Applied Materials pays $252.5M over illegal exports to China
Applied Materials (AMAT) has reached a $252.5 million settlement with the US Department of Commerce, which accused the company of illegally shipping chipmaking equipment to China's Semiconductor Manufacturing International Corp. (SMIC).
The settlement, which was reached with the Commerce Department's Bureau of Industry and Security (BIS), is the second-highest penalty ever imposed by BIS.
According to the agency, Applied Materials exported semiconductor manufacturing equipment known as ion implanters to SMIC in 2021 and 2022, after SMIC had been placed on the department's "Entity List" in 2020 over its alleged ties to the Chinese military.
The Commerce Department restricts exporting goods and technologies to companies on the Entity List.
According to a press release from the department, Applied Materials "violated BIS’s requirement to obtain a license before shipping to a company on the Entity List by shipping ion implanters first to AMK in Korea for assembly, and then onward to China, without applying for and receiving an export license."
Reuters reported in 2023 that Applied Materials was under investigation by the Commerce Department over the alleged illegal shipping. The investigation was launched by the Biden administration, which was restricting shipments of advanced chips and chipmaking equipment to China over national security concerns.
Export controls on China have only intensified since President Trump entered the White House and started a trade war with Beijing last year.
The value of the merchandise illegally shipped by Applied Materials was approximately $126 million, according to the Commerce Department. The $252.5 million fine levied on the company, which was twice the transaction value, was the maximum allowed by law, the department said.
As part of the settlement, Applied Materials also agreed to conduct multiple audits of its export compliance program and make annual certifications to BIS in connection with those audits.
Shares of Applied Materials fell 3.4% on Thursday.
“The Bureau of Industry and Security is strongly committed to safeguarding sensitive American technologies and deterring wrongdoers,” Jeffrey Kessler, the under secretary of commerce for BIS, said in a statement. “When companies export their products around the world, they must follow the law or face stiff penalties.”
Applied Materials in a statement blamed the illegal exports "on the company’s misunderstanding of the applicability of those regulations."
"Applied believes that resolving this matter is in the best interest of the company, its customers, employees and shareholders," the company said. "Integrity and compliance are core to how Applied operates, and the company remains fully committed to maintaining strong export-control and trade-compliance practices across its global operations.
"With this matter closed, Applied is focused on executing our technology roadmap and supporting the accelerating demand for next-generation semiconductor innovation."
The Commerce Department noted that the senior compliance employees and the senior global trade and production executives responsible for the illegal shipments to China are no longer employed by Applied Materials.