Chinese tech titans' share prices slump after THAT Super Micro story

Lenovo slides by a fifth, ZTE sinks too on back of server allegations

China v USA

The ripple effect of explosive claims that Chinese government agents slipped snooper chips into Super Micro servers used by Apple and Amazon today dented the share price of the Middle Kingdom's tech titans.

Bloomberg yesterday alleged that chips built to look like signal conditioning couplers were included in the data centre servers bought by 30-plus punters including the US government. Manufactured by sub-contractors in China, the chips were said to provide access to highly sensitive data.

The report sent the stock market value of Super Micro down by 50 per cent, and though the share price recovered to a degree, it is still down by more than 40 per cent at the time of writing. Apple and Amazon shares fell by a couple of per cent and remain in that ballpark.

However, Chinese vendors unconnected to the bombshell also saw their market cap shrink today: Lenovo slumped by more than a fifth early this morning and was down by 15 per cent at the time of typing; telco kit maker ZTE was down almost 11 per cent.

Lenovo issued a statement to confirm that Super Micro had not built servers for it and "is not a supplier to Lenovo in any capacity".

It added: "Furthermore, as a global company we take extensive steps to protect the ongoing integrity of our supply chain."

Castor Pang Wai-sun, head of research at financial services outfit Core Pacific-Yamaichi Financial Group, told the South China Morning Post that the share price slump was linked to the Super Micro tale.

"The suspected infiltration of chips to the server seems to be the major reason for the drop in the share price.

"Whether the news is real or fake is questionable. If it is the case, then government procurement from other regions like Europe, the US and Dubai, of Lenovo servers, will drop substantially because of national security concerns."

The alleged imposter chips were not on the original board designs and are reported to have been added after the factory bosses were bribed or in some way pressed to tweak the initial draft.

The alleged espionage was said to have been discovered in 2015 when Amazon began to review potential acquisition target Elemental Technologies and hired a third party to pull apart its security. It found what Bloomberg described as "troubling issues" with its servers that were built by Super Micro. Elemental's customers included the Department of Defense, the CIA's drone ops and onboard networks of US Navy warships.

Apple insiders were also alleged to have discovered the "malicious" chip nestled on Super Micro motherboards in the same year, which supposedly led to Cupertino's severance of ties with Super Micro, cancelling an order for more than 30,000 servers.

For their part, Apple, Amazon and Super Micro – the later of which is already wrestling with accounting problems that caused its shares to be delisted from NASDAQ – have flatly denied the findings of the Bloomberg report.

As El Reg already pointed out, it is not typical behaviour for publicly listed organisations to deliberately deceive the market even though all have a lot to lose if, in the fullness of time, more evidence surfaces.

One thing is certain: the allegation of chips and Chinese snoopers is set to intensify the already bad-tempered relations between the Chinese and US administrations. ®




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