Shares for Apple Suppliers Drop Following Report of Hidden Spy Chips

Apple’s Asia suppliers experienced a broad decline Friday following a bombshell reports that alleges Chinese spy chips have been found in data center equipment that both Apple and Amazon use.

In Japan on Friday shares of TDK the maker of electronic parts fell 4.8% while Murata Manufacturing the maker of components dropped 3.9%.

South Korea’s LG Display was down 1.84% while Samsung Electronics the industry’s giant closed flat even though it announced earlier in the day that its operating profit for the third quarter likely rose to a new record high.

Taiwanese markets also experienced declines as Taiwan Semiconductor a major chipmaker for Apple was down 1.56% and Largan Precision the maker of lens fell 7.28%.

The moves across Asia followed the report released late Thursday that alleges data center equipment that Apple and Amazon Web Services use could have had a vulnerability to spying by the government of China due to a microchip having been inserted into the equipment during manufacturing.

The chips said the report have been a subject of a U.S. government top secret investigations dating back to 2015 and were used in the gathering of intellectual property as well as trade secrets from U.S. companies and might have been introduced by Super Micro a server company in China that assembled machines in centers. Apple, Amazon as well as Super Micro disputed the Thursday report.

However, one analyst was quick to note that the recent moves in stocks are not likely to carry on over the long term. The analyst added that the moves were a quick reaction to the report and the controversy involving the chips were over server chips and not components of the iPhone.

The analyst concluded by saying Apple’s current suppliers are unlikely to be hurt as Apple has not had a relationship with Super Micro since 2016.

However, the analyst said the report would likely cause the U.S government to pressure Apple into moving production back to the United States and to use components made in the states.

However, it is not likely Apple will comply, since costs would increase significantly. However, it may cause investors to stay away from Apple suppliers in Asia until a resolution of the matter has been reached.

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