‘It’s us versus them.’
That’s what I imagine Tim Cook, CEO of Apple Inc. [NASDAQ:AAPL] tells employees.
You may have heard about their recent struggles. Apple isn’t selling as many iPhones as they’d like.
Not only is Apple not number one in this arena. They’re not even number two or three.
Things just aren’t the same without Steve Jobs. But it was bound to happen, I guess.
Apple is a consumer electronics company. You know who else falls into this bucket? Nokia, Motorola and Sony.
Where are these companies now? In the investing dustbin.
It’s exactly where Apple might be long-term.
If you look back at Apple’s history, it was new products and new technologies that led the company from one success to the next.
Problem is the iPhone, iPad and all the other iDevices have a shelf life. It only takes a few months for Samsung and Huawei to come out with a derivative. Then it’s bye-bye to fat profit margins and market share.
Apple then has to start the process all over again: come up with a new product to wow the world.
This was why Jobs was so valuable to Apple. He was the guy who had ideas for new products.
Cook sees Apple’s problems a little differently however…
Those difficult Chinese!
It’s those difficult Chinese, according to Cook.
They’re the ones not buying iPhones and it’s ruining everything.
From South China Morning Post (SCMP):
‘Apple reported a 19.9 per cent decline in shipments in China in the fourth quarter, but climbed one place to No 4 in smartphone shipments after Xiaomi did even worse, tumbling 34.9 per cent during the same period, according to a report by research firm IDC published on Monday. Overall industry shipments for China fell 9.7 per cent to 103 million units.
‘Bucking the trend, Huawei Technologies registered a 23.3 per cent gain, while second- and third-placed Oppo and Vivo eked out modest gains of 1.5 per cent and 3.1 per cent, respectively.’
I doubt they like each other, but Trump finds himself agreeing with Cook too.
It’s those difficult Chinese. They’re not buying enough American goods. They steal our technology. They’re not playing ball on trade.
More recently, the Donald went further to protect American interests. He banned Chinese telecom equipment, include Huawei’s, from US wireless networks.
Again, from SCMP:
‘…the ban would be a new blow to the expansionary plans of China’s telecoms giants, which account for the bulk of the country’s exports in this sector.
‘…In August, Trump banned US government agencies from buying equipment-made by Huawei Technologies, the Chinese telecoms and technology giant.
‘Trump is now set to expand the ban by signing an executive order that would bar private companies in the US wireless sector from buying any Chinese telecoms equipment.’
Trump just wants to protect Americans. With communication infrastructure in the hands of American businesses, citizens will be safer, right?
If it’s not China, it’s someone else
China’s government isn’t the only one skilled in surveillance.
The following comes from Kate Tummarello of the Electronic Frontier Foundation in January 2017:
‘With mere days left before President-elect Donald Trump takes the White House, President Barack Obama’s administration just finalized rules to make it easier for the nation’s intelligence agencies to share unfiltered information about innocent people.
‘New rules issued by the Obama administration under Executive Order 12333 will let the NSA—which collects information under that authority with little oversight, transparency, or concern for privacy—share the raw streams of communications it intercepts directly with agencies including the FBI, the DEA, and the Department of Homeland Security, according to a report today by the New York Times.’
To a lesser extent, our Aussie government does the same.
Peter Kammerer of SCMP points out that ‘Apple and Samsung smartphones…Facebook and Google, among so many others, collect and store and even share endless amounts of data about us whenever we activate them.’
‘Those big tech companies often also work with governments and militaries and it’s anyone’s guess what gets passed on, as whistle-blower Edward Snowden so helpfully revealed in his leak of United States spy agency documents,’ Kammerer adds.
This domestic surveillance is for our own good. Or so they tell us.
Regardless, Trump has successfully been able to paint China as the global bogeyman. He’s achieved what he set out to do.
Now all he has to do is muscle China into an agreement.
A 5G rebel
Members of the European Union are also considering bans on Chinese telecom equipment, likely thanks to Trump.
Even us laid-back Aussies banned Huawei from our connectivity roll out. The Labor party won’t even pander to the Chinese.
Again, it’s largely thanks to Trump and his ability to turn everyone against China.
The fifth generation of connectivity (5G) boasts massive leaps forward in technology. It might end up becoming the backbone of driverless cars, industrial automation and smart cities.
Why let such critical hardware be of the Chinese ilk? It was only late last year that we found out Chinese hardware was being used to spy on American businesses.
As reported by The Atlantic:
‘The report [from Bloomberg’s Businessweek] claims that Chinese spies systematically infiltrated U.S. corporate and government computer systems by installing hardware exploits on the motherboards of servers destined for widespread use, from video-streaming services to the CIA.
‘According to Businessweek, the infected machines provided a backdoor into any network on which the machines were installed. The reporting claims that at least 30 U.S. companies were affected, including Apple and Amazon, the most valuable companies in the world.’
So where does this leave China?
For now, it leaves them out in the cold.
China’s export-led nation, to a lesser extent depends on relationships. A good relationship with the US, Europe and Oz means China can push hundreds of millions of cheap manufactured units into foreign countries, tariff free.
Of course the opposite is happening. According to Trump, China has been benefiting for far too long. And he’s putting their darker activities in the spotlight.
I doubt you’ll see Aussie politicians call for Chinese import tariffs anytime soon. But I would say relations are weaker since the Donald has been in charge.
Same goes for Canada and most of Europe, in my opinion.
Mission accomplished I guess.
Editor, Money Morning
PS: What’s Driving This ‘Green Energy’ Stock Frenzy? Download this free report to find out.