Apple has begun testing memory chips from Chinese supplier CXMT, according to a new Wall Street Journal report citing people familiar with the matter.
The two companies have reportedly held early talks about using the Chinese chips in some Apple products sold in China, including iPhones and MacBooks. But the fate of the plan would be entirely up to the U.S. government, which imposes strict rules on American tech companies that want to do business with Chinese companies, especially when it comes to chips.
ChangXin Memory Technologies, also known as CXMT, specializes in DRAM memory chips and is not only considered China’s largest chipmaker but also the world’s fastest-growing supplier of memory chips. The chipmaker is also considered a national security risk by Washington. The Biden administration designated the chipmaker a Chinese military company, and the Trump administration considered adding it to a trade blacklist but decided against it earlier this summer, according to a Reuters report.
Previous reports claim Apple has been lobbying the Trump administration for a green light regarding CXMT for some time now, an action that has struck a chord with some members of Congress, who fear the action will undercut U.S. chip manufacturers like Micron and expose Apple tech secrets to Chinese competitors. Prominent China hawk Representative John Moolenaar told the Financial Times back in June that any partnership between Apple and the Chinese chipmaker “would be a grave mistake” that would help Beijing “succeed in its plans to dominate critical supply chains.”
A bipartisan group of senators led by Senator Chuck Schumer also sent Apple an open letter in June, asking the Cupertino giant to commit to not using CXMT-produced memory chips “in any Apple product sold anywhere in the world.”
“As the most demanding component buyer in the world, a decision by Apple to procure Chinese memory chips would carry weight well beyond the company’s own purchase orders. This validation would function as a signal that other buyers follow,” the senators wrote in the letter. “The limitation that CXMT memory would, for the moment, be confined to devices sold in China cannot be expected to hold, because once a part clears qualification for Apple production, extending it worldwide is a single procurement decision away.”
Apple is joining a growing list of American laptop makers, including Acer, HP and Asus, that are reportedly resorting to business with the controversial Chinese chipmaker despite pushback from Congress, highlighting just how dire the memory supply crunch has become.
AI hype has led to an unprecedented AI infrastructure buildout and skyrocketing demand for high-bandwidth memory chips. With finite capacity, chipmakers have responded by prioritizing the AI industry’s supply needs, leaving consumer electronics manufacturers that rely on memory chips for computers and smartphones to deal with the fallout of the supply crunch even as demand continues to rise. As a result, delays and price hikes have plagued consumer electronics, as the crisis continues with no clear end in sight, with some experts seeing its effects bleed into the next decade. The memory supply crunch is currently “the single biggest drag on the smartphone industry,” according to a recent report from Counterpoint Research.
Apple has suffered its fair share of the impact as well. The company has had to pay increasingly more for memory in each passing financial quarter, executives said in a recent earnings call. They were able to offset some of that by carrying over inventory, but CEO Tim Cook said that strategy will have limited impact with the situation looking to get worse.
“If you look beyond September, we see the market pricing for memory continuing to increase, which could drive an increasing impact on our business,” CEO Tim Cook said in the company’s earnings call last month.
So the price hikes can be passed down to consumers even more, unless Apple can find an alternative source for the supply. The tech giant has already had to raise prices for many of its products from iPads to MacBooks, and market watchers are pricing in hikes for iPhones as well.
Cook said in the earnings call last month that the company had “reluctantly raised prices,” because the industry is experiencing “a 100-year flood on memory pricing, with exponential increases in memory prices.”
But getting the chips from Chinese manufacturers is not the only solution to the problem. According to the New York Times, companies across industries, including consumer electronics makers, are reportedly lobbying Washington on a plethora of solutions, many of which include a form of requiring chipmakers to allocate a portion of their memory chip supply specifically to non-AI industries.
