According to a report in The Wall Street Journal on July 24th, Apple is actively lobbying to mitigate rising costs by using Chinese memory chips. Its main supplier, Micron Technology, is fully opposed to this plan. This confrontation has put President Trump in the midst of a conflict of interests between two major American technology giants.
Sources familiar with the matter revealed that in recent weeks, Apple CEO Tim Cook and senior company officials have been lobbying officials such as Trump, U.S. Commerce Secretary Wilbur Ross, and Treasury Secretary Steven T. Bieber, hoping to get approval for Apple products sold in markets outside of the United States to use memory chips from China's ChangXin Memory and Yangtze Memory.
Apple believes that this move will help alleviate the global shortage of storage chips and is expected to reduce the price of related products for American consumers.
However, these views have been refuted by Micron, the only large-scale memory chip manufacturer in the United States. Sources familiar with the matter said that Micron’s CEO Sanjay Mehrotra and other executives warned Lurtnik and other government officials that if Chinese companies like ChangXin Memory were allowed to supply products to American technology companies, regardless of where those products were eventually sold, it could potentially destroy the American memory chip industry, just as China’s impact on the U.S. steel and manufacturing industries has done.
In recent years, after the US Department of Defense designated these Chinese enterprises as “Chinese military-related enterprises”, Apple and other suppliers of memory chips have avoided using products from Chinese suppliers. In addition, Yangtze Memory Technology has been listed on the US trade blacklist – the “Entity List”.
This lobbying battle is likely to force Trump to make a choice between two important economic goals: one is to reduce the burden on American consumers, and the other is to increase domestic semiconductor production in order to reduce dependence on other countries. As trade negotiations continue, Trump has avoided further restrictions on Chinese companies, while also praising Apple and Micron for expanding their investments in the United States.
Sources familiar with the matter said that Micron executives believe the company can alleviate the shortage of memory chips by accelerating the construction of factories in the United States and increasing domestic investments. Micron stated that the increase in prices of consumer electronics products, including those made by Apple, is not solely due to rising memory chip prices.
Trump once stated that he hoped to significantly increase the production of chips in the United States before leaving office.
White House Technology Policy Director Michael Kratsios told congressmen this week: “Most importantly, we must establish production capacity in the United States. Obviously, we do not want to do business with any companies that are on the Entity List.”
As one of the world’s largest purchasers of storage chips, Apple has been exerting pressure on Micron and its competitors for many years, demanding the lowest prices for key components required for its devices. Storage chip manufacturers, however, need Apple’s large procurement volumes to ensure that their factories operate at full capacity.
The negotiations between the two sides have been very intense over the years, and their mutual resentment has continued to deepen. Sources familiar with the matter said that before serving as CEO of Micron, Mehrotra was in charge of another memory chip supplier for Apple, SanDisk. During his tenure at SanDisk, he showed extreme antipathy towards Apple and rarely met with Apple officials. This hostility has persisted until now.
The AI revolution has changed this situation, giving Mehrotral more control. Large data center operators purchase storage chips in large quantities at higher prices, weakening Apple's bargaining power. According to research firm TechInsights, this resulting supply shortage has caused the price of storage chips to rise four times over the past year, and it is expected to continue to increase. As a result, the stock prices of related manufacturers have also risen significantly.
Apple is strongly dissatisfied with this situation, believing that Micron's current gross profit margin of over 80% indicates attempts to earn excessive profits. The iPhone manufacturer also stated that Micron's investment in expanding production capacity is not fast enough, and the newly added capacity will be disproportionately allocated to artificial intelligence customers. Industries such as medical devices and automotive also have requested assistance from the U.S. government to alleviate chip shortages.
Memory Technology said that the company serves many industries and plans to invest $250 billion in the United States to expand its production capacity. A spokesperson stated, “The strategic importance of advanced storage and storage devices has never been more evident than it is today.” Memory Technology executives noted that customers like Apple have historically squeezed suppliers’ profits during periods of industry downturn, which foreshadowed the current supply shortages.
The spokesperson for the Chinese Ministry of Foreign Affairs has repeatedly emphasized that China has always firmly opposed the US practice of generalized national security concepts, the establishment of discriminatory lists under various pretexts, and the unreasonable suppression of Chinese enterprises. We urge the US to correct its wrongful practices and stop its unreasonable actions against Chinese enterprises. China will take necessary measures to firmly protect the legitimate rights and interests of Chinese enterprises.
