October 5, 2018 / 3:12 AM / 2 months ago

Lenovo and ZTE tumble on fears over China hack report

HONG KONG (Reuters) - Lenovo and ZTE Corp shares slid on Friday, hurt by worries about overseas sales after Bloomberg reported that the systems of multiple U.S. companies had been compromised by malicious computer chips inserted by Chinese spies.

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

In a report published on Thursday, Bloomberg Businessweek cited 17 unidentified sources from intelligence agencies and businesses as saying 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 and Amazon.com’s Amazon Web Services (AWS), named as being among the U.S. companies subject to the attack, strenuously denied the report. Super Micro Computer Inc, which Bloomberg said was the supplier of server boards containing the malicious chips, also denied the report.

Britain’s National Cyber Security Centre (NCSC), a unit of Britain’s GCHQ intelligence and security agency, said it had no reason to doubt the statements made by Apple and Amazon.

“We are aware of the media reports but at this stage have no reason to doubt the detailed assessments made by AWS and Apple,” it said in a statement.

“The NCSC engages confidentially with security researchers and urges anybody with credible intelligence about these reports to contact us.”

The Bloomberg report did not say any Chinese tech firms were involved in the attack. But Lenovo shares plunged 15 percent on fears that consumers and businesses could become reluctant to buy Chinese tech goods.

“Super Micro 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,” Lenovo said.

Daiwa Research said: “If the hacking concern keeps snowballing, the potential impact on Lenovo could be substantial.” It estimates that Lenovo earns more than a fifth of its revenue from the United States.

Chinese telecoms equipment maker ZTE, the Hong Kong-listed shares of which fell 11 percent, declined to comment.

The IT hardware sector sub-index on the Hong Kong stock exchange plunged 4.7 percent as investors fretted over the impact of the hack report at a time when the industry is already reeling from an intensifying China-U.S. trade war.

“This could prove a death blow to China’s ambitions to leap up the value-chain by 2025 as Western markets are likely to slam shut on the likes of Huawei [HWT.UL], ZTE, etc,” Michael Every, a senior Rabobank strategist, said in a note to clients.

“Taken together with the imposition of 25 percent tariffs by the U.S. ... this will only accelerate a move of the electronics supply chain out of China and into Mexico.”

Huawei Technologies declined to comment.

China’s Ministry of Foreign Affairs did not respond to a 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 Vidya Ranganathan in SINGAPORE; Jack Stubbs and Guy Faulconbridge in LONDON; Editing by Edwina Gibbs, Himani Sarkar and David Goodman

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