US Hits Record Fine for Chip Exports
The US Bureau of Industry and Security (BIS) just imposed its second-highest penalty ever for unauthorized semiconductor exports to China. The aggressive enforcement action signals a continued crackdown on tech transfers, requiring heightened vigilance on export compliance for advanced-node silicon.
The $252 million penalty was levied against Applied Materials, a Santa Clara-based semiconductor equipment giant, for illegally exporting technology to China's top chipmaker, Semiconductor Manufacturing International Corp. (SMIC). This figure represents the maximum allowed by statute—double the $126 million value of the illicit transactions. The illegal shipments of ion implanters, a critical tool for fabricating integrated circuits, occurred between 2021 and 2022. This was after SMIC had already been placed on the U.S. government's "Entity List" in 2020, a designation requiring a license for any exports of specified U.S. technology due to the company's ties to the Chinese military-industrial complex. To circumvent the export controls, Applied Materials implemented a "dual-build process." Equipment was partially constructed in Massachusetts, shipped to its subsidiary in South Korea for final assembly, and then re-exported to SMIC in China without the required U.S. license. The company's Global Trade Group argued that the assembly in South Korea constituted a "substantial transformation," making the equipment a foreign-made product not subject to U.S. Export Administration Regulations (EAR). The Bureau of Industry and Security (BIS) unequivocally rejected this legal interpretation in its enforcement order. As part of the settlement, Applied Materials must conduct multiple independent audits of its export compliance program. The compliance and production executives responsible for the illegal shipments are also no longer employed by the company.
