Lenovo shares tumble, investors fret over impact of chip hack report

Technology

HONG KONG (Reuters) – Shares in Lenovo Group Ltd and ZTE Corp plunged on Friday, hurt by concerns their sales could suffer in the wake of a Bloomberg report that U.S. companies’ systems had been infiltrated by malicious computer chips inserted by Chinese spies.

The Lenovo logo is seen in this illustration photo January 22, 2018. REUTERS/Thomas White/Illustration

Bloomberg Businessweek cited 17 unidentified sources from intelligence agencies and business that Chinese spies had placed computer chips inside equipment used by about 30 companies and multiple U.S. government agencies, which would give Beijing secret access to internal networks.

Apple Inc and Amazon.com Inc, cited as U.S. companies that had been subject to the attack, denied the report. Super Micro Computer Inc, which Bloomberg said was the supplier of server boards that contained the malicious chips, also denied the report.

The report did not say any Chinese tech firms were involved in the attack.

But Lenovo shares tumbled 18 percent while Hong Kong-listed shares of Chinese telecommunications equipment maker ZTE Corp fell 11 percent in what analysts and market participants said was response to fears that consumers and businesses may become reluctant to buy Chinese tech goods.

FILE PHOTO: The logo of Chinese telecommunications equipment maker ZTE is seen outside the ZTE R&D building in Shenzhen, China April 27, 2016. REUTERS/Bobby Yip/File Photo

Lenovo said in a statement: “SuperMicro is not a supplier to Lenovo in any capacity. Furthermore, as a global company we take extensive steps to protect the ongoing integrity of our supply chain.”

ZTE declined to comment.

“Lenovo has fallen more than others because the United States represents a significant chunk of their business,” said Linus Yip, chief strategist at First Shanghai Securities.

“The stock had also risen a lot in recent months… so the price is at a relative high point, the news of uncertainty may prompt some to sell and profit.”

The IT hardware sector subindex on the Hong Kong stock exchange was down 5.5 percent, underperforming a 0.4 percent dip in the benchmark Hang Seng index.

The Bloomberg report said that a unit of the Chinese People’s Liberation Army infiltrated the supply chain of Super Micro Computer to plant the malicious chips.

China’s Ministry of Foreign Affairs did not respond to a written request for comment. Beijing has previously denied allegations of orchestrating cyber attacks against Western companies.

Reporting by Sijia Jiang and Donny Kwok in HONG KONG and Yimou Lee and Jess Macy Yu in TAIPEI; Editing by Miyoung Kim and Edwina Gibbs

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