Chinese cybersecurity association urges review of Intel products

The Cybersecurity Association of China (CSAC) has urged a security review of Intel products sold in the country, claiming the US semiconductor firm poses ongoing threats to China’s national security and interests.

In a statement posted on its WeChat account, CSAC said that Intel’s major product quality and security management flaws indicate its extremely irresponsible attitude toward customers.

CSAC is an industry body, but its allegations raise concerns >about a potential security review and subsequent action by the country’s cyberspace regulator, the Cyberspace Administration of China (CAC). Last year, CAC banned products from Micron, citing national security risk.

Significantly, this year Intel has secured orders for its Xeon processors from several Chinese state-affiliated agencies for AI applications, according to Reuters.

This action marks the latest chapter in the ongoing trade conflict, which has seen US administrations ban Chinese-made hardware from domestic networks and impose export controls to limit China’s access to advanced computing technologies.

Impact on Intel and the industry

A ban could deal a significant blow to Intel, already struggling with financial challenges, a shrinking market share, and layoffs. It could also affect Chinese companies that are already contending with US export restrictions.

“If the CAC decides to take more drastic action than it did with Micron, Intel could face significant challenges with its sales and market share in China,” said Thomas George, president of Cybermedia Research. “This situation also poses a risk for the numerous companies in China that rely on Intel chips for high-performance computing (HPC), which is essential for scientific research, financial services, and even national security.”

A potential review and subsequent action from the CAC could substantially impact Intel’s strategies and market position, while also reshaping the strategic considerations of other key players in the semiconductor industry, George noted.

Other analysts also highlight that the broader impact would likely extend beyond Intel, affecting the industry as a whole.

“The sanctions will definitely have repercussions and a short-term impact on Intel,” said Pareekh Jain, CEO of Pareekh Consulting. “But although rivals like AMD might see some initial benefit, eventually they will likely be targeted as well. The medium-term goal seems to be to bolster China’s domestic chip industry.”

Speculations on Chinese companies

China has been pushing for self-sufficiency in the semiconductor sector, recently urging domestic car manufacturers such as SAIC Motor, BYD, Dongfeng Motor, GAC Motor, and FAW Group to boost their sourcing of automotive-related chips from local suppliers.

“Chinese firms like Huawei and Alibaba are accelerating their investments in semiconductor technologies,” George said. “Despite these ambitions, the readiness and capability of domestic alternatives to match Intel’s offerings remain uncertain.”

One potential way for US companies to overcome this challenge would be to invest more in China, Jain suggested, citing Tesla as an example.

“This strategy would demonstrate a commitment to the Chinese market and may provide some protection from retaliatory actions,” Jain added. “Essentially, US companies can position themselves as commercial entities with interests in China, separate from US government actions.”