Apple has plans to use Chinese chips for its iPhone 14 — US not happy

• Apple has plans to procure 3D NAND memory chips from China state-owned Yangtze Memory Technologies Co.
• US lawmakers claim the deal “would introduce significant privacy and security vulnerabilities to the global digital supply chain.”

Earlier this month, reports surfaced that US tech giant Apple Inc is considering using chips from Chinese state-owned chipmaker, Yangtze Memory Technologies Company (YMTC), for its iPhone 14 lineup. The news, though unsubstantiated, triggered US lawmakers to threaten Apple with increased scrutiny from Congress. Apple was quick to point out in a statement that it has no plans to sell iPhones with YMTC chips outside of China.

Despite that assurance, Senators from both parties last week asked the nation’s top intelligence official to lead a review of the security threat posed by the reported plan by Apple to use memory chips from a major Chinese chipmaker. The main concern with YMTC  is the fact that there are reports that claim the company has close ties to the People’s Liberation Army (PLA).

YMTC has grown from 1% of global market share for NAND memory chips in Q1 2020 to 5% as of the middle of 2022, and is on track to reach 13% market share by 2027, according to Yole Development. Last year, the Biden administration even described YMTC as China’s “national champion memory chip producer.” 

According to the White House, YMTC has even received around US$24 billion in subsidies from Chinese government sources, which, the White House said, was essential to the firm’s rapid development. Following that, four senators and other colleagues urged Commerce Secretary Gina Raimondo in July to place YMTC on the Department’s export blacklist, on the grounds that it was supplying companies under US sanctions.

Currently, Apple sources NAND flash from Korean giants Samsung and SK hynix, as well as Japanese producer Kioxia. It also buys RAM from SK hynix and Samsung, making its supply chain heavily reliant on Korea. That being said, two Republican lawmakers have said Apple is “playing with fire” if reports of its plans to source 3D NAND flash from China’s YMTC are proven true. 

“We write to convey our extreme concern about the possibility that Apple Inc. will soon procure 3D NAND memory chips from the People’s Republic of China state-owned manufacturer YMTC,” the lawmakers, led by Sen. Marco Rubio, wrote in a letter to Director of National Intelligence Avril Haines. The senators also want Haines to look at what they said was YMTC’s role in aiding other Chinese firms, including the telecom equipment manufacturer Huawei, which is under strict U.S. export controls. 

They even want Haines to examine YMTC’s alleged links to the Chinese military. The same letter also claimed that if Apple proceeded with “its plans,” (which is to say the plans the senators thought Apple had, irrespective of objective reality), it “would introduce significant privacy and security vulnerabilities to the global digital supply chain that Apple helps shape.” This is not the first time China’s top NAND flash manufacturer has been talked about as an additional storage supplier for the iPhone.

There rumors that Apple was considering diversifying its memory chip supply chain, with Bloomberg sources already claiming that China was in the mix, have been circulating since March this year.  The March reports came shortly after contamination disruption at Kioxia, based in Japan, exposed the risks to Apple’s global supply.