The Chinese government is set to expand the ban on iPhone use to include government-backed agencies and state-owned companies.

China has decided that the iPhone poses a national security risk, but banning the use of Apple's smartphone at some Chinese ministries is apparently just the first step. As Bloomberg reports, the ban is expected to expand to include employees at state-owned companies, as well as those at agencies backed by the government.

The impact of such a ban could be significant on future sales of iPhones in China. For example, state-owned companies such as PetroChina employ over 500,000 people. If you scale that up to include all companies and agencies subjected to the ban, it could easily see Apple lose millions of iPhone users in China this year.

Although Apple is establishing manufacturing locations outside of China, it's still heavily reliant on the country for producing hardware. In turn, Apple has helped create millions of jobs across China in the manufacturing sector, which may play a part in how widespread this ban becomes.

There's also a question regarding consumer confidence going forward—will Chinese consumers continue to choose the iPhone once it becomes widely known the government classes Apple's smartphones as a national security risk?

Alongside the iPhone ban, China is slowly reacting to the US sanctions blocking the most advanced chip-making technologies from being exported to the country. Recently Intel's $4.5 billion Tower Semiconductor acquisition was killed through China's inaction, exports of two vital chip-making metals were restricted, and Micron chips were banned. Meanwhile, Apple will be increasingly glad it decided not to use cheap Chinese memory in its smartphones.