Report: China infiltrated supply chain of top server supplier

An explosive story from Bloomberg Businessweek alleges that Chinese government agents planted tiny chips in servers widely used in government and industry – but so far firms are denying reports.

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A new blockbuster Bloomberg Businessweek story draws on 17 different anonymous government and private-sector sources to claim that major tech companies, including Apple and Amazon Web Services, had their servers compromised by the Chinese People's Liberation Army.

According to the story, the compromise that was discovered in 2015 was facilitated through the clandestine placement of tiny, nearly imperceptible microchips onto motherboards produced by two companies, Elemental Technologies and Supermicro. The companies  are based in the U.S. but outsource parts of their supply chain to China. Unnamed sources said the chips gave China backdoor access to the networks and systems of at least 30 companies, including Apple and AWS, along with a major bank and government contractors.

A quick look at U.S. government contracting sites reveals purchase orders for Supermicro servers and products across multiple agencies, including the Departments of Defense, Energy, Commerce and more.

Security researcher Thomas Rid said the story reveals a potential "intelligence operation of historic proportions" but said he was reticent to fully endorse findings from a story that relied entirely on anonymous sources.

Both AWS and Apple issued highly specific denials rebutting the Bloomberg story.

"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," an AWS spokesperson said in an emailed statement after the story was published. "Additionally, we have not engaged in an investigation with the government."

Apple issued a specific denial of allegations in the piece, saying it had "never found malicious chips, 'hardware manipulations' or vulnerabilities purposely planted in any server." The company also said that Bloomberg's reporters were not "open to the possibility that they or their sources might be wrong or misinformed."

The security blogger who writes under the moniker The Grugq noted that if the article is accurate, it is more evidence that the Baseboard Management Controllers and the Intelligent Platform Management Interface protocol allegedly targeted by the chips "are a horrendous tire fire for cyber security." 

IPMI is a remote management tool that allows for administrative access to servers for tasks like maintenance, software installation and updates. If compromised, it can give an attacker access to user credentials and data.  BMC is essentially a computer within the server included as a chip on the motherboard that facilitates the operation of IPMI.

Security researcher Dan Farmer noted in a brief explainer that "[u]sers tend to manage servers in very large collections that all share the same IPMI password; Groups of 100,000 servers or more that share a common password is not unusual with large organizations."

It's not clear whether at least some of the denials and Bloomberg's reporting could both be true. Depending on the kind of supply chain audits conducted by Apple, AWS and others, a tiny physical addition to the motherboard -- the size of the point of a pencil, according to the story -- could have escaped notice of auditors who were focused on tracing components through the supply chain and looking for malfunctions or anomalies in server performance.

"There is a point at which eradicating every potential vulnerability is impossible. The laws of physics just won’t allow us to get there," Lisa Belt, cyber development executive for the Defense Information Systems Agency, told FCW on the sidelines of an Oct. 4 industry event.

Belt didn't comment directly on the allegations in the Bloomberg report, but she said that a move to "zero-trust networking" will help protect data and "reduce some of the threat of what might be introduced by a chip manufacturer, for example, or a component or a card manufacturer on the network side."

One key talking point among intelligence officials is the true cost of doing business with low-cost suppliers with possible links to the Chinese government or the People's Liberation Army.

At an April 2018 event, William Evanina, director of the U.S. National Counterterrorism and Security Center, described the profit pressures facing U.S. manufacturers.

"When you go to a board of directors or a CEO and say, 'Hey, I know you have two bids, you have Cisco or Oracle, and then you have the Chinese company which is 40 percent cheaper,' it's hard to explain to them and hard for them to explain to their constituents that they're going to pay 40 percent more for a U.S.-based company because it doesn’t threaten national security," Evanina said.

Citing security reasons, DOD didn't comment directly on the allegations in the Bloomberg report. But DOD spokeswoman Heather Babb said in an emailed statement that, "commercial products and services procured and deployed by DOD are evaluated for security risks. The Department has policies in place to address software assurance and supply chain risk management, as well as established security standards to ensure all procured commercial products and services are rigorously inspected for security vulnerabilities. As threats within the cyberspace domain change, DOD looks for solutions that provide more capability."

This article was updated Oct. 4 to include comment from the Department of Defense.

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