According to media reports, Apple has been weighing a switch to storage and memory chips produced by Chinese firm CXMF in a bid to offset supply shortages triggered by the AI boom. The American tech company is initially looking to use those chips in the products it sells on the Chinese market.
Apple is looking to obtain authorization from the White House to use those China-made chips in its products, such as MacBooks and iPhones, that it sells in China. The tech company has already started conducting tests involving CXMF components in its products.
The motivation behind this push has been the worsening shortage of storage and memory chips on the global market as AI hyperscalers like Google, Meta and other tech giants buy up everything available in order to actualize their plans to expand their data center footprint across the globe in the race to dominate the AI industry.
As a result, manufacturers of these AI chips have increasingly focused on producing AI chips since they are sold at a premium. This has squeezed out the manufacturing capacity that had previously been allocated to making chips intended for consumer electronics like smartphones and laptops.
The exploding revenues of memory manufacturers have propelled those companies to unprecedented valuations as investors rush to buy their shares and get a slice of the huge profits that these manufacturers are making.
However, Apple’s bid to get the OK from the White House for its plans to use Chinese chips in its devices, even if those specific devices will be sold in China for now, is unlikely to be smooth. Already, a bipartisan coalition of senators penned a letter in July urging Apple to reconsider its plan to use CXMF chips in its products.
They argue that the products in question are several generations behind similar products from other manufacturers and it would be taking several steps back to start using those inferior chips.
Apple’s bid comes at a time when there is widespread distrust in Washington regarding Chinese technology. Concerns have been raised about Chinese products having the potential of being controlled remotely and the possibility of national security interests being compromised as Chinese authorities leverage their links with these companies to harvest data through the devices sold abroad.
This particular concern may not hold water since Apple plans to use those parts in products intended for the Chinese market. However, the indication of a possibility of expanding the markets where those products with Chinese parts end up being sold could trigger legitimate concerns among those wary of the backdoor exploitation of the technology by Chinese authorities.
For companies like Micron Technology Inc. (NASDAQ: MU) that have recently joined the trillion-dollar club due to their valuations rising as demand for memory chips goes off the charts, the dilemma that Apple faces offers opportunities to expand manufacturing capacity in order to benefit from this insatiable demand for storage and memory chips.
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