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Super Micro stock falls amid report of hardware attack denied by company

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Super Micro stock falls amid report of hardware attack denied by company

Shares of San Jose, Calif.-based technology hardware component supplier Super Micro Computer Inc. fell sharply Oct. 4 after a Bloomberg Businessweek report claimed some of the company's server motherboards were compromised in 2015 by a microchip improperly inserted during factory assembly. The company strongly denied the claims in a statement provided to Bloomberg Businessweek and posted online.

Shares of Super Micro lost 41% of their value on Oct. 4, ending the session at $12.60, down from $21.40 at market close on Oct. 3.

The Bloomberg Businessweek report also claimed some products from technology companies Apple Inc. and Amazon.com Inc. that contained Super Micro-assembled components were impacted by the hardware breach. Apple and Amazon both strongly denied the allegations in emailed statements posted online by Bloomberg Businessweek; shares of Apple lost about 1.8% in value on Oct. 4, while those of Amazon declined by 2.2%.

Citing interviews with unnamed government and corporate sources, Bloomberg Businessweek reported that Chinese spies had targeted 30 U.S. companies, including Amazon and Apple, in the hardware attack. China's Ministry of Foreign Affairs denied the claims in a statement translated by Bloomberg News and posted online.

In an Oct. 4 statement posted on its website, Apple said "there is no truth to these claims." The company added: "Apple has never found malicious chips, 'hardware manipulations' or vulnerabilities purposely planted in any server. Apple never had any contact with the FBI or any other agency about such an incident. We are not aware of any investigation by the FBI, nor are our contacts in law enforcement."

The Bloomberg Businessweek report claimed the U.S. Federal Bureau of Investigation opened an investigation into the hardware attack in 2015 when a third-party hired by Amazon Web Services Inc. to assist with due diligence related to its acquisition of Elemental Technologies Inc. discovered the extra chip on Elemental servers that had Super Micro-assembled motherboards. Amazon ultimately acquired Elemental Technologies for $296 million in October 2015.

"As we shared with Bloomberg BusinessWeek multiple times over the last couple months, at no time, past or present, have we ever found any issues relating to modified hardware or malicious chips in SuperMicro motherboards in any Elemental or Amazon systems.‎ Additionally, we have not engaged in an investigation with the government," an AWS spokesperson said in a statement emailed to S&P Global Market Intelligence.

Super Micro likewise said in a statement to Bloomberg Businessweek that it was not aware of any government investigation into an attack on its hardware, though it said it would cooperate with any such government investigation. In an Oct. 4 statement posted on its website, Super Micro said it "never found any malicious chips, nor been informed by any customer that such chips have been found." The company said that manufacturing motherboards in China is "a standard industry practice" and added that it "qualifies and certifies every contract manufacturer and routinely inspects their facilities and processes closely."

An aide to the House Homeland Security Committee told S&P Global Market Intelligence that the committee is currently looking into the issues raised in Bloomberg Businessweek's report.

Sen. Mark Warner, D-Va., vice chairman of the Senate Select Committee on Intelligence, said in a statement emailed to S&P Global Market Intelligence that the Bloomberg Businessweek report "adds to the testimonials from private companies ... whose entry into China was preconditioned on locating manufacturing facilities to China or partnering with a local Chinese company, only to see their customers — and often their technology — appropriated by their erstwhile local 'partner.'"

Warner added: "These realities have fundamentally changed the risks for U.S. business — even for companies that have worked in China or with Chinese companies for years. In the government, we are grappling with what these changes mean, and it's incumbent upon the business community to do the same."