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Probe Into US Chip Equipment Maker’s Gear Sent to China’s SMIC

US officials are investigating if Applied Materials broke sanctions by sending gear worth ‘hundreds of millions’ to top China chipmaker via a unit in South Korea in 2021 and 2022, sources say

Applied Materials, which is based in California, has been accused of repeatedly shipping equipment from its plant in Gloucester, Massachusetts, to a subsidiary in South Korea and then to SMIC (Reuters image).


US Justice Department officials are investigating whether computer-chip equipment maker Applied Materials broke export restrictions imposed by the Biden Administration, sources say.

The criminal probe is seeking to determine if Applied Materials – the largest US semiconductor equipment maker –potentially evaded export restrictions on China’s top chipmaker SMIC, the three sources said.

The investigation relates to Applied Materials’ equipment sent to SMIC via South Korea without export licences over the past two years, the sources said.

Hundreds of millions of dollars of equipment is involved, one of the sources said. This is the first report on details about the probe.


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Company says it’s cooperating

The US has restricted shipments of advanced chips and chipmaking equipment to China for national security, and the Justice and Commerce departments launched a task force earlier this year to investigate and prosecute criminal violations of export controls.

The rules are aimed at stemming the flow of US technology that could be used to bolster China’s military and intelligence capabilities.

Applied Materials, which is based in Santa Clara in California, said on Thursday it first disclosed in October 2022 that it had received a subpoena from the US Attorney’s Office in Massachusetts for information on certain China customer shipments.

“The company is cooperating with the government and remains committed to compliance and global laws, including export controls and trade regulations,” it said in a statement.

The US Attorney’s office in Boston said: “We do not confirm or deny investigations.” Prosecutors in the office’s National Security Unit are handling the ongoing probe, two sources said.

Reuters could not determine whether Applied Materials violated the law, and it isn’t clear whether the investigation will result in charges.


‘Shipments sent via subsidiary in 2021, 2022’

The company produced semiconductor equipment in Massachusetts, then repeatedly shipped the equipment from its plant in Gloucester to a subsidiary in South Korea, the people said.

From there, the equipment went to China’s Semiconductor Manufacturing International Corporation (SMIC), people familiar with the probe said.

The shipments began after the US Commerce Department added SMIC to its “Entity List” in December 2020, which restricted exports of goods and technology to the company, two of the sources said, and took place in 2021 and 2022.

SMIC was placed on the list over its apparent ties to the Chinese military. SMIC did not immediately respond to a request for comment on the shipments from Applied Materials.

In 2020, SMIC denied ties with the Chinese military, saying that it manufactures chips and provides services “solely for civilian and commercial end-users and end-uses.”

A spokesperson for the Commerce Department, which oversees export controls, declined comment. A spokesperson for China’s embassy in Washington did not immediately respond to a request for comment.


‘Bid to limit Chinese military’s modernization’

In adding SMIC to its trade blacklist in 2020, the Commerce Department said that licences for equipment uniquely capable of producing chips at advanced technology nodes are likely to be denied to “prevent such key enabling technology from supporting China’s military modernization efforts,” according to a 2020 posting in the Federal Register.

In March 2021, Reuters reported that the US government had been slow to approve licences for American companies like Lam Research Corp and Applied Materials to sell to SMIC.

“This matter is subject to uncertainties, and we cannot predict the outcome, nor reasonably estimate a range of loss or penalties, if any, relating to this matter,” the company said in an August 2023 filing with the US Securities and Exchange Commission, in reference to its 2022 receipt of the subpoena relating to certain China customer shipments.


  • Reuters with additional editing by Jim Pollard




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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.


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