China's tech firms hit by spy chips row
October 5, 2018
Chinese tech stocks came under intense pressure on Friday after a news report said Beijing had used microchips inserted in US computer goods as part of a drive to steal technology secrets.
Citing 17 unidentified intelligence and company sources, Bloomberg News said on Thursday the tiny chips were placed in gadgets made for US tech giants like Amazon and Apple, and possibly for other companies and government agencies.
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Bloomberg said malicious chips were inserted into equipment supplied by Super Micro Computer Inc., headquartered in San Jose, California.
The media company claimed Chinese military operatives added components to Super Micro products made at factories in China. It said the components included code that caused the products to accept changes to their software and to connect to outside computers.
'No evidence'
Super Micro denied its products contained malicious chips. "Supermicro has never found any malicious chips, nor been informed by any customer that such chips have been found," said a company statement.
Apple and Amazon also denied the allegation that their systems contained malicious computer chips inserted by Chinese intelligence.
Apple said it had refuted "virtually every aspect" of the story in on-record responses to Bloomberg. "Apple has never found malicious chips, 'hardware manipulations' or vulnerabilities purposely planted in any server," the company said.
Amazon, in a statement published by Bloomberg, said: "We've found no evidence to support claims of malicious chips or hardware modifications."
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Britain's national cyber security agency also said on Friday it had no reason to doubt the assessments made by Apple and Amazon that refuted the Bloomberg story. "We are aware of the media reports but at this stage have no reason to doubt the detailed assessments made by AWS and Apple," said the National Cyber Security Centre, a unit of Britain's eavesdropping agency, GCHQ.
Another irritant
The article comes as China-US relations are strained by an intensifying trade dispute, claims of intellectual property theft by Beijing and an accusation China is trying to sway upcoming elections.
The world's top two economies have had months of tense trade relations, slapping tit-for-tat tariffs on each other's goods worth hundreds of billions of dollars.
The chip story "plays heavily into the view that the Sino-US trade stoush is not just about Trump's infatuation with the size of the US-China bilateral trade balance," said Ray Attrill, head of foreign exchange strategy at the National Australia Bank.
"But it is a much more geopolitical affair as well as being related to China's desire to dominate the technology sphere. It means that an early resolution of Sino-US trade issued is not a realistic prospect."
Following the publication of the report, shares in two mainland Chinese tech giants Lenovo Group and ZTE Corp. tumbled on Friday.
In Hong Kong trade, PC maker Lenovo tanked more than 15 percent, while mainland-based telecoms equipment maker ZTE plunged 11 percent.
"Electronics produced in China may be viewed unsafe due to this news, and tech shares are falling in general because of that," said Ray K W Kwok, an analyst at CGS-CIMB Securities Hong Kong.
sri/hg (AFP, AP, Reuters)