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  • On this episode of China Uncensored,

  • a tiny tiny chip caused a big problem.

  • Welcome back to China Uncensored,

  • I'm your host Chris Chappell.

  • Computers connect the world!

  • Why, you and I are connected right now.

  • But computers don't just bring you the world's best

  • China-related edutainment on YouTube.

  • Computers do all sorts of things!

  • Like transmitting sensitive data that's critical to national security,

  • which gets bounced around on servers throughout the United States.

  • With that in mind, maybe someone should have realized

  • it might be a problem that the backbone of these computer networks

  • is being built in China.

  • Oh wait, US intelligence agencies

  • have been warning about this for years!

  • But instead of listening to those intelligence agencies

  • what do they know anyway?—

  • a lot of major US companies ignored them,

  • because who can say no to low prices?

  • So these tech companies went for all the gold that was

  • surely waiting for them at the end of the Chinese rainbow.

  • What's that, Shelley?

  • Chinese rainbows don't have a pot of gold?

  • What do they have instead?

  • Ok, that sounds painful.

  • Yes, it turns out, the relentless pursuit of cheaper products

  • had a horrible, horrible downside.

  • At least according to this Bloomberg article.

  • It says China used microchips to infiltrate US companies.

  • This is a server motherboard.

  • Get a bunch of these together,

  • and they're basically like the neural network

  • of a giant multi-computer brain.

  • But wait!

  • What's that?

  • Don't see it?

  • How about now?

  • No?

  • Keep going.

  • There we go.

  • That is a tiny microchip about the size

  • of the tip of a sharpened pencil.

  • Wait, what's that Shelley?

  • Ah.

  • To clarify for our younger viewers, this is a pencil.

  • In the olden days we would take sticks of wood

  • filled with graphite and drag them across thin sheets

  • made from more dead trees to draw letters.

  • It was a primitive form of writing

  • before the widespread use of computers.

  • Anyway, the chips were small.

  • But it turns out the size doesn't of the chip doesn't matter.

  • It's how you use it.

  • And according to Bloomberg,

  • which cited 17 unnamed intelligence agents and other sources

  • within different tech companies,

  • the Chinese Communist Party may have managed

  • to pull off the most sophisticated hack

  • the world has ever seen.

  • They allegedly installed these microchips

  • on servers used by around 30 companies,

  • including Amazon and Apple,

  • as well as US government agencies.

  • “[These] servers could be found in

  • Department of Defense data centers,

  • the CIA's drone operations,

  • and the onboard networks of Navy warships.”

  • The microchip would have given the Chinese Communist Party

  • secret access a huge number of these private networks.

  • Oops.

  • So, how did the microchips get there?

  • Well you see, there are essentially

  • two ways to hack a computer.

  • The most common kind is software hacking.

  • This is probably what you associate Chinese hackers with.

  • Like when they hacked the Office of Personnel Management

  • and stole data on over 22 million Americans.

  • Then there's hardware hacking.

  • That involves making physical changes

  • or additions to the guts of computers

  • which builds in loopholes that can later be exploited

  • by software hacking.

  • Hardware hacking is really really hard to do.

  • According to one expert Bloomberg interviewed,

  • Having a well-done, nation-state-level hardware implant surface

  • would be like witnessing a unicorn jumping over a rainbow.

  • Hardware is just so far off the radar,

  • it's almost treated like black magic.”

  • But while hard to pull off, if pulled off,

  • it would give foreign agents major control of

  • critical computer infrastructure.

  • And it's a little easier to pull off when you're the country

  • that makes about 75% of the world's mobile phones

  • and 90% of its PCs.

  • Here's what's alleged to have happened.

  • There's a company called Elemental.

  • They make cubes that shoot other cubes with lasers I guess?

  • Actually they specialize in video processing and storage.

  • Their technology has been used for everything

  • from helping stream the Olympic Games,

  • to communication with the International Space Station,

  • to even handling drone footage for the CIA.

  • In 2015 Elemental was bought by Amazon.

  • Wow, Amazon really does everything.

  • Elemental is an American company.

  • And their main product is assembled by

  • another American company,

  • Super Micro Computer Inc.

  • They sell more server motherboards than almost anyone else.

  • One US intelligence official told Bloomberg,

  • Think of Supermicro as the Microsoft of the hardware world.”

  • So...like Microhard?

  • No, forget that, it's a terrible name.

  • Anyway, it turns out, Supermicro's core product

  • their motherboards

  • are mostly made by contractors in China.

  • So what seems to have happened is this:

  • Agents for the People's Liberation Army

  • strolled into these contractors' factories

  • and offered some bribes to change

  • the motherboard design ever so slightly.

  • Just add this one teensy weensy little extra microchip, ok?

  • Of course, “If that didn't work,

  • they threatened factory managers

  • with inspections that could shut down their plants.”

  • And while one tiny microchip sounds like it can't do a lot,

  • it doesn't have to.

