U.S. Secretary of Commerce Howard Lutnick has issued an extraordinary warning to Apple, stating that the use of memory chips manufactured in China is “not desirable”. This move comes as Apple faces a severe supply shortage and soaring prices driven by an explosion in AI demand, alongside complex national security concerns.

An Unusual Warning from the U.S. Secretary of Commerce

On August 15, 2026, U.S. Secretary of Commerce Howard Lutnick explicitly stated that Apple’s move to procure memory chips from Chinese manufacturers is not supported by the administration. In an interview with the Wall Street Journal, Lutnick emphasized that it is undesirable for “great American companies” to utilize Chinese-made memory and urged Apple to find alternative solutions to its supply issues. The U.S. government is currently pushing for “reshoring”—bringing semiconductor production back to the United States—and is pressuring Apple to shift away from its historical model of relying on low-cost overseas labor toward a supply chain based on advanced domestic manufacturing. Of particular concern are candidates like ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies Corp (YMTC), both of which appear on the U.S. Department of Defense’s “1260H” list of Chinese military-related companies, raising significant national security alarms.

Apple’s Difficult Choice Amid Global Supply Shortages

Apple currently sources its dynamic random-access memory (DRAM) from major global players such as South Korea’s Samsung Electronics and SK hynix, as well as the U.S.-based Micron. However, the global generative AI boom has caused a massive surge in demand for memory chips in data centers, often resulting in smartphone manufacturers being deprioritized in the supply chain. This has led to “chipflation,” where the rising cost of key components directly impacts corporate profitability. In Japan, these rising costs forced Apple to implement significant price hikes for products like Macs and iPads in June 2026, with base prices increasing by 20% to 30%. Apple’s Chief Operating Officer, Sabih Khan, has acknowledged the severity of the shortage, stating that the company must “consider all options” to stabilize its supply and reduce costs, making procurement from Chinese firms a tempting, albeit risky, alternative.

The “Supplier Advantage” Created by the AI Euphoria

The massive expansion of AI investment has fundamentally altered the profit structure of the memory industry. Major manufacturers are prioritizing the production of High Bandwidth Memory (HBM) and server DRAM, which offer much higher profit margins, thereby squeezing the supply of general-purpose memory used in smartphones and PCs. A stark illustration of this shift is Micron’s mobile business gross margin, which reportedly jumped from 24% to 87% within a single year. In this environment, China’s CXMT has emerged as a significant fourth supplier, backed by massive government subsidies. CXMT has already secured an 8% share of the global DRAM market, ranking fourth behind the three giants. By integrating CXMT into its supply chain, Apple hopes to break the current “memory cartel” and regain bargaining power to lower procurement costs.

Shockwaves of “Chinese Procurement” Rattling Global Markets

On July 2, 2026, reports that Apple was considering Chinese memory sent shockwaves through global stock markets. Shares of existing suppliers plummeted: South Korea’s SK hynix fell by 15%, Samsung Electronics by 9%, and the U.S.-based Micron dropped by 5%. In Japan, Kioxia Holdings, a major NAND manufacturer, saw its stock price fall by 13% as investors feared that Apple—one of the world’s largest customers—might pivot away from traditional suppliers. This market reaction demonstrates how sensitive the industry is to shifts in Apple’s procurement strategy, as any sign of weakened pricing power for established manufacturers leads to immediate sell-offs. This event proved that semiconductors now sit at the core of the global market, with a single company’s strategy capable of triggering worldwide volatility.

Apple Caught Between Economic Rationality and Political Pressure

Apple’s plan to source from China faces a formidable political barrier in the form of economic security. On July 30, 2026, a bipartisan group of U.S. Senators issued an ultimatum to CEO Tim Cook, demanding a commitment by August 21 that Apple will not adopt Chinese-made memory. Lawmakers argue that partnering with companies designated as military-related by the U.S. government not only weakens the domestic semiconductor industry but also poses a risk of critical technology transfer to China. This situation is particularly contradictory for Apple, which previously committed to investing \$600 billion in U.S.-based production over four years. Becoming more dependent on China while simultaneously championing U.S. domestic manufacturing has put the company in a difficult “political dilemma”.

Future Prospects and Supply Chain Restructuring

The central question moving forward is whether Apple’s move is a genuine pivot or a “high-level bluff” intended to force price concessions from existing suppliers. Even if Apple proceeds with Chinese memory, analysts believe its use may be restricted to products sold within the Chinese domestic market or low-end models like the iPhone SE to avoid the full brunt of U.S. sanctions. However, the technical growth of Chinese manufacturers cannot be ignored. CXMT is reportedly planning to double its production capacity from 300,000 to over 600,000 wafers per month and is considering a second DRAM plant in Beijing. If these plans come to fruition, the resulting surge in supply could disrupt the global semiconductor cycle. Ultimately, the U.S. government’s final decision on approvals and Apple’s subsequent reaction will dictate the future of global semiconductor hegemony.

Reference Pages

• DOD Releases List of People’s Republic of China (PRC) Military Companies

• How is Semiconductors Handled in the Economic Security Promotion Act? – CIO (in Japanese)

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