On Friday, November 1st, the U.S. government announced that it has fined the New York-based company, GlobalFoundries, $500,000 for exporting chips to a Chinese company without authorization. This Chinese company is linked to the blacklisted Chinese chipmaker, SMIC (Semiconductor Manufacturing International Corporation).
GlobalFoundries is the third-largest contract chipmaker globally, and the fine on Friday is part of a settlement agreement.
The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) stated in a release that GlobalFoundries had sent 74 batches of semiconductor wafers worth about $17.1 million to SJ Semiconductor (SJS), without obtaining the necessary license or authorization from BIS, thereby violating the Export Administration Regulations (EAR).
SJ Semiconductor, formerly known as SMIC North Electronics, was jointly established by SMIC and Jiangsu Changjiang Electronics Technology, a prominent IC packaging and testing company.
According to the Commerce Department, GlobalFoundries was aware that sending items subject to EAR restrictions to SJS required BIS approval when the violation occurred. Although SJS was not a direct customer of GlobalFoundries, it was a third-party outsourced assembly and testing service provider (OSAT) designated by GlobalFoundries’ customers, and therefore should have been screened through GlobalFoundries’ transaction screening system. However, due to data input errors, SJS was not correctly identified in GlobalFoundries’ transaction screening system, and therefore was not screened.
The U.S. Commerce Department stated that SJS is linked to SMIC. Due to the People’s Republic of China’s civil-military integration policy and interactions between SMIC and entities in China’s military-industrial complex, SMIC and its related entities (including SJS) were added to the BIS Entity List in 2020.
Matthew S. Axelrod, Assistant Secretary of Commerce for Export Enforcement, stated in the release, “We expect U.S. companies to exercise high vigilance when sending semiconductor materials to Chinese companies.”
The Commerce Department also highlighted that GlobalFoundries voluntarily disclosed the violation, extensively cooperated with the Commerce Department, and the BIS Office of Export Enforcement’s investigation, and took remedial measures upon discovering the non-compliance, leading to a significant reduction in the fine amount by the Commerce Department.
To prevent the Chinese government from accessing sensitive U.S. technology for military and surveillance capabilities, the U.S. government continues to tighten restrictions on technology and chip exports to China, progressively expanding the entity lists of Chinese companies.
Meanwhile, U.S. lawmakers are increasingly concerned about the Department of Commerce’s enforcement shortcomings responsible for overseeing export policies.
According to a Reuters report on Thursday, influential Democratic Senator Mark Warner criticized the government for what he sees as “obvious regulatory laxity” towards TSMC (Taiwan Semiconductor Manufacturing Company).
Prior reports suggested that chips manufactured by TSMC have appeared in heavily sanctioned Huawei products.