U.S. Government Export Block Could Prevent Apple Using Chinese 3D NAND

Apple has seemingly cancelled its plans, which we reported in September, to source 3D NAND chips from Chinese manufacturer YMTC (Yangtze Memory Technologies Corp). The move, per an article on Nikkei Asia, comes following political pressure from the U.S. government.

The story, which cites ‘multiple sources’, claims Apple’s deal has fallen foul of U.S. export controls imposed on China, despite the lengthy certification process for the 128-layer storage chips having been completed. The chips, described as the most advanced yet produced by a Chinese foundry, still lag behind those from Samsung and Micron but are noticeably cheaper as they’re subsidized by the Chinese government.

While the plan was for the China-sourced flash to be used in iPhones for the Chinese market, one of Nikkei Asia’s sources said the Cupertino-based phone company was considering populating up to 40% of the flash storage in all iPhones with the YMTC 3D NAND. No YMTC products have yet appeared in Apple’s hardware.

The move that triggered the cancellation was the October 7 placing of YMTC on the Unverified List, a non-punitive measure that means that the US Bureau of Industry and Security “or federal officials acting on BIS's behalf cannot verify the bona fides (i.e., legitimacy and reliability relating to the end use and end user of items subject to the EAR [Export Administration Regulations]) of such persons because an end-use check, such as a pre-license check (PLC) or a post-shipment verification (PSV), cannot be completed satisfactorily for reasons outside of the U.S. Government's control,” according to Subtitle B, Chapter VII, Subchapter C, Part 744 of the appropriate Title 15 federal regulations. 

What this means is that, while Apple could still import completed chips from YMTC, it is banned from exporting any know-how for making them or sharing designs and technologies without a special license.

The Unverified List should not be confused with the Entity List, which contains people, companies and even states involved in "activities sanctioned by the State Department and activities contrary to U.S. national security and/or foreign policy interests," which contains Huawei as of May 2019, or the Specially Designated Nationals and Blocked Persons List, which targets US-designated terrorists, the officials and beneficiaries of certain authoritarian regimes, and international criminals. YMTC is none of those things.

Neither company involved has commented on the matter. However, a senior U.S. Commerce Department official told Nikkei Asia that companies added to the Unverified List are ‘likely’ to be added to the Entity List if they cannot provide the necessary verification information within a certain period of time, often 60 days.