Apple will stop using Chinese chips due to US export restrictions on China, what kind of impact will export restrictions have and what will happen in the future?


by

Harald Groven

On October 7, 2022, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) announced an interim final rule (IFR) that strengthens export control rules for semiconductor-related goods, mainly to China. In response, there are concerns about various impacts of export restrictions, such as reports that Apple has suspended plans to use Chinese memory chips in its products.

Apple freezes plans to use China's YMTC chips - Nikkei | Reuters
https://www.reuters.com/technology/apple-freezes-plan-use-chinas-ymtc-chips-nikkei-2022-10-17/

Apple Nixes Plan For China's YMTC Chips In iPhones: Report | CRN
https://www.crn.com/news/components-peripherals/apple-nixes-plan-for-china-s-ymtc-chips-in-iphones-report?itc=refresh

US Government Export Block Could Prevent Apple Using Chinese 3D NAND | Tom's Hardware
https://www.tomshardware.com/news/ymtc-chips-off-the-menu-for-apple

Xi's Speech, & US Chip Export Controls
https://whatchinawants.substack.com/p/xis-speech-and-us-chip-export-controls

Biden declares economic war on the Chinese semiconductor industry
https://noahpinion.substack.com/p/biden-declares-economic-war-on-the

China Responds to Chip Export Controls - by Irene Zhang
https://www.chinatalk.media/p/china-responds-to-chip-export-controls

The IFR imposed restrictions on the export of advanced semiconductors intended for use in supercomputers or for semiconductor development and production in China. In addition, 31 Chinese companies have been added to the BIS entity list (transaction restriction list), and the drastic export restrictions by the Biden administration have been described as an ``economic war''. According to the U.S. Undersecretary of Commerce for Industry and Security, the goal of the regulation is to 'protect our national security and ensure that classified technology, including military applications, is used by the People's Republic of China's military, intelligence, and security services. It is to prevent it from being acquired.'

The United States is cracking down on semiconductor exports to China due to the suspicion that ``China will develop weapons and decipher code using AI and supercomputers''-GIGAZINE



At the same time as the export restrictions, Apple had canceled plans to use memory chips from China's Yangtze River Memory (YMTC) in iPhones, Nikkei Asia reported from multiple sources. According to a supply chain executive, Apple originally planned to start using YMTC chips as early as 2022, but changed its policy due to U.S. export restrictions and political pressure. The YMTC chip was removed from the new iPhone.

YMTC chips were originally planned to be used only in iPhones sold in the Chinese market, but Apple eventually considered buying up to 40% of the NAND flash memory for all iPhones from YMTC. , says one source.


by Raimond Spekking

It is known that YMTC was added to the BIS 'Unverified List' on October 7, 2022, and if companies added to the Unverified List fail to provide the required information within a certain period of time, the official export control It may be added to the entity list, which is a blacklist. In addition, tightening export controls on China's semiconductor sector, announced the same day, bar American chip equipment makers from providing services and technical support to help Chinese companies produce advanced chips. is expected to be hit hard by this.

Dan Ives, managing director and analyst at American investment firm Wedbush, said YMTC is only a small fraction of the companies supplying memory chips to Apple, and the potential financial impact on Apple. says he's not worried about On the other hand, CFRA Research analyst Angelo Gino said, 'The more significant impact is that Apple will leverage Chinese companies in the US and improve its cost profile over time, further expanding its supplier base. It limits the possibility of diversification,' he said about this regulation.

Also, Sam Olsen's What China Wants , which publishes news focused on China's growing influence, states, 'Beijing is a dominant force in new technology areas such as AI, robotics and self-driving cars. All of these new tech emerging technologies could be affected by the US export embargo, because China can't currently make its own chips without US chips, so it's going to stay that way. If this continues, the burden on China's technology economy will increase.This will also lead to risks to the legitimacy of the regime from the pressure of economic planning on the Chinese Communist Party,' he said. points out.

Similarly, Mr. Noah Smith's Noahpinion cites 'the know-how that China can obtain' as a major blow to this regulation. He cited the example in the book ' Asia's Mechanism ' that 'a Korean company hired retired Japanese engineers and absorbed the know-how of automobiles and electronic equipment, and Korean companies defeated Japanese companies.' Smith points out that China is doing the same. However, there arereports that the Biden administration's export restrictions will prohibit American citizens from working in China's semiconductor industry, so Chinese companies will not be able to export know-how.

Analyst Jordan Schneider translated a comment by a Chinese entrepreneur, saying, 'New regulations against Americans are driving an industry-wide decapitation.' We are facing a supply cutoff, the resignation of all American staff and an immediate shutdown of operations.' However, Mr. Schneider and Mr. Smith also expressed skepticism that the 'decapitation' that Chinese entrepreneurs say will occur completely, and the Biden administration's regulation is only for Americans and Taiwanese and South Korean semiconductors Both said it would be a big blow but not completely lost because it doesn't apply to professionals.




The China Semiconductor Industry Association (CSIA) issued a statement saying it was 'disappointed' by the Biden administration's regulations, saying, 'Such unilateral measures not only harm the semiconductor industry's global supply chain, but also , and more importantly, it will adversely affect the spirit of trust, goodwill and cooperation among global semiconductor industry players that the industry has carefully cultivated over the past decades.' At a press conference held on October 14, Mao Ning, a spokesperson for China's Ministry of Foreign Affairs, said, 'China believes that the United States has overextended the concept of national security and abused export control measures. We are resolutely opposed to obstructing Chinese companies.'

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