Explosive Report Details Chinese Infiltration Of Apple, Amazon And The CIA

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Subject: Explosive Report Details Chinese Infiltration Of Apple, Amazon And The CIA
Posted by:  Virus Guy (Vir…@Guy.c0m)
Date: Thu, 04 Oct 2018

Explosive Report Details Chinese Infiltration Of Apple, Amazon And The CIA

Thu, 10/04/2018 - 08:14

One week ago, President Trump stood up at a meeting of the United
Nations Security Council and accused China of attempting to tamper with
US elections - mimicking some of the same allegations that had first
been levied against Russia nearly two years prior. In his speech, Trump
claimed that China was working to undermine Republicans, and even the
president himself, warning that "it's not just Russia, it's China and
Russia." While the media largely shrugged off this proclamation as more
presidential bombast probably inspired by the burgeoning US-China trade
beef, the administration continued to insist that it was taking a harder
line against Chinese efforts to subvert American companies to aide the
Communist Party's sprawling intelligence apparatus. As if to underline
Trump's point, the FBI had arrested a Taiwanese national in Chicago the
day before Trump's speech, accusing the 27-year-old suspect of trying to
help China flip eight defense contractors who could have provided
crucial intelligence on sensitive defense-related technology.

But in a game-changing report published Thursday morning, Bloomberg
Businessweek exposed a sprawling multi-year investigation into China's
infiltration of US corporate and defense infrastructure. Most notably,
it confirmed that, in addition to efforts designed to sway US elections,
China' intelligence community orchestrated a pervasive infiltration of
servers used to power everything from MRI machines to the drones used by
the CIA and army. They accomplished this using a tiny microchip no
bigger than a grain of rice.

BBG published the report just hours before Vice President Mike Pence was
expected to "string together a narrative of Chinese aggression" during a
speech at the Hudson Institute in Washington. According to excerpts
leaked to the New York Times, his speech was expected to focus on
examples of China's "aggressive moves against American warships, of
predatory behavior against their neighbors, and of a sophisticated
influence campaign to tilt the midterms and 2020 elections against
President Trump". His speech is also expected to focus on how China
leverages debt and its capital markets to force foreign governments to
submit to its will (something that has happened in Bangladesh and the
Czech Republic.

China

But while those narratives are certainly important, they pale in
comparison to Bloomberg's revelations, which reported on an ongoing
government investigation into China's use of a "tiny microchip" that
found its way into servers that were widely used throughout the US
military and intelligence infrastructure, from Navy warships to DoD
server farms. The probe began three years ago after the US intelligence
agencies were tipped off by Amazon. And three years later, it remains
ongoing.

    Nested on the servers’ motherboards, the testers found a tiny
microchip, not much bigger than a grain of rice, that wasn’t part of the
boards’ original design. Amazon reported the discovery to U.S.
authorities, sending a shudder through the intelligence community.
Elemental’s servers could be found in Department of Defense data
centers, the CIA’s drone operations, and the onboard networks of Navy
warships. And Elemental was just one of hundreds of Supermicro customers.

    During the ensuing top-secret probe, which remains open more than
three years later, investigators determined that the chips allowed the
attackers to create a stealth doorway into any network that included the
altered machines. Multiple people familiar with the matter say
investigators found that the chips had been inserted at factories run by
manufacturing subcontractors in China.

With those two paragraphs, Bloomberg has succeeded in shifting the
prevailing narrative away from Russia and toward China. Or, as Pence is
expected to state in Thursday's speech (via NYT) "as a senior career
member of our intelligence community recently told me, what the Russians
are doing pales in comparison to what China is doing across this country."

The story begins with a Silicon Valley startup called Elemental. Founded
in 2006 by three engineers who brilliantly anticipated that broadcasters
would soon be searching for a way to adapt their programming for
streaming over the Internet, and on mobile devices like smartphones,
Elemental went about building a "dream team" of coders who designed
software to adapt the super-fast graphics chips being designed for video
gaming to stream video instead. The company then loaded this software on
to special, custom-built servers emblazoned with its logo. These servers
then sold for as much as $100,000 a pop - a markup of roughly 70%.  In
2009, the company received its first contract with US defense and
intelligence contractors, and even received an investment from a
CIA-backed venture fund.

