Apple, the world’s most valuable company, is considering sourcing memory chips for its iPhone 14 from Yangtze Memory Technologies Company (YMTC), according to a recently uncovered Credit Suisse report.
The report, which was obtained by industry news outlet Light Reading, states that “YMTC could start supplying memory for new iPhone models in 2022.” Noting that Apple began adapting the design of NAND controllers last year to support YMTC chips, the report predicts that the company’s decision will be made within the next two months.
“YMTC’s presence in the best-selling smartphone would look about as welcome as a Gazprom pipeline through Germany does to opponents of Russia,” Light Reading editor Iain Morris adds.
U.S. experts and policymakers have cautioned that YMTC, which evidence shows maintains close ties to the Chinese military and Chinese Communist Party (CCP), is a wolf in sheep’s clothing.
Last year, U.S. Representative Michael McCaul and Senator Bill Hagerty called on Commerce Secretary Gina Raimondo to add YMTC to the U.S. Entity List, citing “facts that link YMTC to the CCP military, the Party-state, and a national semiconductor plan designed to deplete the U.S. defense industrial base.”
A December 2020 analysis by James Mulvenon, Director of Intelligence Integration for SOS International, detailed YMTC’s ties to the Chinese military. Those include senior executives’ involvement with China’s military modernization program and an ownership stake by the recently bankrupted Tsinghua Unigroup, which supplied the People’s Liberation Army.
In 2020, former U.S. Representative Robert Pittenger and Dr. Roslyn Layton warned that “slow-moving” export controls have bought time for Chinese state-owned entities, like YMTC, to game the system—a problem exacerbated by the vacancy at the head of the Bureau of Industry and Security (BIS), the agency responsible for implementing export controls on sensitive U.S. technology.
“The United States needs to protect its innovation base from China and cannot blindly allow its technological advantage to be acquired by China’s state-owned enterprises and ‘national champions,’” Mr. Mulvenon wrote last year.
Apple’s consideration of partnering with YMTC—which Light Reading explains may be due to “pressure from the Chinese Communist Party to use YMTC for products sold in China” (last year Apple’s revenues from sales to China grew 70%, making it the company’s fastest growing market)—sends an alarming message, for several reasons.
First, Apple’s engagement lends credibility to YMTC, despite overwhelming evidence that the chipmaker is involved in the CCP’s global ambitions. As one of the largest and most recognized U.S. brands, Apple’s actions could motivate other American companies to trust products made by Chinese state-owned entities, even though those may contain vulnerabilities that could be exploited by the Chinese military against U.S. interests.
Perhaps more alarming, should Apple decide to rely on YMTC to supply the memory chips for its iPhone 14, it would provide material support to the CCP’s ambitions to dominate the global NAND market. This would accelerate what Dylan Patel, a leading semiconductor industry analyst, called the impending “NAND Apocalypse.”
“YMTC is able to produce NAND memory chips, critical memory that’s used in nearly every device and server and military application,” Mr. Patel cautioned, noting that YMTC is the beneficiary of significant subsidies from the Chinese government. “They will be able to essentially cause margins in the entire industry to fall heavily due to these huge subsidies… like [the CCP has] in other industries in the past, such as solar.”
The revelation that Apple is in talks with China’s “national champion” semiconductor manufacturer should raise red flags for the Biden Administration, which has called maintaining the United States’ competitive advantage in this critical field a “national security issue.”
Apple’s partnership with YMTC could put millions of Americans’ personal information at risk and create serious vulnerabilities in U.S. defenses. Policymakers must act—and they have a very narrow window to do so.