Apple may consider adding Chinese companies to its list of memory chip suppliers

2022-05-23 0 By

Apple is reportedly exploring new suppliers for its iPhone memory chips, which could include the company’s first Chinese chip supplier, after production disruptions at a key Japanese partner exposed risks to its global supply.Apple is considering expanding its list of chip suppliers, which already includes Micron Technology Co. and Samsung Electronics Co., after Qiaoxing Holdings ltd. lost a batch of products to pollution in February, according to people familiar with the matter.While Samsung and SK Hynix are likely to take up the lion’s share of Apple’s chip supply, apple is still keen to diversify its supply network and offset further risks from the pandemic and shipping congestion, the sources said.Apple is now testing samples of NAND flash chips made by Hubei Changjiang Storage Technology Co., the people said.The sources did not want to be identified because the talks between the two sides have not been made public.Apple has been discussing a partnership with Changjiang storage for several months, but no final decision has been made.Cheung Kong storage is owned by chip maker Tsinghua Unigroup Group Co LTD.If Cheung Kong and its parent company win the Apple contract, it would be an important milestone for China as it looks to build its world-class chip industry at home.Memory is often a hurdle for semiconductor companies hoping to build a nationwide business because it requires more capacity to produce than advanced processors and other logic chips and requires significant investment.In 2016, Cheung Kong completed a merger with a government-run chipmaker, and the company is seen as China’s best chance to design and develop homegrown 3D NAND flash memory, which is widely used to store data in gadgets such as smartphones, laptops, servers and future electric cars.The tests and discussions do not guarantee that Apple will purchase chips from Changjiang.It is unclear whether the company can convince Apple of its reliability, people familiar with the matter said.They say Cheung Kong storage technology is at least a generation behind current state-of-the-art technology and is at best a fallback option for apple’s major suppliers, such as Hynix and Samsung of South Korea.Even if Apple authenticates the company’s components, it will need to measure their reliability in terms of volume and quality.Boe Technology Group Co LTD, for example, another well-known Apple supplier, took years to mass-produce iPhone displays.However, People familiar with the matter said Apple could decide to use Changjiang’s products in low-end devices such as the iPhone SE.Representatives for Yangtze Storage and Apple declined to comment.Over the past two years, component shortages and logistics problems stemming from the pandemic have plagued apple, the world’s largest consumer electronics brand, prompting a rethink of a supply chain that once relied on just-in-time inventory and a global network.In February, two factories in Japan halted production because of material contamination, highlighting the risks of over-reliance on one particular supplier.That could lead to a 5-10 per cent rise in flash memory chip prices in June, according to industry tracker Trendforce.The iPhone is largely assembled in China by Foxconn and Pegatron, which source components such as memory chips from dozens of different suppliers before assembling them into the final device.Factory storage could provide an attractive source of low-cost chips close to its factories, while potentially gaining government support in the world’s largest smartphone market.Jeff Pu, an analyst at Haitong International Securities, estimated: “Changjiang storage will provide about 5 per cent of the memory for the iPhone SE and 3-5 per cent for the upcoming iPhone 14.Apple will use its products because the company offers competitive prices.”Yangtze Storage’s products rely on a homegrown technology called Xtacking, which integrates storage cell wafers with supporting circuitry and performs better than traditional technology in some cases, one of the sources said.