In a recent joint letter to Apple Inc. from multiple senators of both parties in the United States, there is a request to refrain from purchasing products from Chinese storage chip companies ChangXin Storage (CXMT) and Yangtze Memory Technologies Co. (YMTC). The senators caution that such actions could potentially lead to Apple being included in the U.S. list of “Chinese Military Companies,” posing national security risks even if the equipment is intended for sale only in the Chinese market.
According to Bloomberg, Republican Senator Jim Banks and Democratic Senator Chuck Schumer led this initiative, along with several bipartisan senators, to address their concerns to Apple CEO Tim Cook.
The senators articulated in their letter that both ChangXin Storage and Yangtze Memory Technologies have recently been identified by the Pentagon in the latest “Chinese Military Companies” list, with the U.S. government acknowledging their affiliations with the Chinese military. They assert that if Apple were to adopt products from these companies, the world’s most valuable consumer electronics company would become dependent on suppliers recognized by the U.S. as having military ties, a short-sighted practice.
They further argue that even if the Chinese storage chips are currently intended for the Chinese market, once Apple completes certification for its supply chain, the decision to expand to global products could be made through an internal procurement decision, rendering the commitment to “only for the Chinese market” incapable of eliminating potential security risks.
Moreover, the senators refute the notion that purchasing Chinese chips assists in cost reduction, citing market analysis that reveals ChangXin Storage’s prices for certain products are not lower than those of competitors. They stress that regardless of price advantages, Apple’s utilization of said products could still have long-term implications for U.S. national security once certification is completed.
Driven by the wave of Artificial Intelligence (AI), the demand for high-performance storage chips continues to rise, tightening global supply and causing prices to surge. Sources reveal that to alleviate supply pressures, Apple is currently in discussions with ChangXin Storage and Yangtze Memory Technologies to potentially incorporate both companies into the storage chip supply system for products targeting the Chinese market, although negotiations remain uncertain.
In June this year, Apple raised prices for products such as Macs, iPads, smart home devices, and Vision Pro, attributing the constrained storage chip supply as one of the reasons for the adjustment. As of now, Apple has not publicly responded to the joint letter from the aforementioned senators.
As early as 2022, Apple had planned to utilize NAND flash memory from Yangtze Memory Technologies in iPhones designated for specific segments of the Chinese market. However, due to strong opposition from both parties in the U.S. Congress, the collaboration did not proceed.
On this occasion, U.S. senators are again urging Apple to commit by August 21 not to incorporate storage chips from ChangXin Storage or Yangtze Memory Technologies into their product supply chain, while also requesting clarification on any involvement in technology data sharing, intellectual property transfer, and whether they have sought priority supply from U.S. or South Korean storage chip manufacturers.
The senators believe that if Apple were to pioneer the procurement of Chinese storage chips, it could send the wrong signal to the market, prompting more tech companies to follow suit and further impact domestic semiconductor investments in the United States, potentially undermining the policy achievements of recent years in promoting the reshoring of chip manufacturing.
This incident comes amidst escalating U.S.-China tech competition, with the semiconductor supply chain emerging as a critical issue in U.S. policies towards China. In recent years, the U.S. has continued to tighten restrictions on Chinese semiconductor companies and promoted the reshoring of semiconductor manufacturing to the United States, aiming to reduce dependence on Chinese supply chains.