Reports of Chinese spies hacking U.S. computer networks hit shares of Chinese chip makers
October 9, 2018 Category Foreign trade, Weekly
A Bloomberg News report alleged that Chinese spies hacked American computer networks using a microchip inserted into motherboards in China. This led to a precipitous drop of the shares of Chinese computer makers Lenovo Group and telecom company ZTE. Lenovo said Super Micro Computer (Supermicro), whose servers the Bloomberg report described as being compromised by malicious chips inserted during production in China, is not a supplier “in any capacity” and that Lenovo takes “extensive steps to protect the ongoing integrity” of its supply chain. ZTE declined to comment on its share price decline.
U.S. National Security Adviser John Bolton did not confirm whether the White House was aware of the Chinese hack before the publication of Bloomberg’s report. “I don’t want to address anything that might touch on specific intelligence questions,” he told reporters. “But I will say the Chinese efforts to threaten us in cyberspace and across the information technology spectrum are a very high priority for us – countering them, establishing structures of deterrence to prevent China from even thinking about doing it, touches on the offensive cyber operations that the President has authorized,” Bolton said. Bloomberg Businessweek reported that Chinese spies exploited vulnerabilities in the U.S. technology supply chain to infiltrate computer networks of almost 30 U.S. companies and government agencies, including Amazon.com, Apple, a major bank and government contractors. Among the targets was a contractor that made software to help transfer drone footage to the CIA and communicate with the International Space Station (ISS).
According to Bloomberg, investigators found that tiny microchips, not much bigger than a grain of sand, had been inserted during manufacturing in China onto equipment made by subcontractors of Supermicro, one of the world’s biggest suppliers of server motherboards. The chips allowed hackers to create a stealth doorway into any network that included the servers. The investigation of the altered motherboards began during the Obama administration. Amazon, Apple, Supermicro and the Chinese government refuted Bloomberg’s report. While no Chinese technology companies were named in the report, it has fueled security concerns in the whole sector, and could hit Chinese firms’ business with overseas clients in the future, according to analysts. Anyhow, the report would further complicate relations between Washington and Beijing, the South China Morning Post reports.
Apple Vice President for Information Security George Stathakopoulos told the U.S. Congress that it had found no sign of suspicious transmissions or other evidence that it had been penetrated in a sophisticated attack on its supply chain. It found no evidence for the main points in a Bloomberg BusinessWeek article, including that chips inside servers sold to Apple by Super Micro Computer allowed for backdoor transmissions to China. Bloomberg said it stood by its story, which was based on 17 anonymous sources.
A spokesperson for the Chinese government said: “China is a resolute defender of cybersecurity. We hope parties make less gratuitous accusations and suspicions but conduct more constructive talk and collaboration so that we can work together in building a peaceful, safe, open, cooperative and orderly cyberspace.”
Headquartered in San Jose, California, Supermicro was founded in 1993 by Taiwanese-American Charles Liang. It specializes in server motherboards. While the company engineers the motherboards mostly at its U.S. headquarters, the products are almost entirely manufactured by contractors in China. The company is one of the world’s biggest sellers of server motherboards, as well as a leading player in the USD1 billion market for boards used in specialized computers.
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