Commerce Secretary says US opposes Apple buying Chinese memory chips

The Wall Street Journal reports that US Commerce Secretary Howard Lutnick has urged Apple not to turn to Chinese memory chips as the company looks for alternatives to alleviate the ongoing global supply shortage. Here are the details.

A bit of context

Over the past few months, Apple has been seeking approval from the Trump administration to buy memory chips from two Chinese companies, CXMT and YMTC, a move that has been facing bipartisan pushback.

For context, YMTC is on the US Commerce Department’s Entity List, and the Pentagon has designated both YMTC and CXMT as Chinese military companies due to their alleged ties to China’s military.

So, in addition to the alleged competitive disadvantage US companies could face from competing with Chinese state-subsidized rivals, another issue is that Apple typically needs customized components for its devices.

However, Apple COO Sabih Khan told the WSJ that while Apple does customize many iPhone components, “there isn’t a lot of customization” when it comes to memory, raising the possibility that Apple could simply use off-the-shelf Chinese memory chips.

If Apple did require customized chips, though, it would likely need to share product information with CXMT or YMTC, which is currently restricted under US export-control rules and would require a license from the Commerce Department.

’The Trump administration is not in favor of that’

Apple has made little secret of its intention to expand its memory supply options. That includes Tim Cook arguing the US should “look at all supply,” reports that Apple had already been discussing the issue directly with the Trump administration, and Cook’s remarks on the company’s recent earnings call that Apple is “evaluating all options.”

There have also been reports that Apple was already testing memory chips from CXMT and exploring a potential deal with YMTC, prompting a bipartisan group of US senators to urge the company to abandon any plans to source memory from the Chinese companies.

Now, The WSJ reports that Commerce Secretary Howard Lutnick has weighed in, expressing the Trump administration’s opposition to Apple’s plans.

From the report:

The Trump administration doesn’t want Apple to buy memory chips from China, Commerce Secretary Howard Lutnick said in an interview. Apple may do so anyway.

And

“The Trump administration is not in favor of that,” Lutnick said in an interview after touring an Apple manufacturing facility in Houston. There have to be “other solutions to the memory issue, but it’s not great American companies using Chinese memory.”

Lutnick’s comments came just a day after he joined Tim Cook at Apple’s new Advanced Manufacturing Center in Houston, Texas, alongside Senator Ted Cruz and other federal and local officials.

Apple’s new center is part of the company’s $600 billion investment in domestic manufacturing, which many see as part of its effort to remain in the Trump administration’s good graces and secure favorable deals in return.

However, it is increasingly looking like a deal allowing Apple to source memory chips from China will not be part of the package. When asked by the WSJ whether he had relayed the Trump administration’s opposition to the idea directly to Apple, Lutnick said he had done so “plainly.”

What do you think Apple should do? Let us know in the comments.

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