So much for long-term strategies. Apple has put on hold plans to use chips from China’s Yangtze Memory Technologies in products such as the iPhone. Washington’s latest crackdown topples years worth of Chinese tech companies’ investment to break into the US market. This bad news could spread.
The timing of recent US export controls imposed against the Chinese tech sector could not be worse. Apple is reported to have completed a complicated process to certify Yangtze’s Nand flash memory for use in iPhones earlier this month.
This agreement would have boosted both sides. Yangtze could have become Apple’s main supplier for Nand flash memory for iPhones. Apple would have finally diversified its narrow flash memory supply chain, sourcing these chips at significantly lower prices than from South Korea’s Samsung and the US-based Micron.
Nand flash offered one of the few export hopes for Chinese suppliers. This type of chip, used for storing text, images and music in mobile devices, does not require the high end technology required to manufacture more advanced Dram chips. Chinese chipmakers are years behind rivals like Samsung and TSMC on Dram chips. But at least China could compete on price in the Nand sector.
Beijing has spent over $100bn to support the local chip industry, not just hoping for self-sufficiency but to gain from the growing global chip demand. Yangtze Memory is a major beneficiary, and has government-linked funds as key stakeholders.
Worse, the latest restrictions ban US chip equipment makers from providing services that help Chinese companies produce advanced chips. Yangtze currently uses chip gear by US-based Applied Materials, KLA and Lam Research.
But the real damage to Chinese tech companies will come from other restrictions. US companies are banned from sharing any design, technologies, documents or specifications to unapproved Chinese companies. This goes far beyond semiconductors. Expect other Chinese Apple suppliers, including display maker BOE and assembler Luxshare, to soon follow Yangtze’s path.
Our popular newsletter for premium subscribers is published twice weekly. On Wednesday we analyse a hot topic from a world financial centre. On Friday we dissect the week’s big themes. Please sign up here.
