Apple seeks to alleviate some of the pressure on its supply chain by requesting an exception from the Trump Administration to purchase chips from RAM to CXMTa Chinese company blacklisted by the Pentagon for its ties to the People’s Liberation Army. According to the Financial Times, Apple contacted the Department of Commerce more than a month ago and also spoke with other officials in Washington about the main manufacturer of DRAMthe type of RAM used as main memory in computers, tablets and servers, from China.
The Pentagon’s blacklist is that of Chinese companies considered linked to the People’s Liberation Army. It is known as list 1260H or list of ‘Chinese military companies’. Being in it does not automatically equate to a sanction, but Yes, it poses a strong reputational risk. and may trigger restrictions on US government contracts or purchases.
For Apple, the situation is complicated. Tim Cook recently warned of that the company was going to be forced to raise prices because AI companies are buying large amounts of memory for data centers and last week Apple increased those of the MacBook, iPad and other devices in its catalog. In total, 23, with increases of between €30 and €1,500.
Micronone of the three main memory manufacturers in the world along with SK Hynix and Samsunghas recently pointed out that its customers have committed billions of dollars to secure memory supplies years in advancewhich shows how complicated the race to guarantee the infrastructure for AI has become. This places the aforementioned suppliers in a position of greater power and pushes hardware manufacturers to look for alternatives.
CXMT is one of those alternatives, but not the simplest. Apple has been trying to diversify part of its supply chain for years to reduce its dependence on Chinaespecially in the final assembly, although remains heavily reliant on Chinese manufacturing and suppliers. Even Chinese domestic brands are leaning towards CXMT and YMTC instead of depending on Samsung, Micron and SK Hynix.
Legally, Apple is not prohibited from buying chips from CXMTbut doing business with a company linked to the Chinese military carries serious reputational risks. It is possible that CXMT ends up subject to export controls for undermining US security.
The company also appeared on a list of candidates to be added to the call ‘Entity List’ of the Commerce Department, but the decision was postponed because the White House was in the middle of trade negotiations with China. This list includes companies or entities subject to special licensing requirements to export, re-export, or transfer U.S. technology to them.
It is not clear if the Administration will give its approval to Apple. But, If the White House granted permission to Apple, the decision would likely generate a strong backlash. John MoolenaarRepublican chairman of the US China Committee House of Representativestold the Financial Times ‘that Apple decides to partner with a Chinese military company would be a serious mistake… Helping the Chinese Communist Party succeed in its plans to dominate critical supply chains will make our country’s technology industry and economy more dependent on China at a time when we must build secure technological supply chains with our allies.’
The demand for AI has become hardware in a bottleneck and companies are trying everything possible to return the situation to normal, even if it means make politically sensitive decisions.