Despite being one of the companies with the most aggressive profit-maximizing policies, Apple has pulled out at the last minute of a deal that would have brought it NAND chips more than 20% cheaper than current suppliers.
Long in preparation, Apple’s plan to cut its NAND chip supply costs by any means possible ran up against US policies to block by any means possible the Chinese rise in the high-tech semiconductor niche, hitherto based on copying/theft of Western technologies and generous government subsidies. And YMTC (Yangtse Memory Technologies Co) is one of those companies “grown” on the Huawei model, with virtually unlimited funds directed directly from the state budget. Like Huawei, YMTC’s business model is to undermine competition by delivering products at vastly undervalued prices, leaving the PPC (Communist Party of China) to cover losses justified by its imperative need to corner the global semiconductor market.
For now, YMTC still “suffers” from a shortage of truly cutting-edge technologies, with products shipped several generations behind solutions offered by Western companies. However, the company has managed to develop its own flash storage solution based on 3D NAND technology, the top of the range being a 128-layer module that can compete with the most advanced solutions provided by Samsung or Micron, but at a price point at least 20% lower. From here, it’s easy to see that if the plan hadn’t been blocked at the insistence of the US government, the only obstacle to excluding Samsung and Micron from Apple’s list of suppliers would have been the Chinese partner’s ability to fill the huge chip orders expected from the iPhone maker.
According to information taken from the Nikkei Asia publication “the proposed solutions were validated by Apple, but when mass production of the new iPhone began the manufacturing lines did not start at the Chinese supplier”.
It seems the plan was to use YMTC chips only for iPhones sold in China, Apple hoping this would overcome objections from US politicians. But another source, who remained anonymous, claimed that Apple was planning to source up to 40% of its NAND memory requirements for iPhones from the Chinese supplier.
The new policies implemented by the US to control technology exports are part of the Biden administration’s goal to bolster American microprocessor production as well as avoid potential security concerns. However, the Biden Administration had granted exemptions to certain companies to avoid creating a bottleneck in the industry. Officially, Apple is still not prohibited from using YMTC as a semiconductor supplier, but rather the decision appears to have been made at the top of the company, following discussions with policymakers.