Intel faces headwinds in China as trade body calls for security probe

Intel products sold in China have been recommended for a security review by local officials who allege that the U.S. chipmaker poses “serious risks” to national security. 

In a statement on Wednesday evening, the Cybersecurity Association of China outlined alleged vulnerabilities in Intel’s CPU chips, claiming the flaws in product quality and security management show an “irresponsible attitude toward its customers,” according to a Google translation.

CSAC further accused Intel of using remote management features to surveil users while covertly installing backdoors and of failing to address defects reported by users. 

Daniel Newman, CEO of The Futurum Group, noted the security review comes amid increased tensions between China and the U.S. in regard to chip controls and AI leadership. 

“Given Intel’s recent challenges, the timing is likely well orchestrated as Intel is up against a number of market challenges and now has to deal with China putting pressure on its significant revenue and market share in the region,” Newman said. 

China accounted for 27.4% of Intel’s revenue in 2023, making it vital to the company’s bottom line at a time its stock is struggling following poor earnings and job cuts.

However, under U.S. chip policy, the company has been restricted from exporting some of its most advanced products to Chinese clients. It has also been barred from shipping to certain Chinese clients altogether. 

In its statement, CSAC noted that Intel has also been one of the largest beneficiaries of the Biden administration’s Chips and Science Act, which it says has unreasonably excluded and suppressed China’s semiconductor industry. 

CSAC also took issue with the company requiring its suppliers not to use any labor or products from China’s Xinjiang region. U.S. law bars imports from the region under the assumption that all goods produced there are the product of forced labor.

Intel has previously warned that export restrictions on China could hurt its sales. 

As part of moves to counter U.S. restrictions and build chip self-sufficiency, China has already reportedly been directing some of its largest telecommunications carriers to cease use of foreign chips from companies like Intel.

Beijing is likely following a playbook similar to the strategy it used on American chip giant Micron last year — a series of actions that had a multibillion-dollar impact on the semiconductor market — said Futurum’s Newman. 

Last year, companies that were deemed part of China’s “critical information infrastructure” were banned from buying Micron products.

An investigation conducted by the Cyberspace Administration of China concluded that Micron products presented “network security issues” and threats to national security. 

Intel said in a post on its official WeChat account on Thursday that it had taken note of the CSAC report and has always put product safety and quality first, according to a Google translation.

“We will maintain communication with the relevant authorities to clarify relevant questions and demonstrate our strong commitment to product safety and quality,” it added.