Applied Materials under criminal probe for shipping to China’s SMIC
Semiconductor equipment giant Applied Materials is currently the subject of a US Justice Department investigation for allegedly violating export restrictions on Semiconductor Manufacturing International Corp (SMIC), China’s leading chip foundry. The inquiry focuses on Applied Materials’ purported export of equipment to SMIC via South Korea without proper licenses, involving hundreds of millions of dollars worth of equipment.
The investigation commenced following SMIC’s inclusion in the US Commerce Department’s Entity List in December 2020, restricting the export of goods and technology to the company. Applied Materials reportedly shipped semiconductor equipment from its Massachusetts plant to a subsidiary in South Korea, and from there to SMIC. This action occurred in 2021 and 2022, after the imposition of export restrictions.
The US government restricts the export of advanced semiconductors and chip-making equipment to China due to national security concerns. Both the Justice and Commerce departments established a task force to investigate and prosecute criminal violations of export controls.
Applied Materials disclosed the receipt of a subpoena from the US Attorney’s Office in Massachusetts in October 2022 regarding certain China customer shipments. The company asserts its cooperation with the government, underscoring its commitment to compliance with global laws, including export controls and trade regulations.
The investigation raises questions about potential charges against Applied Materials, though it is uncertain whether the company violated the law. The Justice Department’s National Security Unit is handling the case, but no confirmation or denial of the investigation has been provided.
SMIC, added to the Entity List over alleged ties to the Chinese military, has not commented on Applied Materials’ shipments. The Commerce Department, responsible for export controls, declined to comment, while China’s embassy in Washington expressed a general disapproval of imposed restrictions.
The 2020 addition of SMIC to the trade blacklist cited concerns about key enabling technology supporting China’s military modernization efforts. The Commerce Department highlighted the likely denial of licenses for equipment capable of producing advanced technology chips, subjecting other items to case-by-case reviews.
In its August 2023 filing with the US Securities and Exchange Commission, Applied Materials expressed uncertainty about the investigation’s outcome and potential losses or penalties, if any. The ongoing situation emphasizes the challenges US companies face in navigating export controls amid geopolitical tensions.