Apple said to be eyeing new chip sources, including from China

BEIJING • Apple is exploring new sources of the memory chips that go into iPhones, including potentially its first Chinese provider, after a production 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 and Samsung Electronics after Kioxia Holdings lost a batch of output to contamination in February, people familiar with the matter said.

While Samsung and SK Hynix - 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 pandemic and shipping snarls, they said.

The iPhone maker is testing sample Nand flash memory chips made by Yangtze Memory Technologies, the people said. Apple has been discussing the tie-up with Yangtze, owned by Beijing-backed chipmaking Tsinghua Unigroup, for months, though no 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 United States.

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.

But tying up with Yangtze could open Apple to criticism back home, given that ties between Washington and Beijing are fraying over China's ambiguous stance on the Ukraine war as well as American efforts to contain its technological ascent. US lawmakers have long railed against the way Beijing champions and subsidises local industry.

Created though a merger with a government-run chip factory in 2016, Yangtze is regarded as China's best shot at designing and developing home-grown 3D Nand flash memory, widely used for storing data in smartphones, laptops, servers and future gadgets such as in 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 talks 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 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.

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