Apple abandons plans to use Chinese chip supplier after Biden showdown
Apple has cut ties with a major Chinese chip supplier following the latest sanctions imposed by the Biden administration on China’s tech industry. The iPhone maker has shelved plans to use memory chips made by China’s Yangtze Memory Technologies Co. (YMTC), Japanese Nikkei Asia published today (October 17).
Apple has been working with YMTC for months to certify its 128-layer 3D NAND flash memory chip for use in iPhones. The NAND flash memory chip is a common component in consumer electronics from smartphones to personal computers. YMTC chips are not currently used in Apple products. Apple had just finished certifying YMTC’s memory chips for use in iPhones when Washington announced tougher export restrictions against China earlier this month.
New restrictions in Washington target China’s chip industry
On October 7, the Ministry of Trade presented comprehensive regulations which make it difficult for American companies to export semiconductors and chip-production of equipment for YMTC i 30 other Chinese firms added to the list of trade restrictions known as the Unverified List. This list was created to prevent the use of American technology by foreign entities for military purposes. A company is listed when the US government cannot confirm who its end users are.
Under the new rules, US companies are prohibited from sharing any designs, technologies, documents or specifications with companies on the unverified list without a special license. Those listed have 60 days to allow US officials to conduct on-site inspections. If they don’t, they will be added to the Commerce Department’s Entity List, a trade blacklist that prohibits all exports from American firms.
YMTC, founded in 2016, is China’s largest manufacturer of advanced memory chips. Its 128-layer NAND chips, while still a generation or two behind those of market leaders such as Samsung and Micron, are up to 20 percent cheaper than those of competitors thanks to government subsidies, according to Nikkei Asia.
Losing the partnership could be a blow to Apple’s production costs. Apple currently sources memory chips from Samsung and Micron, according to him list of suppliers. He began negotiations with YMTC in 2018 in search of more cost-effective memory chips. It is unclear whether Apple wanted to buy those chips exclusively from YMTC. Apple did not immediately respond to a request for comment.
YMTC is also under investigation by the Commerce Department over whether it violated US export rules by selling chips to Chinese smartphone maker Huawei, which is on the agency’s entity list.
Apple’s global supply chain is caught in a split between the US and China
Apple assembles the vast majority of iPhones, iPads and Macs in mainland China through suppliers such as Foxconn. Escalated geopolitical tensions and domestic turmoil in China this year have forced the Californian giant to rethink its supply chain.
In April, Apple moved part of its iPhone assembly line to India in light of the widespread Covid lockdowns in China that have forced factories to halt production.
“Apple’s global supply chain management strategy continues to change in response to deglobalization trends, mainly to reduce assembly work in China,” tweeted Ming-Chi Kuo, a consumer technology analyst at TF International Securities based in Hong Kong known for his analysis of Apple.
Kuo estimates that in three to five years, Apple products sold in the US, which account for about 30 percent of its global sales, could be entirely sourced from non-Chinese factories. In the long term, China could turn from Apple’s global factory into a regional supplier serving only the Chinese market, he added. another tweet.
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