On Wednesday, the U.S. Department of Commerce announced a $252 million settlement agreement with Applied Materials, Inc. for illegally exporting chip manufacturing equipment to China.
According to documents released on Wednesday, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce stated that they have reached a settlement agreement with Applied Materials, Inc., based in Santa Clara, California, and its Korean subsidiary Applied Materials Korea Ltd., regarding the illegal exports of semiconductor manufacturing equipment to China.
In 2020, it was found that Applied Materials, Inc. exported certain semiconductor manufacturing equipment (referred to as ion implanters, critical equipment for chip manufacturing) to a company on the Entity List. In 2021 and 2022, the company violated the rules of the BIS regarding the requirement of obtaining export licenses before shipping to entities on the Entity List. The equipment was first sent to Applied Materials Korea Ltd. in Korea for assembly and then transferred to China without the necessary export licenses. The value of the illegally transported goods is estimated to be around $126 million.
Applied Materials, Inc. stated in a press release that the settlement agreement resolved the allegations brought by the BIS, stating that the company erroneously exported goods to China for certain customers between November 2020 and July 2022 that were not in compliance with the U.S. Export Administration Regulations (EAR) due to a misunderstanding of the applicable regulations. Under the terms of the settlement agreement, Applied Materials agreed to pay $252.5 million to the U.S. Department of Commerce.
The company also mentioned that the U.S. Department of Justice and the U.S. Securities and Exchange Commission have informed them that they have concluded their investigations and have taken no action against the company.
Reuters reported that the company exporting chip equipment is China’s largest chip company, SMIC (Semiconductor Manufacturing International Corporation).
SMIC was added to the Entity List by the U.S. Department of Commerce due to its association with the Chinese military, restricting exports of goods and technology to SMIC.
In November 2023, Applied Materials disclosed that it had received a subpoena from the U.S. Attorney’s Office in Massachusetts in October 2022, requesting information regarding exports to certain Chinese customers. The company stated that they are cooperating with the government and are committed to complying with global laws, including export control and trade regulations.
The $252 million fine imposed by the U.S. Department of Commerce is the highest penalty allowed by law, equal to twice the transaction amount.
This Wednesday’s fine is the second-highest penalty ever issued by the Bureau of Industry and Security for export violations. Previously, Seagate Technology was fined $300 million in 2023 for selling hard drives to Huawei in China.