Apple Inc is exploring new sources of the memory chips that go into iPhones, including its first Chinese producer of the critical component, after a disruption at a key Japanese partner exposed the risks to its global supply.
It is considering expanding a roster of suppliers that already includes Micron Technology Inc and Samsung Electronics Co after Kioxia Holdings Corp in February lost a batch of output to contamination, people familiar with the matter said.
While Samsung and SK Hynix Inc — the world’s largest makers of flash memory — are likely to pick up the slack, Apple remains keen to diversify its network and offset the risk of further disruption from the COVID-19 pandemic and shipping snarls, they said.
The iPhone maker is testing sample NAND flash memory chips made by Hubei-based Yangtze Memory Technologies Co (長江存儲), the people said, asking not to be identified discussing private deliberations.
Apple has been discussing the tie-up with Yangtze, owned by Beijing-backed chipmaking champion Tsinghua Unigroup Co (清華紫光), for months, but no final decisions have been made.
A contract for Yangtze and its well-connected parent would be a milestone for China’s ambitions to build a world-class domestic chip industry that can compete with the US.
For semiconductor players aspiring to build a business on a national scale, memory is typically a gateway, because production capabilities count more than the intricate designs needed for advanced processors and other logic chips — though it requires enormous investment to sustain.
Tying up with Yangtze could open Apple to criticism back home given ties between Washington and Beijing are fraying over China’s ambiguous stance on the Ukraine war, as well as US efforts to contain its technological ascent. US lawmakers have long railed against the way Beijing champions and subsidizes local industry.
Created through a merger with a government-run chip factory in 2016, Yangtze Memory is regarded as China’s best shot at designing and developing homegrown 3D NAND flash memory, widely used for storing data in smartphones, laptops, servers and future gadgets, such as electric vehicles. Beijing regards the crucial component as one of the bottlenecks that could endanger its economy, because of a heavy reliance on imports.
The testing and discussions are no guarantee Yangtze chips will ultimately ship. It is unclear if the Chinese firm can convince Apple of its dependability, the people said.
Yangtze Memory technology is at least one generation behind and could at best be a backup choice to Apple’s main suppliers like Hynix and Samsung, they said. Even if Apple qualifies Yangtze’s components, it will need to gauge its reliability in terms of yields and quality. It took years for Beijing-based BOE Technology Group Co, another prominent Chinese Apple supplier, to reach high-volume production of iPhone displays.
Yet because memory chips are largely commoditized, Apple could conceivably decide to use Yangtze’s product in lower-end devices, such as the iPhone SE, the people said.
Apple’s iPhones are put together primarily in China by Foxconn Technology Group (富士康科技集團) and Pegatron Corp (和碩), which take components like memory chips from scores of different providers before assembling them into the final device. Yangtze Memory could offer an attractive source of cheaper chips close to their plants.
“Yangtze memory will supply about 5 percent of memory for iPhone SE, and 3 percent to 5 percent of memory for the upcoming iPhone 14. Apple is using its product because it offers competitive pricing,” said Jeff Pu (蒲得宇), an analyst with Haitong International Securities (海通國際證券), working off theoretical estimates.
This time was supposed to be different. The memorychip sector, famous for its boom-and-bust cycles, had changed its ways. A combination of more disciplined management and new markets for its products — including 5G technology and cloud services — would ensure that companies delivered more predictable earnings. Yet, less than a year after memory companies made such pronouncements, the US$160 billion industry is suffering one of its worst routs ever. There is a glut of the chips sitting in warehouses, customers are cutting orders and product prices have plunged. “The chip industry thought that suppliers were going to have better control,” said
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