Apple’s China Risks Are Real, But the Market Is Missing the Bigger Picture


Apple Inc Tim Cook-by John Gress Media Inc via Shutterstock
Apple Inc Tim Cook-by John Gress Media Inc via Shutterstock

Apple’s (AAPL) long-standing reliance on China for both manufacturing and consumer demand has sparked concern among investors and analysts. With rising geopolitical tensions and tariff escalation, many people wonder if Apple can continue to grow in a world where its relationship with China is becoming more strained.

This negative sentiment has weighed on Apple’s stock this year. Compared to the other Magnificent 7 stocks, Apple’s shares are down 15.7% year to date, trailing the tech-heavy Nasdaq Composite Index’s ($NASX) 6.5% gain.

However, while Apple’s China risks are real, I believe the overall picture is far more bullish. Let’s dig deeper to find out more.

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Apple’s ecosystem is vast and increasingly sticky. It develops, manufactures, and markets consumer electronics, software, and digital services. Apple is well-known for its flagship products including the iPhone, Mac, Apple Watch, iPad, and Apple TV+, among others. Rising U.S.-China tensions continue to create uncertainty, particularly regarding tariffs.

CEO Tim Cook acknowledged that, while tariffs had “limited impact” in the March quarter, estimates suggest they could add $900 million to Apple’s costs in the June quarter, assuming current global trade policies remain unchanged.

Apple is also under increasing pressure in China’s consumer market. Consumer trends favoring domestic brands, government restrictions on iPhone use by state employees, and fierce competition from Huawei’s high-end smartphones are all legitimate threats. Historically, China has accounted for nearly 20% of Apple’s revenue, and even minor disruptions can have a significant financial impact.

Despite the headwinds, Apple reported $95.4 billion in revenue in Q2 of fiscal 2025, up 5% year over year, and set records in markets far beyond China, including the U.K., India, Brazil, Poland, and the Philippines. This quarter, Apple’s artificial intelligence (AI) strategy took center stage. With iOS 18, the company introduced Apple Intelligence, a tightly integrated layer of generative AI features for the iPhone, iPad, Mac, and Vision Pro.

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