    * Elemental also started working with American spy agencies. In
2009 the company announced a development partnership with In-Q-Tel Inc.,
the CIA’s investment arm, a deal that paved the way for Elemental
servers to be used in national security missions across the U.S.
government. Public documents, including the company’s own promotional
materials, show that the servers have been used inside Department of
Defense data centers to process drone and surveillance-camera footage,
on Navy warships to transmit feeds of airborne missions, and inside
government buildings to enable secure videoconferencing. NASA, both
houses of Congress, and the Department of Homeland Security have also
been customers. This portfolio made Elemental a target for foreign
adversaries.

Like many other companies, Elementals' servers utilized motherboards
built by Supermicro, which dominates the market for motherboards used in
special-purpose computers. It was here, at Supermicro, where the
government believes - according to Bloomberg's sources - that the
infiltration began. Before it came to dominate the global market for
computer motherboards, Supermicro had humble beginnings. A Taiwanese
engineer and his wife founded the company in 1993, at a time when
Silicon Valley was embracing outsourcing. It attracted clients early on
with the promise of infinite customization, employing a massive team of
engineers to make sure it could accommodate its clients' every need.
Customers also appreciated that, while Supermicro's motherboards were
assembled in China or Taiwan, its engineers were based in Silicon
Valley. But the company's workforce featured one characteristic that
made it uniquely attractive to China: A sizable portion of its engineers
were native Mandarin speakers. One of Bloomberg's sources said the
government is still investigating whether spies were embedded within
Supermicro or other US companies).

But however it was done, these tiny microchips somehow found their way
into Supermicro's products. Bloomberg provided a step-by-step guide
detailing how it believes that happened.

* A Chinese military unit designed and manufactured
  microchips as small as a sharpened pencil tip. Some
  of the chips were built to look like signal conditioning
  couplers, and they incorporated memory, networking
  capability, and sufficient processing power for an
  attack.

* The microchips were inserted at Chinese factories that
  supplied Supermicro, one of the world’s biggest sellers
  of server motherboards.

* The compromised motherboards were built into servers
  assembled by Supermicro.

* The sabotaged servers made their way inside data centers
  operated by dozens of companies.

* When a server was installed and switched on, the
  microchip altered the operating system’s core so
  it could accept modifications. The chip could also
  contact computers controlled by the attackers in
  search of further instructions and code.

In espionage circles, infiltrating computer hardware - especially to the
degree that the Chinese did - is extremely difficult to pull off. And
doing it at the nation-state level would be akin to "a unicorn jumping
over a rainbow," as one of BBG's anonymous sources put it. But China's
dominance of the market for PCs and mobile phones allows it a massive
advantage.

    One country in particular has an advantage executing this kind of
attack: China, which by some estimates makes 75 percent of the world’s
mobile phones and 90 percent of its PCs. Still, to actually accomplish a
seeding attack would mean developing a deep understanding of a product’s
design, manipulating components at the factory, and ensuring that the
doctored devices made it through the global logistics chain to the
desired location - a feat akin to throwing a stick in the Yangtze River
upstream from Shanghai and ensuring that it washes ashore in Seattle.
"Having a well-done, nation-state-level hardware implant surface would
be like witnessing a unicorn jumping over a rainbow," says Joe Grand, a
hardware hacker and the founder of Grand Idea Studio Inc. "Hardware is
just so far off the radar, it’s almost treated like black magic."

    But that’s just what U.S. investigators found: The chips had been
inserted during the manufacturing process, two officials say, by
operatives from a unit of the People’s Liberation Army. In Supermicro,
China’s spies appear to have found a perfect conduit for what U.S.
officials now describe as the most significant supply chain attack known
to have been carried out against American companies.

