Apple would be evaluating chip suppliers, even in China

(Bloomberg) — Apple Inc. is exploring new ways to stock up on the memory chips that go on iPhones, including its first Chinese producer of the critical component, after an outage in a key Japanese partner exposed the risks of its global supply.

The company is considering expanding a list of suppliers that already includes Micron Technology Inc. and Samsung Electronics Co., after Kioxia Holdings Corp. lost a production batch due to pollution in February, according to people familiar with the matter. While Samsung and SK Hynix Inc., the world's largest flash memory manufacturers, are likely to take over, Apple remains interested in diversifying its network and neutralizing the risk of further pandemic disruption and shipping problems, they said.

The iPhone manufacturer is testing samples of NAND flash memory chips manufactured by Hubei-based Yangtze Memory Technologies Co., people said, who asked not to be identified as a private matter. Apple has been discussing the alliance with Yangtze, owned by Beijing-backed chip-manufacturing giant Tsinghua Unigroup Co., for months, although no final decision has been made.

A contract for Yangtze and its powerful matrix would be a milestone for China's ambitions to create a world-class domestic chip industry that can compete with the United States. For semiconductor manufacturers who aspire to build a business on a national scale, memory is often a gateway because production capabilities are more important than the intricate designs needed for advanced processors and other logic chips, although it requires enormous investment to sustain itself.

Partnering with Yangtze could expose Apple to criticism in his country, as ties between Washington and Beijing are being deteriorated by China's ambiguous stance on the Ukrainian war, as well as US efforts to contain its technological rise. US lawmakers have long criticized the way Beijing defends and subsidizes its local industry.

Created in 2016 through a merger with a government-managed chip factory, Yangtze Memory is regarded as China's best choice for designing and developing a self-made 3D flash memory, widely used to store data on smartphones, laptops, servers and future appliances such as electric vehicles. Beijing considers this crucial component as one of the bottlenecks that could jeopardize its economy, due to heavy dependence on imports.

Tests and discussions do not guarantee that Yangtze chips will finally be sent. It is not clear whether the Chinese company can convince Apple of its reliability, people said. Yangtze Memory's technology is at least a generation behind and, at best, could be a backup option for major Apple vendors, such as Korean Hynix and Samsung, the sources noted. Even if Apple approves Yangtze components, it would have to evaluate their reliability in terms of performance and quality. BOE Technology Group Co., another prominent Chinese supplier to Apple, took years to achieve a high volume of iPhone display production.

However, because memory chips are largely a commodity, Apple might decide to use Yangtze's product on low-end devices such as the iPhone SE, people said. Representatives from Yangtze Memory and Apple did not want to comment.

Original Note:

Apple Said to Weigh More Chip Suppliers, Including in China (1)

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