U.S. lawmakers warn Apple not to buy flash memory chips from Chinese firm...or else

Lawmakers on the Republican side of the aisle have given Apple a stern warning. They told the company that if it starts sourcing Nand flash memory chips that store data for the iPhone from China's Yangtze Memory Technologies Co. (YMTC), Apple will have to deal with increased scrutiny from Congress. Apple has told the Financial Times that it has not used chips from YMTC in any product but it was "evaluating sourcing from YMTC for Nand flash memory chips to be used in some iPhones sold in China."

Republican Marco Rubio (Vice-chair of the Senate intelligence committee), and Michael McCaul, (the top Republican on the House foreign affairs committee) said that they became alarmed after reading a report that said Apple would turn to YMTC to procure flash memory chips for the iPhone. But as Apple pointed out in the statement above, it has no plans to sell iPhones with YMTC chips outside of China. Apple also said that all user data stored on Nand flash chips in Apple devices is "fully encrypted."

Senator Rubio told the Financial Times that "Apple is playing with fire. It knows the security risks posed by YMTC. If it moves forward, it will be subject to scrutiny like it has never seen from the federal government. We cannot allow Chinese companies beholden to the Communist party into our telecommunications networks and millions of Americans' iPhones."

Rep. McCaul states that "YMTC has extensive ties to the Chinese Communist party (CCP) and military. There is credible evidence that YMTC is breaking export control laws by selling goods to Huawei. Apple will effectively be transferring knowledge and knowhow to YMTC that will supercharge its capabilities and help the CCP achieve its national goals."

YMTC is a national security threat according to members of both major political parties in the U.S. Back in July, Senate Majority Leader Chuck Schumer (a Democrat) voiced concerns about the Chinese chip maker with commerce secretary Gina Raimondo according to a person with knowledge of the discussion. In July, Schumer and Senator Mark Warner (the Democrat who is the chair of the Senate intelligence committee) joined a bipartisan group of senators asking the Biden administration to place YMTC on the Entity List.

Being placed on the Commerce Department's Entity List is the same punishment that the Trump administration handed out to Huawei which prevents the company from accessing its U.S. supply chain including Google. The group wanted President Biden to place YMTC on the list for selling memory chips to Huawei. That is a violation of U.S. export control rules which were changed in 2020 to prevent Huawei from buying cutting-edge chips manufactured using American technology.

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The lawmakers also accused YMTC of using subsidies from Beijing to sell its chips below cost. The bipartisan group told commerce secretary Raimondo that "YMTC is an immediate threat." One person familiar with the commerce department's reaction to the lawmakers' request to place YMTC on the Entity List says that the commerce department is familiar with the situation and is currently preparing a response.

An independent tech expert named Zach Edwards is surprised that Apple would even consider using chips from YMTC. He says, "It’s pretty shocking that Apple is partnering with a Chinese technology company... which is in exactly the same industry as the other banned companies and has the direct support of the top CCP leadership."

Earlier in the story, we told you that the Chinese Communist Party (CCP) is subsidizing YMTC allowing the company to sell chips below cost. McCaul, the member of the House foreign affairs committee said, "Massive CCP subsidies to YMTC mean the company will undercut the market. This could very likely devastate the memory chip market and give China even more control of this critical national security technology. How can the world’s data be secure if it’s stored on a chip made by a CCP national champion?"