Intel is in the crosshairs of a potential security review by China after the Cybersecurity Association of China (CSAC) accused the company of embedding backdoors allegedly linked to the NSA in its processors. The accusations center on Intel’s Xeon processors, critical for AI tasks, which the CSAC claims pose a severe national security risk due to vulnerabilities that could allow unauthorized access to sensitive data.
The CSAC’s statement, released on WeChat, called for a comprehensive investigation into Intel’s products, further intensifying tensions between the U.S. and China. Although not a direct government body, the CSAC is closely aligned with Beijing’s cybersecurity policies and could influence the powerful Cyberspace Administration of China (CAC) to take regulatory action. This scenario mirrors the CAC’s previous review of Micron Technology, which led to a product ban over security concerns.
Intel’s market prospects in China now hang in the balance, as China accounts for over 25% of Intel’s 2023 revenue. Investors are already reacting, with Intel’s shares dropping by 2.7% following the CSAC’s call for a review. The potential for a prolonged investigation threatens Intel’s foothold in the lucrative Chinese tech market, especially as China works to reduce its dependence on U.S. technology amid escalating trade restrictions.
The allegations come against the backdrop of heightened U.S.-China tech rivalry. Washington has imposed stringent export controls on AI chips, particularly impacting U.S. firms like Nvidia, whose advanced chips are now restricted from sale to China. Beijing has responded by phasing out Intel and AMD chips in government systems and ramping up efforts to develop indigenous technology.
Complicating the situation is China’s accusation that Intel is leveraging the U.S. CHIPS Act—aimed at bolstering domestic semiconductor production—to suppress China’s technological growth. These tensions contrast with Chinese President Xi Jinping’s recent call for improved U.S.-China relations, raising questions about the future of cooperation in the tech sector.
If the Cyberspace Administration of China proceeds with a review and determines Intel’s products compromise national security, it could deal a significant blow to Intel’s operations in China. The situation underscores the fragility of U.S.-China business ties, particularly in critical sectors like semiconductors, as both nations continue to prioritize their national security and technological sovereignty.
