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Why Apple Stock Dropped This Morning

By Rich Smith – Sep 27, 2021 at 1:16PM

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The EU doesn't like Lightning cords and plans to legislate them away.

What happened

Shares of Apple (AAPL -0.34%) stock dipped 1.5% in noonday trading, EDT, Monday, and the slip appears tied to some news out of Europe that broke late last week.

So what

As The Verge reported Thursday, the European Commission, the executive arm of the European Union, is considering mandating that all cellphones sold in the EU use a standard USB-C power cord.  

Such a requirement, if it becomes law (and it might not become law) wouldn't be a big deal to companies such as Alphabet (GOOG -0.44%) (GOOGL -0.55%) that sell phones that already use USB-C for charging. It could be a big problem for Apple, however, which uses, and sells, proprietary Lightning cables to charge its iPhones.  

As The Verge points out, "if you want to plug anything into an iPhone, be it charger or adapter or accessory, you have to go through Apple. And Apple takes a cut of every one of those devices." While Apple doesn't break down precisely how much it makes from selling such peripherals for its devices, if you've ever tried to shop for a Lightning cord on Amazon and had to balance price against the risk the cord will stop functioning prematurely -- just like your last one -- it's hard to escape the impression that Lightning cords provide a nice revenue stream to Apple.

Row of device power cords of various types

Image source: Getty Images.

Now what

So this new EU law could be a problem for Apple. It might not be as big a problem as it seems, however.

Apple could, for example, design future iPhones to charge wirelessly, as it's rumored to be planning. The Verge notes that "a USB-C port [would only be] mandatory for devices that charge using a cable."

It also wouldn't be a problem for Apple immediately, because manufacturers "will eventually have 24 months to comply with the new rules" if they become law, says The Verge. Given two full years to design a workaround, Apple will probably survive this kerfuffle just fine.

Indeed, I wouldn't put it past Apple to turn lemons into lemonade and grow an entirely new business selling wireless chargers instead.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Stocks Mentioned

Apple Stock Quote
Apple
AAPL
$147.81 (-0.34%) $0.50
Alphabet Stock Quote
Alphabet
GOOGL
$100.44 (-0.55%) $0.55
Alphabet Stock Quote
Alphabet
GOOG
$100.83 (-0.44%) $0.45

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