Silicon Sellout Paper: The Five Risks of An Apple-YMTC Deal

On June 8th China Tech Threat (CTT) and the Coalition for a Prosperous America (CPA) released Silicon Sellout, a report detailing the dangers of Apple’s decision to source memory chips for the iPhone from Chinese state-backed chipmaker YMTC.

Our first blog post recounted the reasons Apple is entering into this deal. To recap, the company is likely able to purchase YMTC’s state-subsidized chips more cheaply than it can other chipmakers’ products. It’s also possible that the Chinese government has pressured Apple to choose YMTC chips as a condition of market access – a proposition that Apple would be hard-pressed to be reject given the size of the Chinese market.

Apple may reap a short-term financial reward from a deal with YMTC. But for America and the world, there are at least FIVE significant risks:

  1. An Apple-YMTC Deal Threatens American National Security

The Chinese government has already demonstrated capacity and will to illegally surveil technology users. In the 2010s, the Chinese military, in concert with a Chinese government subcontractor, allegedly inserted a tiny chip into thousands motherboards manufactured by Supermicro, obtaining stealth remote access at companies like Apple and Amazon Web Services. The Chinese government could conduct a similar espionage operating by inserting surveillance technologies into YMTC chips. YMTC is also closely tied to the Chinese military, which could insert “kill switches” into YMTC chips.

  1. An Apple-YMTC Deal will Put American and Global iPhone Users’ Privacy at Greater Risk

Silicon Sellout notes, “YMTC chips equipped with spyware and installed on Apple devices could funnel collected data back to Beijing.” Apple boasts of its user protections, but partnering with a Chinese state-backed company creates vulnerabilities for a surveillance-loving regime to surreptitiously collect American user data.

  1. An Apple-YMTC Deal Will Put China Closer to Controlling the Memory Chip Market
    YMTC has collected an estimated $24 billion in subsidies from the Chinese government since its founding in 2016. China is positioning YMTC to repeat the success of subsidized Chinese entities like Huawei, which have gained market share over Western competitors – and even put them out of business. The Apple deal will give a boost of legitimacy to YMTC, creating opportunities for the company to win more deals and likely put at least one competitor in the memory chip sector out of business.
  2. An Apple-YMTC Deal Jeopardizes Supply Chain Security

An Apple-YMTC pact could exacerbate the risk of American consumers already experiencing shortages of goods. Today a global semiconductor shortage is damaging virtually every industry’s capacity to produce goods and services.

  1. An Apple-YTMC Deal Threatens U.S. Jobs
    The U.S. semiconductor business employs an estimated 250,000 people, including some 24,000 in the memory sector. These jobs are at risk from a disruptive Chinese incursion into the market.

There are plenty of dangers inherent in a YMTC-Apple deal. Our next blog post will explore solutions to stop or mitigate them.

Check out our page to learn more about the YMTC-Apple deal.