Samsung, LG investors spooked by China’s iPhone ban

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Samsung, LG investors spooked by China’s iPhone ban

Published: 12 Sep. 2023, 18:22

PARK EUN-JEE
park.eunjee@joongang.co.kr

People walk near an Apple logo outside its store in Shanghai, China. [REUTERS]

China’s push to ban Apple iPhones for government workers is dampening investment sentiment for Samsung, LG and smaller parts suppliers tied with the San Francisco-based smartphone maker.

Shares of the Apple vendors — Samsung Electronics, LG Display and LG Innotek — tumbled after reports that the Chinese government will extend its restriction on the use of iPhones at not only government bodies but state-owned corporations and organizations.

The move could strip Apple of 440,000 units, equivalent to 1 percent of its entire sales, should the order be limited to the central government.

When it extends to state-run corporations, it could affect 2 million units or translate into a 4 percent decline in sales, according to Kim Dong-won, an analyst at KB Securities.

Hit hardest among local suppliers is LG Inntek, the largest camera module supplier to Apple, where 75 percent of its revenue comes from deals with Apple.

The Seoul-based component company dipped by 6.13 percent on Sept. 7 after the Wall Street Journal reported the initial ban on the pricey handset device.

The stock hit a 52-week low the following day on the reports that the ban would also concern government-owned corporations.

“Apple shares plummeted 9.6 percent compared to the previous 52-week high while LG Innotek was down 29.6 percent and LG Display 31.3 percent,” Kim said.

LG Display is the second largest supplier of organic light-emitting diode (OLED) panels for iPhones after Samsung Display. The panel maker, 37.9 percent owned by LG Electronics, lost 1.57 percent on Sept. 7 and another 0.38 percent the following day, although the stock rose 0.76 percent on Tuesday. Around 30 percent of LG Display’s revenues stem from supply deals with Apple, according to a report from the Institute of Information & Communications Technology Planning & Evaluation, a state-run research center.

The news adds to the damage for the display maker as it is still reeling from falling global demand for televisions and PCs.

Apple is among the five largest clients of Samsung Electronics, which owns Samsung Display, according to its latest business report released in August.

Samsung Display stands as the primary panel supplier with around 21 percent of sales generated from Apple.

Samsung Electronics and SK hynix provide a range of memory chips including dynamic random access memory and NAND flash chips to Apple, although neither company revealed specific shares linked with iPhones or Apple.

Some analysts warn that the impact of China’s restriction could reverberate across other related sectors.

“The Chinese government is currently at the stage of reviewing the measure, but other stocks tied with the Chinese market have become volatile,” said Lee Jung-yeon, an analyst at Meritz Securities.

“The possible China ban is increasing downside risks for other stocks such as software, materials and automotive companies with high exposure to China,” the analyst noted.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]