Applied Materials to pay $252 million penalty for selling chipmaking tools to banned Chinese firm — settles over alleged 56 tool exports to chipmaker SMIC following Entity List designation

The U.S. Department of Commerce has ordered Applied Materials to pay a $252 million civil penalty to settle allegations that it illegally exported semiconductor manufacturing equipment to subsidiaries of Semiconductor Manufacturing International Corp (SMIC) after the Chinese foundry had been placed on the U.S. Entity List.

According to the Bureau of Industry and Security (BIS), the violations involved 56 exports or attempted exports of ion implanter systems and related modules between November 2020 and July 2022. The transactions were valued at some $126 million, with the final penalty set at twice that amount, which Commerce described as the statutory maximum.

Ion implanters are front-end tools used to dope silicon wafers during transistor formation. While they’re not as fancy as other tooling like EUV machines, they are just as important across a wide range of process nodes, including mature and advanced logic. BIS says that Applied Materials continued shipping the systems to SMIC subsidiaries after receiving an “is-informed” letter from Commerce on September 25, 2020. That letter stated a license was required for certain exports, reexports, or transfers involving SMIC due to military end-use concerns.

The charging letter includes excerpts from internal communications, including one exchange dated the day after the is-informed notice, where a senior executive wrote that the company needed to go into “hyper drive” on its Korea operations. BIS also alleges that internal discussions referenced competitive pressure and the risk of losing SMIC business if shipments were delayed pending license determinations.

The Commerce Department’s order includes a three-year suspended denial of export privileges, which can be activated if Applied Materials fails to comply with payment or audit conditions imposed by the order. The settlement also requires multiple external audits and annual compliance certifications.

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Luke James is a freelance writer and journalist. Although his background is in legal, he has a personal interest in all things tech, especially hardware and microelectronics, and anything regulatory.

10 Comments Comment from the forums

hotaru251

The transactions were valued at some $126 million, with the final penalty set at twice that amount, which Commerce described as the statutory maximum.

and until this changes they will keep doing it.

When they can easily make the fine back its just the cost of doing business.

Maximum fines need to be scaled off the company's value and/or profit (whichever is greater) since the law was broken so that the fines are ACTUALLY impactful that a company actually gets harmed for more than a quarter or two.
Reply
thestryker

hotaru251 said:
and until this changes they will keep doing it.

When they can easily make the fine back its just the cost of doing business.
In this specific type of situation the company actually loses which is the outcome you want. If they make x amount and the fine is 2x that does discourage them because it's not financially worthwhile even if the company can absorb the cost.
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TechieTwo

If there is a "next time" then the fine should be increased 100 fold.
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hotaru251

thestryker said:
If they make x amount and the fine is 2x that does discourage them because it's not financially worthwhile even if the company can absorb the cost.
except it does.
they were only caught doing this one thing.
They will make that back eventually and if they are doing other shady stuff they still profit.

Point of scaling it to the companies value/profit is there is no making that back as thats multiple yrs of damage that a company would not risk.

Its meant to be extremely costly to prevent anyone from actually trying it.
Reply
thestryker

hotaru251 said:
except it does.
they were only caught doing this one thing.
They will make that back eventually and if they are doing other shady stuff they still profit.

Point of scaling it to the companies value/profit is there is no making that back as thats multiple yrs of damage that a company would not risk.

Its meant to be extremely costly to prevent anyone from actually trying it.
That's very much not a viable strategy anyone is going to get behind. That'd be like executing someone for embezzlement.
Reply
nrdwka

maybe it would make economic sens to move out to another country to do business with profitable client🤔🤷‍♂️
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jwnm

These companies should be broken up and sold to cover damage. The damage amount from these corruptions perpetuate over time so the damage amount is just starting now. It will get worse over time thus breaking them up will avoid future violations and set an example.
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bill001g

thestryker said:
That's very much not a viable strategy anyone is going to get behind. That'd be like executing someone for embezzlement.
Maybe not executing them but making it so they live the rest of their lives with a sign "will work for food". Take every penny they make for the rest of their lives.

This is the whole problem there is no punishment. If you said we will give you a millions dollars you just have to go to jail for a year you would have a line around the block of volunteers.

No different than shoplifters. Watch the youtube body cams videos. They outright say they will get a couple hours in jail and a fine for the times they get caught. They make so much from when they are not caught they do it over and over. If there was a walmart sniper on top of the roof they would not be running with their whole shopping cart of goods telling the walmart employees to not touch them and we will be gone before the cops get here.
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hotaru251

nrdwka said:
maybe it would make economic sens to move out to another country to do business with profitable client🤔🤷‍♂️
depends on company. if you are a very large company (i.e. nvidia/tsmc/etc) i believe gov's can deny you leaving.

thestryker said:
That'd be like executing someone for embezzlement.
which isnt unheard of in history (iran did it within past decade iirc)
and again if you have a n extreme risk then it happens a few times before people stop doing it entirely as it isnt worth it.

is it extreme and not a fair punishment for the crime? sure however if nothing changes and a system is constantly abused you might need to be ea bit extreme to fix the abuse.
heck you could just swap executed for life in prison w/o parole for more humanitarian version and get similar outcome.

Point is in business if the cost isnt scary enough then they will risk it as thats the cost of doing business.

bill001g said:
This is the whole problem there is no punishment. If you said we will give you a millions dollars you just have to go to jail for a year you would have a line around the block of volunteers.
exactly.
to large companies they will make up the fines within 3 yrs tops so they might as well risk trying to make extra as the risk isnt high.

example: imagine if you (a large wealthy business) pirated media to train an ai for years which has made you a massive amount of $...and yrs laetr are caught and you are slapped on wrist with a mere 6 figure fine.

will you think "oh no this money amount I made in 3months that made me multiples more is too much i betetr stop doing it"?
no you are going to think "thats it? man crime pays!"
Reply
jp7189

This part: "The settlement also requires multiple external audits and annual compliance certifications."

This is the reason they can't just double down on bad behavior to recover the fines.
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