A new report claims that Apple is exploring new sources of the memory chips that go into iPhones, including its first Chinese producer of the critical component, after a disruption at a key Japanese partner exposed the risks to its global supply.

It’s considering expanding a roster of suppliers that already includes Micron Technology Inc. and Samsung Electronics Co. after Kioxia Holdings Corp. lost a batch of output to contamination in February, people familiar with the matter said. While Samsung and SK Hynix Inc. -- the world’s largest makers of flash memory -- are likely to pick up the slack, Apple remains keen to diversify its network and offset the risk of further disruption from the pandemic and shipping snarls, they said.

The iPhone maker is now testing sample NAND flash memory chips made by Hubei-based Yangtze Memory Technologies Co., the people said, asking not to be identified discussing private deliberations. Apple’s been discussing the tie-up with Yangtze, owned by Beijing-backed chipmaking champion Tsinghua Unigroup Co., for months though no final decisions have been made.

Yangtze Memory’s product relies on a self-developed technology known as Xtacking, which integrates memory cell wafers with supportive circuits for higher performance in some cases compared with traditional technologies.

A contract for Yangtze and its well-connected parent would be a milestone for China’s ambitions to build a world-class domestic chip industry that can compete with the U.S. For semiconductor players aspiring to build a business on a national scale, memory is typically a gateway because production capabilities count more than the intricate designs needed for advanced processors and other logic chips -- though it requires enormous investment to sustain.

"Yangtze memory will supply about 5% of memory for iPhone SE, and 3% to 5% of memory for the upcoming iPhone 14. Apple is using its product because it offers competitive pricing,” projected Jeff Pu, an analyst with Haitong International Securities, working off theoretical estimates.

For more, read the full Bloomberg report.