Intel products pose national security risks, Could trigger scrutiny from China's cybersecurity regulator, the Cyberspace Administration of China.

01 China Cyber Security said

The China Cyber Security Association said on Wednesday that Intel products sold in China should be subject to security reviews, accusing the U.S. chipmaker of continually undermining China's national security and interests. 

An Intel spokesman said Intel would work with Chinese officials to "clarify any issues that may exist and demonstrate Intel's firm commitment to the security of our products." For Intel, any reduction in sales in China could have a significant impact at a time when the company is in trouble.

Intel's sales in China accounted for more than a quarter of its total sales last year, although that includes chips used in products assembled in China and exported to the United States and elsewhere. Although the China Cyber Security Association is an industry group rather than a government agency, it has close ties to the government and could trigger a security review by the Cyberspace Administration of China (CAC). A broad sell-off in technology stocks followed a disappointing update from chip equipment maker ASML, which fell 2.7% in U.S. pre-market trading. "It is recommended to initiate a cybersecurity review of Intel's products sold in China to effectively safeguard China's national security and the legitimate rights and interests of Chinese consumers," the National Security Council said. Last year, the CAC banned domestic critical infrastructure operators from buying products made by U.S. chip maker Micron Technology after determining that the company's products had failed a cybersecurity review. Micron estimates that the ban will reduce sales by about 10%. A similar security review of Intel's products could have a negative impact on the company's revenue, which last year derived more than a quarter of its revenue from China.

02 Backdoor allegations

China is currently facing a U.S.-led effort to restrict access to key chipmaking equipment and components. Analysts say the relationship between the United States and China is fragile, and the more discussions about trade restrictions and tariffs there are, the greater the chances that the other side will retaliate in a tit-for-tat situation. CSAC accused Intel chips, including Xeon processors for AI tasks, of having multiple vulnerabilities and concluded that Intel had major deficiencies in product quality, security management, and was extremely irresponsible with its customers. 

The operating system embedded in all Intel processors is vulnerable to backdoors created by the U.S. National Security Agency (NSA). This poses a great security threat to the critical information infrastructure of countries around the world, including China. Using Intel products poses a serious risk to national security. Even a temporary ban could further tighten the supply of AI chips in the Chinese market, which has been struggling to find viable alternatives to Nvidia's advanced products. These products dominate the world but are now banned from export to China. 

Intel has received orders for Xeon processors for AI work from several Chinese government-related agencies this year, according to public bidding.

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