Apple Nixes Plan For China’s YMTC Chips In iPhones: Report

Apple will forgo its plan to use less expensive memory chips from Yangtze Memory Technologies Co. after the U.S. launched a new round of China tech export controls.

Apple will hold off on plans to install memory chips from China’s Yangtze Memory Technologies Co. (YMTC) in future iPhone lines, Nikkei first reported Monday.

Apple had completed the long process to certify YMTC’s 128-layer 3-D NAND flash memory for its iPhones when the U.S. government unleashed a fresh round of tighter export restrictions affecting China’s tech exports earlier this month, according to multiple sources cited by Nikkei Asia.

The ditched plans will create a scramble to find a cost-effective alternative, as YMTC’s chips are about 20 percent less expensive than its leading competitors, including more advanced and far more expensive offerings from Samsung Electronics and Micron. They are the most advanced memory chips currently offered in China.

YMTC was placed on an “unverified list” of companies that have not been inspected and U.S. officials cannot verify end users. U.S. companies are prohibited from sharing any design, technologies, documents or specifications to companies on the “unverified list” without a license.

Dan Ives, managing director and senior equity analyst with Wedbush, told CRN in an email that he wasn’t too concerned about the potential financial impacts on Apple. “This will be a contained impact that should not pose any major risks to Apple’s production or balance sheet. That said, it’s a fly in the ointment for Cupertino,” he wrote.

Costs may have been a significant factor in Apple’s decision to stick with an older chipset with the entry-level iPhone 14 models—a move analysts cite as the reason the company cut production back on those models. Apple reportedly refused to accept a price increase from Taiwan-based chipmaker TSMC, which plans to hike chip prices by 6 percent to 9 percent. TSMC makes the A16 and A15 chips used in the current iPhone lineup.

Earlier in the month, the U.S. Commerce Department barred American companies from shipping certain grades of advanced chip equipment to any Chinese client without a license. The ban signaled a fresh attempt to curb China’s semiconductor development. The same curbs will apply to American-made electronics or other items that China could use to produce its own chipmaking tools and equipment.

U.S. officials have called the move a national security effort. “We are doing everything in our power to protect our national security and prevent sensitive technologies with military applications from being acquired by the People’s Republic of China’s military, intelligence and security services,” Under Secretary of Commerce for Industry and Security Alan Estevez said in a statement.

The new sanctions on Beijing’s chip ambitions will have a ripple effect, experts say. “This will set the Chinese back years,” Jim Lewis, a technology and cybersecurity expert at the Center for Strategic and International Studies (CSIS), a Washington D.C.-based think tank, told Reuters. “China isn’t going to give up on chipmaking, but this will really slow them [down].”