(Reuters) – U.S. tech giant Apple Inc (AAPL.O) has put on hold plans to use memory chips from China’s Yangtze Memory Technologies Co (YMTC) in its products, after Washington imposed tighter export controls against Chinese technology companies, the Nikkei reported on Monday.
Apple had originally planned to start using state-funded YMTC’s NAND flash memory chips as early as this year, Nikkei said, citing people familiar with the matter. The chips were initially planned to be used only for iPhones sold in the Chinese market.
The company was considering eventually purchasing up to 40% of the chips needed for all iPhones from YMTC, the newspaper said.
Analysts believe that YMTC is among the smaller companies that provide memory chips to Apple and it will see little to no effect by the move.
However, CFRA Research analyst Angelo Zino said that the bigger implication is that it limits Apple from potentially further diversifying its supplier base by utilizing domestic China players and improving its cost profile over time.
Apple is moving a greater amount of production to Vietnam and India to make products like the Airpods and new iPhones.
Shares of the iPhone-maker rose 1.6% to $140.59 in trading before the bell amid broader market gains.
The United States last week added China’s top memory chipmaker YMTC and 30 other Chinese entities to a list of companies that U.S. officials have been unable to inspect, ratcheting up tensions with Beijing, starting a 60 day-clock that could trigger much tougher penalties.
Biden administration’s sweeping set of export controls on China is a bid to slow Beijing’s technological and military advances by cutting the country’s supplies off from certain semiconductor chips made anywhere in the world with U.S. equipment.
Apple did not immediately respond to a Reuters request for comment, while YMTC declined to comment.