatory environment and consumer preferences in China.
They have also suggested that Apple could face legal battles and reputational damage if it is accused of violating the rules or standards set by the regulators in Europe or China. They have also cautioned that Apple could face supply chain disruptions or higher costs if it has to relocate some of its production facilities or source materials from other countries.