Apple faces bipartisan pressure to rule out memory chips from two Chinese suppliers as an AI-driven shortage tightens global supply and raises production costs.
Summary
- Six US senators asked Apple to reject memory chips supplied by China’s CXMT and YMTC.
- Apple must provide a formal commitment by Aug. 21, according to the lawmakers’ letter.
- Both suppliers appear on the Pentagon’s Section 1260H list of Chinese military companies.
- AAPL closed 0.56% lower at $338.19 before extending its decline in Thursday trading.
Senators give Apple an Aug. 21 deadline
Six US senators have urged Apple CEO Tim Cook to abandon any plan to source memory chips from ChangXin Memory Technologies, or CXMT, and Yangtze Memory Technologies Co., commonly known as YMTC.
The bipartisan letter was led by Republican Senator Jim Banks of Indiana and Senate Democratic leader Chuck Schumer of New York. Senators Andy Kim, Jeanne Shaheen, Mike Crapo and Pete Ricketts also signed it.
Lawmakers asked Apple to confirm by Aug. 21 that it would not use components made by either supplier, including in devices produced exclusively for the Chinese market. Bloomberg first reported the letter.
“Once a part clears qualification for Apple production, extending it worldwide is a single procurement decision away,” the senators wrote.
The group also asked Apple whether it transferred intellectual property to CXMT or YMTC while evaluating their components. Such transfers could require approval from the US Commerce Department, depending on the technology involved.
Apple had not publicly responded to the letter at the time of writing.
Why US lawmakers oppose CXMT and YMTC
Washington’s concerns center on the suppliers’ alleged links to China’s government and defense industry.
The Pentagon added both companies to its updated Section 1260H list in June. The Defense Department document describes CXMT as affiliated with China’s Ministry of Industry and Information Technology and state-owned asset authorities.
It identifies YMTC as indirectly owned or affiliated with Chinese government and defense agencies. Both companies have denied that they support China’s military.
A Section 1260H designation does not impose the same restrictions as a full trade sanction. However, it limits Pentagon dealings with listed companies and signals possible future procurement or investment restrictions.
YMTC also remains on the Commerce Department’s Entity List, restricting its access to certain US technology, software and chipmaking equipment. CXMT is not currently on that list, although there are reports that a US interagency committee previously approved it for inclusion.
Apple encountered similar opposition in 2022 when it considered using YMTC flash memory in some iPhones. The company dropped those plans after lawmakers raised national security concerns.
AI memory shortage limits Apple’s options
The dispute comes as AI data centers absorb a growing share of global memory production. Samsung, SK Hynix and Micron have directed more capacity toward high-bandwidth memory used in AI accelerators, reducing supplies available for smartphones, computers and other consumer products.
CXMT has become the world’s fourth-largest memory producer, while YMTC has expanded its position in NAND flash storage. The companies are gaining pricing power as buyers compete for limited supply, according to Reuters.
Apple has argued that it needs access to Chinese memory and has sought assurances that CXMT will not be added to the Entity List, Reuters reported, citing people familiar with the discussions.
Blocking both companies would leave Apple more dependent on Samsung, SK Hynix and US-based Micron. That could weaken Apple’s ability to negotiate prices while memory costs remain elevated.
For US investors, the immediate risk is margin pressure. Apple must either absorb higher component costs, pass them to customers through higher product prices, or redesign parts of its supply chain.
Apple stock falls as investors await its response
Apple shares closed at $338.19 on July 29, down 0.56%, after reaching an intraday high of $344.57. The reversal prevented the company from closing above a $5 trillion market value.
AAPL extended the decline during July 30 trading, falling about 1.8% in the morning as investors also prepared for Apple’s quarterly earnings report.
The Aug. 21 response will show whether Apple accepts the senators’ demand or continues evaluating Chinese memory for locally sold devices. Lawmakers also want to know whether Apple sought priority supply from US and South Korean manufacturers, making its answer relevant to the company’s sourcing plans for the 2027 iPhone cycle.
Separately, Apple faces a federal lawsuit from three users who allege that fake apps impersonating Sparrow Wallet appeared on its App Store and caused approximately $1.835 million in Bitcoin losses.
