Apple recently unveiled its iPhone 14 with the usual fanfare and promotional TV spots. Not well advertised though is the company’s decision to consider using a Chinese chip maker as a supplier for its new phones.
Apple’s actions are stunning given the geopolitical tensions between Beijing and Washington. They also reveal that corporate America is hopelessly hooked on cheap Chinese goods, doesn’t mind undercutting U.S. competitiveness in a critical industry, and is willing to sacrifice our security all in order to save a buck.
China has developed a strategy of propping up companies with enormous subsidies in order to undercut global competitors by selling discounted products. It’s a time tested honey trap that attracts scores of foreign businesses that won’t hesitate to do business with the Communist Party for the right price.
Enter Apple. America’s leading smartphone manufacturer is currently courting Yangtze Memory Technology Corp. (YMTC), a Beijing backed chip maker with links to the Chinese military. YMTC has received approximately $24 billion in government subsidies and is clearly under the thumb of the Chinese Communist Party. It’s risky business.
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Despite the warning signs, Apple remains undeterred because it’s in the market for cheap chips. The company issued a statement that it’s "evaluating" sourcing chips from YMTC for "some iPhones sold in China." Regardless of where the phones are sold though, adding YMTC as a supplier would be a "major boon" for the Chinese company. It also presents two other issues for Apple.
First, doing business with YMTC would damage bipartisan congressional efforts aimed at bolstering American chip competitiveness. Our government recently committed $52.7 billion to the chip industry when Congress passed the CHIPS and Science Act. This spurred Micron, a direct YMTC competitor, to invest $40 billion in manufacturing.
I served on Capitol Hill in senior positions in the Senate and House. CHIPS is the type of massive bipartisan undertaking rarely seen. It’s aimed squarely at countering Beijing’s whole of society approach to dominating the chip market. Apple would undermine America’s strategic interests by subsidizing Communist China’s efforts should they move forward with YMTC.
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The second issue surrounding YMTC is security. Chinese technology is laced with vulnerabilities rendering any hardware relying upon it susceptible to espionage. Sen. Marco Rubio, R-Fla., said Apple is "playing with fire" and that it understands the "security risks posed by YMTC."
Last week Rubio and Sen. Mark Warner, D-Va., the chairman of the Senate Intelligence Committee, sent a bipartisan letter to the Director of National Intelligence calling for a security review of YMTC given reports of a pending partnership with Apple. While Apple has responded that YMTC chips will not be used in iPhones sold outside of China, what guarantees do we have that our security will not be compromised?
Communist China has a penchant for fusing civilian, military and political assets to conduct espionage. In 2018, Bloomberg reported that Apple and other companies were hacked after Chinese spies planted chips on servers partially manufactured in China and sold by an American company. Apple denied the allegations.
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TikTok continues to reject allegations that it shares American user data with Beijing despite a BuzzFeed report containing leaked audio from 80 internal TikTok meetings that quotes an employee as saying "everything is seen in China." A report surfaced last week that over the past 20 years approximately 150 Chinese scientists at Los Alamos National Laboratory had been recruited back to China to provide insights into U.S. technology with the intent of building up China’s military. Their unrestricted warfare against the U.S. is relentless.
China understands that chips impact our lives in ways that are incomprehensible. They are used in everything from refrigerators and medical devices to military equipment. Demand for them has skyrocketed because of COVID-19 manufacturing delays and society’s increasing reliance on "smart" technology. It’s predicted that China will become the world’s leading chip "superpower" by 2030. The last thing they need is an assist from America’s third-largest company.
The fact that Apple is considering YMTC as a supplier amid a chip war with China is proof that Beijing’s cheap goods honey trap still works.
Apple’s actions would undermine American competitiveness in a key strategic industry and trigger security concerns. Yet, Tim Cook and Co. persist.
The Chinese Communist Party views technological superiority as critical to supplanting America as the world’s leading superpower. Apple should not move forward because it knows the stakes are about more than business.
