NATO, NASA and the US Navy all use microchips from a Chinese company for encryption legal entity-List.

The complexity of the IT component supply chain impacts the security of the world’s most sensitive data. For example, Wired has found that suspicious Chinese microchips are being used by NATO, NASA and the US Navy. The chips in question are responsible for encrypting storage media such as hard drives. If they contain a vulnerability, it almost by definition allows access to sensitive data.

Blacklist

The chips are from Initio. This is a company that was based in Taiwan until 2016, but was then swallowed up by Hualan Microelectronics. Hualan stands on the so-called entity list. This is a US-produced list of companies with whom trade is restricted because they act against US interests. Initio itself is not on this list, but is very closely associated with Hualan. Huawei is probably the most recognizable name on the list.

The encryption chips are used on hard drives purchased by NATO, NASA and the Navy. Hualan has ties to the Chinese military, making it theoretically possible that there is a vulnerability in Initio’s microchips. Nothing like this has ever been found, but it would be difficult to prove. Initio has already pointed out in an answer that it is not possible to build in gaps.

It does not say that there really is an acute vulnerability at the moment. The fact is, Western organizations unwittingly rely on chips made in China, from a blacklisted subsidiary.