TAIPEI/PALO ALTO, U.S. -- Apple has put on hold plans to use memory chips from China's Yangtze Memory Technologies Co. (YMTC) in its products, multiple sources told Nikkei Asia.

The move comes amid the latest round of U.S. export controls imposed against the Chinese tech sector and is a sign that Washington's crackdown is creating a chilling effect down the supply chain.

Apple had already completed the monthslong process to certify YMTC's 128-layer 3D NAND flash memory for use in iPhones when the U.S. government unveiled the tighter export restrictions against China early this month, multiple sources said.

NAND flash memory is a key component found in all electronic devices from smartphones and personal computers to servers. YMTC'S 128-layer chips are by far the most advanced by a Chinese chipmaker, though still one or two generations behind market leaders like Samsung Electronics and Micron.

Apple originally planned to start using the government-funded YMTC's chips as early as this year, as they are at least 20% cheaper than those of its leading rivals, supply chain executives said.

However, mounting geopolitical pressure and criticism from U.S. policymakers led Apple to change course, according to several sources.

"The products have been verified, but they did not go into the production lines when mass production of the new iPhone began," one of the sources told Nikkei Asia.

YMTC chips were initially planned to be used only for iPhones sold in the Chinese market. One source, however, said Apple was considering eventually purchasing up to 40% of the NAND flash memory needed for all iPhones from YMTC.

"YMTC is government-subsidized so they can really outprice competitors," said another of the sources.

Currently, YMTC's chips have not yet been used in Apple products, sources said.

Washington on Oct. 7 placed YMTC on the so-called Unverified List. A company is put on this list when U.S. officials cannot verify who its end users are.

Generally, inclusion does not "restrict the acquisition of components or anything else from Unverified List designees," Harry Clark, a Washington-based lawyer with law company Orrick, told Nikkei Asia.

However, U.S. companies are prohibited from sharing any design, technologies, documents or specifications to companies on the Unverified List without a license.

Moreover, a senior U.S. Commerce Department official told Nikkei Asia that companies added to this list are "likely" to be added to the Entity List -- the official export control blacklist -- if they cannot provide the necessary information in a certain period of time, usually about 60 days.

YMTC was also hit by the tighter export controls announced later the same day, aimed at China's broader chip sector. These new rules, among other restrictions, bar U.S. chip equipment makers from providing services or technical support that would help Chinese companies produce advanced chips.

YMTC's 128-layer memory chips fall under the scope of these rules. This means it might no longer have the technological capacity to produce enough quality and quantity of chips for Apple, even if the iPhone maker wanted to source from the company, analysts said.

"Apple may continue wanting to use YMTC in the local market for China. But the way the regulations are set up currently, it's very unlikely that YMTC will even be able to supply the kind of NAND chips in a couple of years that Apple would want," said Brent Fredberg, director of investments at Brandes Investment Partners in San Diego.

Apple started to engage with YMTC as early as 2018 in the search for new, more cost-effective memory solutions, Nikkei Asia earlier reported.

YMTC is China's hope for breaking into the NAND flash memory arena that has long been dominated by a handful of companies, namely South Korea's Samsung and SK Hynix, Kioxia of Japan and Micron of the U.S.

Founded in 2016, YMTC is currently ramping up production at its second chip plant, which is slated to begin mass production this year.

The potential deal with Apple was viewed by the industry as a massive victory for China's semiconductor segment, as it would prove its ability to provide quality products for top global brands.

YMTC has been stepping up efforts to reduce dependence on American chipmaking equipment and components since 2020, following Washington's crackdown on Chinese tech champion Huawei Technologies. However, replacing U.S. suppliers is not easy given their stranglehold on key areas like chipmaking tools, and YMTC's plan to ramp up production still relies heavily on their support.

Apple and YMTC did not respond to requests for comment.