Apple Considers Sourcing From Chinese Memory Producer
Apple (AAPL) is considering adding memory products sourced from Yangtze Memory Technologies (state), a Hubei Province based company we have mentioned a number of times, particularly in reference to the company’s efforts to replace as much US made equipment in their semiconductor process fabs as possible with Chinese sourced tools (05/10/21), our note on the investigation of China’s “Big Fund” management company (07/29/22), which has funded much of China’s semiconductor efforts, and Foxconn’s (2354.TT) attempt to purchase a 10% stake in Tsinghua Unigroup (state), which would give it more direct access to UNISOC (pvt) and YMTC (08/10/22).
While the company is not on the US Commerce Department’s ‘entity’ list, there has been some political discussion concerning the company’s ties to Tsinghua University, a state run institution that is said to have a number of laboratories that are researching defense related projects. YMTC began producing 64 layer 3D NAND in 2019 and has moved to 128 layer using a 20nm node, but unlike SMIC (688981.CH) and Fujian Jinhua IC (state) the company remains off of the DOC list, with support from a number of global semiconductor associations (SEMI.org, SIA, ITIF, etc.), while a number of think tanks and Congressmen have suggested the company’s ties to the Chinese military should warrant its inclusion under the terms of the 2018 Export Reform Control Act. Last month rumors surfaced that pressure from Commerce Secretary Gina Raimondo pushed congressional committees to examine the company, China’s largest memory producer, to see whether Congress would support its inclusion to the entities list.
Apple is said to be considering the company’s products for use in some iPhones assembled and sold in China, with no intention of their use in products that leave the Mainland, but members of the House Foreign Affairs Committee have suggested that “Apple will effectively be transferring knowledge and knowhow to YMTC that will supercharge its capabilities and help the Chinese Communist Party achieve its national goals. While we expect that if Apple were to source NAND from YMTC, there would be some technical communication between the two, especially given Apple’s high quality control standards, but with much of iPhone assembly done in China, Chinese technology spies would already have access to much of Apple’s design technology, and could reverse engineer much of what exists in an iPhone, so the panic concerning Apple sourcing YMTC NAND seems a bit overly dramatic.
From the perspective of broadly not wanting to help the Chinese semiconductor effort in any way, including the purchase of any components, adding YMTC to the entities list would slow the Chinse semiconductor industry’s growth to a degree, but the politics around anti-China sentiment, especially concerning semiconductors, seems to give politicians a platform that is hard to counter without seeming anti-American or anti-worker. While there is certainly a very legitimate goal in not supporting the expansion of the Chinese military effort, Apple’s purchase of YMTC NAND flash is going to do little to move the needle in China’s ability to produce ICBMs and other military equipment. If US politicians are so concerned about the development of China’s semiconductor efforts, perhaps a more unified vote (68 for/32 against) and less resistance to the recently passed CHIPs Bill would have shown China they have a cohesive adversary in the semiconductor space rather than a bunch of self-serving politicians.
While the company is not on the US Commerce Department’s ‘entity’ list, there has been some political discussion concerning the company’s ties to Tsinghua University, a state run institution that is said to have a number of laboratories that are researching defense related projects. YMTC began producing 64 layer 3D NAND in 2019 and has moved to 128 layer using a 20nm node, but unlike SMIC (688981.CH) and Fujian Jinhua IC (state) the company remains off of the DOC list, with support from a number of global semiconductor associations (SEMI.org, SIA, ITIF, etc.), while a number of think tanks and Congressmen have suggested the company’s ties to the Chinese military should warrant its inclusion under the terms of the 2018 Export Reform Control Act. Last month rumors surfaced that pressure from Commerce Secretary Gina Raimondo pushed congressional committees to examine the company, China’s largest memory producer, to see whether Congress would support its inclusion to the entities list.
Apple is said to be considering the company’s products for use in some iPhones assembled and sold in China, with no intention of their use in products that leave the Mainland, but members of the House Foreign Affairs Committee have suggested that “Apple will effectively be transferring knowledge and knowhow to YMTC that will supercharge its capabilities and help the Chinese Communist Party achieve its national goals. While we expect that if Apple were to source NAND from YMTC, there would be some technical communication between the two, especially given Apple’s high quality control standards, but with much of iPhone assembly done in China, Chinese technology spies would already have access to much of Apple’s design technology, and could reverse engineer much of what exists in an iPhone, so the panic concerning Apple sourcing YMTC NAND seems a bit overly dramatic.
From the perspective of broadly not wanting to help the Chinese semiconductor effort in any way, including the purchase of any components, adding YMTC to the entities list would slow the Chinse semiconductor industry’s growth to a degree, but the politics around anti-China sentiment, especially concerning semiconductors, seems to give politicians a platform that is hard to counter without seeming anti-American or anti-worker. While there is certainly a very legitimate goal in not supporting the expansion of the Chinese military effort, Apple’s purchase of YMTC NAND flash is going to do little to move the needle in China’s ability to produce ICBMs and other military equipment. If US politicians are so concerned about the development of China’s semiconductor efforts, perhaps a more unified vote (68 for/32 against) and less resistance to the recently passed CHIPs Bill would have shown China they have a cohesive adversary in the semiconductor space rather than a bunch of self-serving politicians.
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