Some more details from the report are summarized below:

The government found that the infiltration extended to nearly 30
companies, including Amazon and Apple.

* One official says investigators found that it eventually affected
almost 30 companies, including a major bank, government contractors, and
the world’s most valuable company, Apple Inc. Apple was an important
Supermicro customer and had planned to order more than 30,000 of its
servers in two years for a new global network of data centers. Three
senior insiders at Apple say that in the summer of 2015, it, too, found
malicious chips on Supermicro motherboards. Apple severed ties with
Supermicro the following year, for what it described as unrelated reasons.

Both Amazon and Apple denied having knowledge of the infiltration
(Amazon eventually acquired Elemental and integrated it into its Amazon
Prime Video service). Meanwhile, the Chinese government issued a
conspicuous non-denial denial.

* In emailed statements, Amazon (which announced its acquisition of
Elemental in September 2015), Apple, and Supermicro disputed summaries
of Bloomberg Businessweek’s reporting. "It’s untrue that AWS knew about
a supply chain compromise, an issue with malicious chips, or hardware
modifications when acquiring Elemental," Amazon wrote. "On this we can
be very clear: Apple has never found malicious chips, 'hardware
manipulations’ or vulnerabilities purposely planted in any server,"
Apple wrote. "We remain unaware of any such investigation," wrote a
spokesman for Supermicro, Perry Hayes. The Chinese government didn’t
directly address questions about manipulation of Supermicro servers,
issuing a statement that read, in part, "Supply chain safety in
cyberspace is an issue of common concern, and China is also a victim."
The FBI and the Office of the Director of National Intelligence,
representing the CIA and NSA, declined to comment.

Bloomberg based its story on interviews with 17 anonymous sources,
including 6 former government intelligence officials. One official told
BBG that China's long-term goal was "long-term access" to sensitive
government secrets.

* In all, 17 people confirmed the manipulation of Supermicro’s hardware
and other elements of the attacks. The sources were granted anonymity
because of the sensitive, and in some cases classified, nature of the
information.

* The companies’ denials are countered by six current and former senior
national security officials, who - in conversations that began during
the Obama administration and continued under the Trump administration -
detailed the discovery of the chips and the government’s investigation.
One of those officials and two people inside AWS provided extensive
information on how the attack played out at Elemental and Amazon; the
official and one of the insiders also described Amazon’s cooperation
with the government investigation. In addition to the three Apple
insiders, four of the six U.S. officials confirmed that Apple was a
victim. In all, 17 people confirmed the manipulation of Supermicro’s
hardware and other elements of the attacks. The sources were granted
anonymity because of the sensitive, and in some cases classified, nature
of the information.

One government official says China’s goal was long-term access to
high-value corporate secrets and sensitive government networks. No
consumer data is known to have been stolen.

Notably, this revelation provides even more support to the Trump
administration's insistence that the trade war with China was based on
national security concerns. The hope is that more US companies will
shift production of sensitive components back to the US.

* The ramifications of the attack continue to play out. The Trump
administration has made computer and networking hardware, including
motherboards, a focus of its latest round of trade sanctions against
China, and White House officials have made it clear they think companies
will begin shifting their supply chains to other countries as a result.
Such a shift might assuage officials who have been warning for years
about the security of the supply chain—even though they’ve never
disclosed a major reason for their concerns.

As one government official reminds us, the extent of this attack cannot
be understated.

* With more than 900 customers in 100 countries by 2015, Supermicro
offered inroads to a bountiful collection of sensitive targets. "Think
of Supermicro as the Microsoft of the hardware world," says a former
U.S. intelligence official who’s studied Supermicro and its business
model. "Attacking Supermicro motherboards is like attacking Windows.
It’s like attacking the whole world."

But perhaps the most galling aspect of this whole scandal is that the
Obama Administration should have seen it coming.

