IIn the midst of new restrictions imposed by the American government on the technology industry in China, Apple has apparently suspended a planned delivery relationship for the time being. According to a report by the business publication “Nikkei”, the electronics group does not want to use memory chips from Yangtze Memory Technologies, the largest manufacturer of such semiconductors in China, in its iPhones, as previously planned.
According to the report, Apple had already completed the months-long process of certifying so-called NAND memory chips from Yangtze. The group has planned to use the semiconductors in its devices as early as this year.
America vs. China: The Chip Quake
Yangtze supplies the most advanced memory chips of all Chinese manufacturers, even if they still lag behind market-leading suppliers such as the Korean supplier Samsung or the American company Micron by one or two model generations. The Yangtze chips are at least 20 percent cheaper than those of established competitors. Apple initially planned to only include them in iPhones sold in China, but has since considered eventually using them to cover 40 percent of its total NAND needs.
ASML is also alarmed
The US government announced new export restrictions for China less than two weeks ago, and Yangtze has been affected in several ways. The memory chip maker was put on a list of so-called “unverified” companies along with other Chinese technology specialists. What this means is that the US government cannot audit who ends up using their products, and this is seen as a kind of precursor to getting on the government’s official blacklist (“entity list”) that imposes restrictions on doing business with connected to China.
Beyond expanding the list, the Americans have imposed broad export restrictions on high-performance chips and semiconductor manufacturing equipment. There are also restrictions on American citizens working in Chinese factories and supporting the development and production of chips there. Yangtze felt the latter directly.
According to media reports, shortly after the restrictions were announced, American companies such as Applied Materials, KLA and Lam Research, which supply equipment for chip plants and provide related services on site, began to withdraw staff from the Chinese company. Dutch company ASML, which also makes equipment for chip fabs, told its workforce that US employees are no longer allowed to support customers in China, “whether directly or indirectly,” until further notice.
According to observers, the withdrawal of know-how could prove painful for Chinese companies. For example, it would be questionable whether Yangtze would still be able to manufacture the NAND chips for Apple, even if the Americans wanted to keep them. The report on the slackened partnership with Yangtze comes at a time when Apple is trying to reduce reliance on China in its supply chain.
Apple has so far had the vast majority of its devices manufactured by contract manufacturers in China, but has recently put out feelers to other Asian countries. The group has expanded its production network in India and Vietnam in particular.