All companies depend on some level of government regulations and for most investors they only see it when a government wishes to add more regulations. The governments have many reasons and sometimes it is political and sometimes it is to show who is boss and a host of other reasons. On the political side, China is not having the best relations with the US, so it wants the US to be better partners on the technology side. The government needed leverage and it choose Apple, not that Apple did anything wrong, because Apple has been in China for years and it is an important market for them.

In an article by Aitya Soni of Reuters, Beijing said it did not want its government employees not to use the iPhone. This was a few days before the launch of the iPhone 15 around the world. When a government imposes a regulation, analysts will dive into the financials of companies to see how they could or would be affected. Sometimes the regulation is good, sometimes not so good. In Apple’s case while the company enjoys very good relationships with China, the company is not immune to rising tensions between the 2 countries.

Apple gets nearly a 20% of its revenues from China. Similar to America, the iPhone has been the choice of people for the top of the line smartphones. Once a person owns an iPhone they are in the Apple system and Apple receives other revenue streams from them or service fees have increased in recent years to become a $10 billion business segment and growing.

It is possible, government regulations are designed to help the competitor Huawei which introduced the Mate 60 Pro smartphone which closes the big gap between it and the iPhone. the Mate 60 Pro runs on an advance chip made by SMIC and they hope to gain market share on the iPhone.

Linking to dividend paying stocks, often as investors we see the potential of the future for the company and we want to share in it. This is a great reason to consider to buy, the other side of the equation is to understand what happens if the government imposed regulations on the company. In this case of Apple you will understand 20% of the business is from China, it may fall to 17% but it is not going away. Understanding the possible negatives, will allow you to make better decisions and that is good investing.

There are more questions than answers, till the next time – to raising questions.