  • According to Bloomberg,

  • They were capable of doing two very important things:

  • telling the device to communicate

  • with one of several anonymous computers

  • elsewhere on the internet that were loaded with

  • more complex code;

  • and preparing the device's operating system

  • to accept this new code.”

  • And this would give the Chinese military complete access

  • in a very hard to detect way.

  • For example, they could make a secure machine

  • not ask for a password.

  • That way, hackers from China could just waltz right in.

  • Now for a long time,

  • many Americans believed that China

  • would never do something like this

  • because it would jeopardize China's place

  • as the workshop of the world.

  • And so everyone was happy being naïve,

  • taking advantage of China's low-cost manufacturing.

  • Meanwhile, China continued to play a major role

  • building global computer infrastructure.

  • And so companies became dependent on China.

  • Oops.

  • The fact that China has been a major state sponsor

  • of cyber espionage is nothing new.

  • Back in 2015, there was even an agreement

  • between Xi Jinping and President Obama

  • that China would stop stealing US intellectual property.

  • That was the same year

  • the Chinese microchips were first discovered.

  • One official told Bloomberg that the White House

  • may have suspected at the time that

  • China was willing to offer this concession

  • because it was already developing

  • far more advanced and surreptitious forms of hacking

  • founded on its near monopoly of the technology supply chain.”

  • Not that the US government could do much about it.

  • Because it was the big American companies

  • that were actually to blame for exposing themselves

  • to the China supply chain

  • and they refused to listen to the government's warnings.

  • So it shouldn't surprise you

  • that both Apple and Amazon

  • have denied the Bloomberg report.

  • ExceptThe companies' denials are countered

  • by six current and former senior national security officials.”

  • In fact, not only did the companies know about it

  • according to those officials

  • but Apple had reported their discovery of it

  • to the FBI in the first place,

  • and Amazon went even further,

  • by cooperating in a government investigation about it.

  • But of course, neither company said this to the public.

  • If it happened at all.

  • Because, as I said, they totally deny it.

  • Interestingly, “Apple did sever its relationship

  • with Supermicro in 2016,

  • but claimed this was due to an unrelated

  • and minor security incident.

  • Amazon reportedly distanced itself

  • from Supermicro's compromised servers

  • by selling its Chinese infrastructure to a rival,

  • for unknown reasons at the time.”

  • Again, Apple and Amazon totally deny they were hacked.

  • Reporters asked a Chinese Foreign Ministry spokesperson for comment,

  • and he said, “We did it!

  • You finally caught us!”

  • Haha, just kidding.

  • He denied itas usual

  • saying thereports are totally groundless.”

  • And that China, too, is a “victim of cybercrime.”

  • And you can't blame a victim!

  • The Department of Homeland Security sort of backed up

  • Apple and Amazon's denial, saying they,

  • have no reason to doubt the statementsfrom those companies.

  • Which is not exactly a strong confirmation or denial.

  • But of course, it's one thing to warn that

  • Chinese telecommunication companies like Huawei and ZTE

  • could potentially spy on us.

  • But publicizing this giant microchip hack

  • would be incredibly humiliating

  • and it would also damage American companies.

  • But the Trump administration

  • may be taking action in another way.

  • They've put computer and networking hardware,

  • like motherboards, on the list of Chinese tariffs

  • meaning they'll be a lot more expensive to import.

  • The goal is partially to get these companies

  • to shift their supply chains to other countries.

  • Because clearly, getting hacked isn't

  • a good enough reason on its own.

  • It's like if a big kid at school

  • keeps getting beaten up by a smaller kid,

  • but he's so embarrassed that he doesn't tell anyone,

  • so it keeps happening.

  • Eventually grandpappy Trump has to step in

  • and put a stop to it.

  • So what do you think of US tech companies

  • and their reliance on Chinese manufacturing?

  • Leave your comments below.

  • And before you go,

  • now is the time when I answer questions from you

  • the loyal members of the China Uncensored 50-Cent Army

  • who support the show on the crowd funding website Patreon.

  • Largezo asks:

  • What kind of a court system does the PRC have?”

  • Why China has one of the greatest court systems in the world!

  • They convict over 99.9 percent of defendants!

  • Now, they're not perfect.

  • In 2015,

  • about a thousand people out of 1.2 million were found not guilty.

  • But I am confident that the Chinese Court system

  • will soon be able to reach a 100% conviction rate.

  • After all, when you think about it,

  • isn't everyone guilty of something?

  • Thanks for your question, Largezo.

  • And do you have a question you want to ask me?

  • Then join the China Uncensored 50-Cent Army on Patreon.

  • You'll get some cool rewards for your contribution,

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  • So sign up at pateron.com/chinauncensored.

  • Thanks for watching this episode of China Uncensored.

  • Once again I'm your host Chris Chappell.

  • See you next time.

  • As I mentioned,

  • China Uncensored is supported mainly through

  • direct viewer contributions.

  • Go to Patreon.com/ChinaUncensored or click this orange button.

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On this episode of China Uncensored,