* Well before evidence of the attack surfaced inside the networks of
U.S. companies, American intelligence sources were reporting that
China’s spies had plans to introduce malicious microchips into the
supply chain. The sources weren’t specific, according to a person
familiar with the information they provided, and millions of
motherboards are shipped into the U.S. annually. But in the first half
of 2014, a different person briefed on high-level discussions says,
intelligence officials went to the White House with something more
concrete: China’s military was preparing to insert the chips into
Supermicro motherboards bound for U.S. companies.

And thanks to Obama having dropped the ball, China managed to pull off
the most expansive infiltration of the global supply chain ever
discovered by US intelligence.

* But that’s just what U.S. investigators found: The chips had been
inserted during the manufacturing process, two officials say, by
operatives from a unit of the People’s Liberation Army. In Supermicro,
China’s spies appear to have found a perfect conduit for what U.S.
officials now describe as the most significant supply chain attack known
to have been carried out against American companies.

The inconspicuous-looking chips were disguised to look like regular
components but they helped China open doors that "other hackers could go
through" meaning China could potentially manipulate the systems being
infiltrated (as a reminder, these chips were found in servers used in
the US drone program).

* The chips on Elemental servers were designed to be as inconspicuous as
possible, according to one person who saw a detailed report prepared for
Amazon by its third-party security contractor, as well as a second
person who saw digital photos and X-ray images of the chips incorporated
into a later report prepared by Amazon’s security team. Gray or
off-white in color, they looked more like signal conditioning couplers,
another common motherboard component, than microchips, and so they were
unlikely to be detectable without specialized equipment. Depending on
the board model, the chips varied slightly in size, suggesting that the
attackers had supplied different factories with different batches.

* Officials familiar with the investigation say the primary role of
implants such as these is to open doors that other attackers can go
through. “Hardware attacks are about access,” as one former senior
official puts it. In simplified terms, the implants on Supermicro
hardware manipulated the core operating instructions that tell the
server what to do as data move across a motherboard, two people familiar
with the chips’ operation say. This happened at a crucial moment, as
small bits of the operating system were being stored in the board’s
temporary memory en route to the server’s central processor, the CPU.
The implant was placed on the board in a way that allowed it to
effectively edit this information queue, injecting its own code or
altering the order of the instructions the CPU was meant to follow.
Deviously small changes could create disastrous effects.

* Since the implants were small, the amount of code they contained was
small as well. But 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. <strong>The illicit chips could do all this because they were
connected to the baseboard management controller, a kind of superchip
that administrators use to remotely log in to problematic servers,
giving them access to the most sensitive code even on machines that have
crashed or are turned off.

* This system could let the attackers alter how the device functioned,
line by line, however they wanted, leaving no one the wiser. To
understand the power that would give them, take this hypothetical
example: Somewhere in the Linux operating system, which runs in many
servers, is code that authorizes a user by verifying a typed password
against a stored encrypted one. An implanted chip can alter part of that
code so the server won’t check for a password—and presto! A secure
machine is open to any and all users.

Shortly after the report was published, the US Department of Defense has
scheduled a national-security related press conference for 9:30 am ET on
Thursday. It didn't reveal the subject of the briefing, but the timing
is certainly suspicious...

Something's popping tomorrow pic.twitter.com/z66dNh6Px6
  — Chuck Ross (@ChuckRossDC) October 4, 2018

But regardless of what is said on Thursday, one thing probably won't
change: Expect to hear a lot less about Russia, and a lot more about
China as the deep state's interference myopic focus on the former shifts
to the latter. As Kevin Warsh framed the question during a Thursday
interview with CNBC where he asked "are we at the beginning of a 20-year
Cold War?" in response to a question about curbing China's influence -
both economically and defensively. We imagine we'll be hearing a lot
more about the breach from senior US officials, including both the vice
president and the president himself, in the very near future.

https://www.zerohedge.com/news/2018-10-04/explosive-report-details-chinese-infiltration-apple-amazon-and-cia

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