It sounds like the plot of a made-for-TV Tom Cruise movie, but a Bloomberg report claims it’s true: Chinese spies installed malicious chips in motherboards and distributed them to 30 American businesses (including Amazon and Apple) through a company called Supermicro.
The companies involved disputed “virtually every aspect of Bloomberg’s story” (Apple’s words). But, the bombshell accusations rattled the tech sector, which will likely suffer as investigations continue.
The accusation: Supply, supply, supply
Chinese spies allegedly compromised the global tech supply chain by implanting rice-sized chips in tech exports at 4 Chinese subcontracting factories and then shipping them internationally.
And it gets worse — according to Bloomberg, the microchips enabled hackers to remotely enter and manipulate infected networks, part of a long-term plot to access “high-value corporate secrets” and “sensitive government networks.”
According to the article, the “big hack” was the largest tech supply chain attack in history, and it’s been under investigation for 3 years. But not all parties agreed with Bloomberg’s reporting…
The rebuttal: Deny, deny, deny
Every major player in the story rejected Bloomberg’s claims:
- “We have found no evidence to support [Bloomberg’s inquiries].” — Apple
- “There are so many inaccuracies… they’re hard to count.” — Amazon
- “We are not aware of any investigation regarding this topic.” — Supermicro
So, who’s lying? For now, it’s a game of “he said, she said.” Bloomberg claims to have 17 sources on record — including 6 current and former national security officials, 3 Apple insiders, and 2 Amazon employees.
The fallout: Sell! Sell! Sell!
So what’s next?
Regardless of the outcome, American companies will likely further reduce trade with Chinese suppliers (a process that’s begun already thanks to White House trade sanctions).
But investors aren’t excited about the expensive prospect of finding new tech suppliers to replace China in the highly interdependent global supply chain.
Stocks at Amazon and Apple dipped slightly, and the Nasdaq had its worst day since June. Things are looking especially un-Super for Supermicro — the company’s stock fell more than 50% following the exposé.