U.S. Opens Criminal Investigation Into Applied Materials Shipments to China Chipmaker

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Applied Materials, a major U.S.-based maker of chipmaking equipment, is currently under a criminal investigation by the Justice Department for allegedly bypassing U.S. export controls and shipping advanced chipmaking tools to SMIC, a major China-based foundry that is blacklisted by the U.S. government, reports Reuters. During its earnings call on Thursday, the company indicated that the investigation has been ongoing for well over a year.

This probe focuses on the accusation that Applied Materials shipped wafer fab equipment worth hundreds of millions of dollars to SMIC via South Korea, sidestepping required export licenses from the U.S. government. The report does not disclose which tools Applied Materials shipped to SMIC and when. The Justice Department is said to be investigating the transactions following the U.S. Commerce Department's decision to add SMIC to its Entity List in December 2020 on national security grounds. 

In October 2022, Applied Materials acknowledged receiving a subpoena from the U.S. Attorney's Office in Massachusetts, seeking information about its shipments to certain Chinese customers.

"We did disclose last year in our K that we have received a subpoena from the U.S. Attorney's Office, and they are requesting information related to certain shipments to China," said Brice Hill, the chief financial officer of Applied, at the company's earnings call with financial analysts and investors this week (via SeekingAlpha). "[…] We are fully cooperating with the government on this matter. And, of course, we remain committed to complying to all of the trade rules."

The U.S. government imposed strict regulations on the export of high-performance processors and advanced chip manufacturing equipment to China last October, citing national security concerns. In particular, U.S. fab tool makers need a license if they ship equipment to Chinese entities that can make logic chips using 14nm/16nm or more sophisticated technologies. Meanwhile, SMIC, the only China-based foundry that can build 14nm-class chips, has been in the U.S. DoC's Entity List for years, which means that Applied Materials and other prominent makers of chipmaking equipment must obtain an export license for all transactions with SMIC.

Despite major sanctions from the U.S. government, SMIC developed its 2nd Generation 7nm-class process technology and established high-volume manufacturing of Huawei's HiSilicon Kirin 9000s processors on the 7nm node earlier this year. Apparently, the company feels quite confident about its 7nm tech and is reportedly making it available to more partners.

Anton Shilov
Freelance News Writer

Anton Shilov is a Freelance News Writer at Tom’s Hardware US. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.