Apple Built Its Empire With China. Now Its Foundation Is Showing Cracks.

As Apple geared up for this year’s iPhone release, Wall Street analysts at Credit Suisse issued a report saying that Apple might include YMTC chips in upcoming models. Though Apple and YMTC neither confirmed nor denied the report, the potential deal prompted lawmakers, including Senators Chuck Schumer, Democrat of New York and the majority leader, and Marco Rubio, Republican of Florida and a member of the Senate Intelligence Committee, to send letters urging the Biden administration to investigate Apple’s plans.

Semiconductor industry officials also raised concerns with lawmakers that Apple had assisted in recruiting engineers from Western companies to help YMTC improve its production, according to three people familiar with the matter.

Apple later sought to reassure lawmakers by telling them that it would use YMTC chips only for iPhones sold in China. But that did not address congressional leaders’ bigger concern that any purchase from YMTC would hurt the market for memory chips.

Lawmakers urged Gina Raimondo, the commerce secretary, to put YMTC on the United States’ “entity list,” a designation that would bar it from buying American technology and components without a waiver. On Oct. 7, the department stopped short of that, placing export restrictions on YMTC and 30 companies believed to have ties to China’s military.

The new restrictions cost YMTC access to critical American machinery for a new factory in Wuhan and may limit its ability to work with a company like Apple.

In the days after the restrictions were issued, the Japanese business outlet Nikkei published a report saying Apple had dropped its plans to use YMTC. When asked if the Nikkei report was accurate, an Apple spokesman declined to comment.

Lawmakers continue to pressure Apple and YMTC. In a statement to The New York Times, Mr. Rubio said, referring to Apple’s chief executive: “If Tim Cook understands the risks that YMTC and the rest of the Chinese Communist Party’s chip-making efforts pose to U.S. national security and that of our allies, then he and his company should clearly commit not to proceed.”

Ana Swanson and Edward Wong contributed reporting from Washington.

Article source: https://www.nytimes.com/2022/11/07/business/apple-china-ymtc.html