US vs China chip fight means iPhone 14 may remain in short supply in India

Apple has put on hold plans to use China's Yangtze Memory Technologies Co (YMTC) chips on iPhones. The decision comes days after the US government added YMTC and 30 other Chinese entities to a so-called unverified list, which includes companies that US officials have been unable to inspect. Apple was planning to use YMTC's NAND flash memory chip - a key component in several electronics. The chip is capable of storing data and does not require power to function. The American tech giant was slated to use YMTC's 128-layer 3D NAND flash memory for iPhones. A supply issue for crucial chips would mean a delay in iPhones' shipment and sales in other countries. For instance, in India, some iPhone 14 units are already shipping very late to customers.

According to the Japanese daily Nikkei Asia, Apple originally planned to start using YMTC's chips as early as this year, as they are at least 20 per cent cheaper than those of its leading rivals. YMTC is also a government-funded firm aimed to boost China's digital economy. Its chips help Chinese firms to reduce dependency on rival firms based in Japan and South Korea.

The publication notes that Apple initially planned to use YMTC chips only on China-specific iPhones. Nikkei Asia, citing a source, points out that the company was even planning to use its 128-layer 3D NAND flash memory chips for 40 per cent of iPhones. Currently, YMTC's chips have not yet been used in Apple products, the publication points out.

Apple's move to pause YMTC's chips on iPhones does not exactly mean the deal is over. Typically, inclusion in the unverified list does not mean a sanction. However, a Reuters report points out that if a "government prevents US officials from conducting site checks at companies placed the unverified list, Washington will start the process for adding them to the entity list after 60 days".

YMTC is under investigation by the Commerce Department over whether it violated US export controls by selling chips to blacklisted Chinese telecommunications company Huawei Technologies.

Apple started to engage with YMTC in 2018 during its search for more cost-effective memory solutions. It currently uses Japan's Kioxia (formerly known as Toshiba) NAND chips for iPhone 13, M1 Pro/Max MacBook Pro, and iPad Pro, as pointed out by 9to5Mac in February 2022. Earlier this year, some of Kioxia's NAND chips were feared to be contaminated, causing problems for Apple.

Restrictions on YMTC's NAND chips may further push Apple to look for China-made alternatives for its products. The company is already planning to move assembly units from China to India and Vietnam. A JPMorgan analyst even forecasts that the dependency would drop significantly by 2025.