Apple tests DRAM chips from US-sanctioned Chinese company

What happened?

According to a report from The Financial Times picked up by 9to5Mac and Engadget, Apple is actively testing DRAM memory chips from Chinese manufacturer CXMT (ChangXin Memory Technologies) for potential use in devices sold in China. CXMT was blacklisted by the U.S. Department of Commerce in 2023 for alleged ties to the People's Liberation Army (PLA), restricting the sale of American technology to the company. Apple had previously requested a waiver from the U.S. government to use these chips, as reported by The Financial Times in September 2024. The current tests, which include integrating CXMT chips into device prototypes, represent a significant step toward potential commercial adoption, though sources close to the matter say no final decision has been made.

Why is this important?

This decision reflects the growing pressure Apple faces in China, its second-largest market after the United States, with sales accounting for approximately 19% of the company's total revenue in 2024 (about $70 billion). On one hand, it needs to comply with local regulations requiring greater use of domestic components, driven by the Chinese government to promote technological self-sufficiency. On the other, it must navigate U.S. sanctions aimed at limiting China's access to advanced technology. If Apple adopts CXMT chips, it could reduce its reliance on Samsung and SK Hynix, which currently supply most DRAM chips for iPhones and iPads. However, it also risks retaliation from the U.S. government or criticism for supporting a company linked to the Chinese military. Notably, Apple faced a similar situation in 2023 with NAND memory chips from YMTC, another sanctioned Chinese manufacturer, though it ultimately did not incorporate them into its products after pressure from Washington.

Potential consequences

• For Apple: diversification of suppliers and potential cost reduction (CXMT chips are estimated to be 10-15% cheaper than Samsung's), but with regulatory and reputational risks. If the U.S. government denies the license, Apple could face sanctions or fines for violating export restrictions. Additionally, using chips from a company linked to the PLA could draw criticism from U.S. consumers and lawmakers.
• For the tech industry: sets a precedent for other U.S. companies, such as Dell or HP, to consider sanctioned Chinese suppliers, eroding the effectiveness of restrictions. This could lead to further fragmentation of the global supply chain, with companies having to choose between complying with U.S. sanctions or accessing the Chinese market.
• For U.S.-China relations: could intensify trade tensions and lead to new sanctions or countermeasures. China has already threatened to restrict iPhone sales in the country if Apple does not meet local content requirements. On the other hand, the U.S. could expand the blacklist or impose tariffs on products containing CXMT chips.

Context and analysis

Apple had already begun lobbying in Washington for a license to use CXMT chips, arguing it needs to adapt to the Chinese market. The current test indicates the company is moving in that direction, though there is no confirmation yet that the chips will be used in final products. Historically, Apple has used multiple suppliers for key components, such as modem chips (Qualcomm and Intel) and displays (Samsung and LG), but including CXMT would be the first time it turns to a U.S.-sanctioned manufacturer for DRAM memory. It's worth noting that Apple has faced similar challenges with other components, such as NAND memory chips from YMTC, another sanctioned Chinese manufacturer, and in that case chose not to use them after pressure from the U.S. government. However, the current geopolitical context is different: tensions between the U.S. and China have escalated, and Apple needs to demonstrate its commitment to the Chinese market to avoid retaliation like the ban on iPhones in Chinese government agencies in 2023.

"Apple's decision to test CXMT chips is a strategic move that balances the need to comply with Chinese regulations and maintain market access, but could have significant geopolitical consequences. If Apple goes ahead, it could trigger an escalation in the tech war between the U.S. and China." — Analyst at TheVortiq

What should readers know?

For now, these are just tests. There is no guarantee Apple will integrate these chips into its products. However, the signal is clear: Apple is willing to challenge U.S. sanctions to protect its business in China. Investors and consumers should watch for potential official announcements and the U.S. government's reaction. The final decision could come in the coming months, coinciding with the launch of the next generation of iPhones. Meanwhile, it's important to monitor statements from the Biden administration and possible countermeasures from China. In a broader context, this case illustrates how global tech companies are caught in the middle of the rivalry between the two superpowers, and how their decisions can have repercussions beyond business.