US lawmakers warn Apple about using Chinese group chips in new iPhone

Republican lawmakers have warned Apple that it will face congressional scrutiny if the California-based company buys memory chips from a controversial Chinese semiconductor maker for the new iPhone 14.

Marco Rubio, Republican vice chairman of the Senate Intelligence Committee, and Michael McCall, top Republican on the House Foreign Affairs Committee, said they are alarmed by media reports that Apple will add Yangtze Memory Technologies Co. to its list of suppliers to Nand. flash memory chips that are used to store data on smartphones.

“Apple is playing with fire,”Rubio told the Financial Times. “He is aware of the security risks associated with YMTC. If he moves forward, he will be subject to a scrutiny never seen before by the federal government. We cannot allow Chinese companies beholden to the Communist Party to have access to our telecommunications networks and millions of American iPhones.”

Asked about congressional concerns, Apple told the FT it has not used YMTC chips in any products, but said it is “evaluating YMTC sources for Nand chips to be used in some iPhones sold in China.”

Apple has said it is not considering using YMTC chips in phones for sale outside of China. He added that all user data stored on the Nand chips used by the company were “fully encrypted.”

In April, the FT reported that the White House and the Commerce Department were investigating allegations that YMTC was violating U.S. export control regulations by supplying chips to Huawei, a Chinese telecommunications equipment group.

“YMTC has extensive ties to the Chinese Communist Party and the military. There is credible evidence that YMTC is violating export control laws by selling Huawei products,” McCall told the FT. “Apple will effectively transfer knowledge and know-how to YMTC, which will enhance its capabilities and help the CCP achieve its national goals.”

Senate Democratic Majority Leader Chuck Schumer also privately raised concerns with Commerce Secretary Gina Raimondo about YMTC, according to a person familiar with the situation.

YMTC did not respond to a request for comment on its relationship with Apple.

In July, a bipartisan group of senators, including Schumer and Mark Warner, the Democratic chairman of the Senate Intelligence Committee, called on the Biden administration to blacklist YMTC from the Commerce Department, effectively barring American companies from providing technology to the Chinese group.

The senators, who included James Risch, the top Republican on the Foreign Relations Committee, said YMTC should be placed on the “organization list”because it violated export control regulations by selling memory chips to Huawei.

The lawmakers also accused Beijing of subsidizing YMTC in a way that would help the “national champion”dominate the sector by selling chips below cost, as China has done in other areas such as the solar industry.

“YMTC poses an immediate threat,”they wrote to Raimondo.

One person familiar with the Commerce Department’s position said it was aware of the concerns and was preparing a response to the senators.

The spokesman said the ministry’s Bureau of Industry and Security is conducting a China-related policy review that “potentially seeks to use a variety of legal, regulatory and, where necessary, enforcement tools to prevent advanced technology from falling into the wrong hands.””

McCall, who is set to head the House Foreign Affairs Committee if Republicans gain control of the lower house of Congress in November’s midterm elections, said Chinese YMTC subsidies pose a threat.

“CCP’s massive subsidies for YMTC mean the company will disrupt the market. This could most likely disrupt the memory chip market and give China even more control over this critical national security technology,” he said. “How can the world’s data be protected if it’s stored on a chip made by a national CCP champion?”

Several people familiar with the situation said lawmakers have been asking Apple about YMTC-related speculation in recent months but haven’t heard back. Apple has not commented on congressional requests.

Apple has been criticized as the Biden administration is ramping up efforts to make it harder for China to access cutting-edge technology. U.S. officials recently told Nvidia and Advanced Micro Devices — two U.S. chip makers — that they would have to obtain special licenses to sell advanced processors used for AI applications to Chinese companies.

In July, Congress passed legislation that would provide U.S. semiconductor manufacturers with a $52 billion pool to support the development of the domestic chip industry and reduce dependence on foreign companies.

Highlighting the importance of YMTC for China, President Xi Jinping visited the company in 2018 after Washington imposed tight restrictions on Huawei and ZTE, another Chinese telecommunications equipment manufacturer.

“It’s amazing that Apple is partnering with a Chinese technology company… that operates in exactly the same industry as other banned companies and has direct support from the CCP’s top leadership,”said Zach Edwards, independent tech expert.

Additional report by Eleanor Olcott in Hong Kong

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