Amazon.com Inc. (AMZN) - Get Report and Apple Inc. (AAPL) - Get Report have denied claims that a secret microchip was found embedded in severs linked to Elemental Technologies, a video compressing service purchased by Amazon in 2015, amid concerns that government hackers in China were able to infiltrate U.S. corporate data.
Bloomberg reported Thursday that the chip, found on a server made by San Jose, Calif.-based Super Micro Computer Inc (SMCI) - Get Report via subcontractors in China through a contract with Elemental, could be used to infiltrate a host of computer networks linked to both major U.S. companies as well as portions of the U.S. government's national security system.
Apple said it had no contact with the FBI or any other agency about the incident, and did not find any unusual vulnerabilities in servers it bought from Super Micro. Amazon said it was not true that it had worked with Federal investigators and denied claims it knew about any supply-chain compromise when it purchased Elemental.
"We are deeply disappointed that in their dealings with us, Bloomberg's reporters have not been open to the possibility that they or their sources might be wrong or misinformed," Apple said in a statement to Bloomberg that it subsequently directed media enquiries to. "Our best guess is that they are confusing their story with a previously reported 2016 incident in which we discovered an infected driver on a single Super Micro server in one of our labs."
Amazon shares were marked 0.47% lower in premarket trading, indicating an opening bell price of $1,943.63 each, a move that would still leave it with a 66.5% gain. Apple shares were 0.4% lower at $231.10.
China's Ministry of Foreign Affairs told Bloomberg that it, too, was vulnerable to supply-chain safety issues and urged "host parties" to make "less gratuitous accusations".
China's insertion into the global tech supply chain wasn't an accident, according to a study from the U.S.-China Economic and Security Review Commission published earlier this year.
The Chinese government considers the ICT sector a "strategic sector" in which it has invested significant state capital and influence on behalf of state-owned (information and communications technology enterprises) and its influence has grown significantly over the past 20 years.
In 1997, for example, computers and telecommunication devices, electrical equipment, and related machinery imports from China accounted for around a third of the overall total. Last year, that same group of products measured 54% of America's $375 billion trade deficit.
The study found that seven major American tech companies -- Hewlett Packard (HP) - Get Report , IBM (IBM) - Get Report , Dell Inc, Cisco Systems, Unisys Corp (UIS) - Get Report , Microsoft Corp. (MSFT) - Get Report and Intel Inc (INTC) - Get Report -- source more than half of their products and components from China.
"The U.S. government needs a national strategy for supply chain risk management of commercial supply chain vulnerabilities in U.S. federal information and communications technology, including procurement linked to China," the report said.
"This strategy must include supporting policies so that U.S. security posture is forward-leaning, rather than reactive and based on responding to vulnerabilities, breaches, and other incidents after they have already damaged U.S. national security, economic competitiveness, or the privacy of U.S. citizens."