Export violations, multimillion-dollar penalties, and compliance audits; Applied Materials’ settlement with US regulators reflects rising scrutiny on semiconductor trade with China.
Applied Materials has reached a settlement with the US Department of Commerce’s Bureau of Industry and Security (BIS), agreeing to pay $252.5 million following allegations that it unlawfully exported semiconductor manufacturing equipment to China.
The agreement requires the company to conduct two internal audits of its export compliance programme. BIS warned that failure to meet the terms, including payment, could result in a three-year suspension of export privileges.
The penalty is the second‑largest ever imposed by the agency, after Seagate Technology’s $300 million fine in 2023 for shipments to Huawei.
Applied Materials faced 56 alleged violations involving equipment worth $126.3 million. Investigators found that between late 2020 and mid‑2022, the company shipped partially assembled ion implanting equipment from Massachusetts to South Korea, where it was completed and then sent to Semiconductor Manufacturing International Corp. (SMIC) in China.
SMIC was added to the US entity list in December 2020 due to concerns about its role in China’s military modernisation strategy.
The company admitted to the conduct in the settlement. Employees involved in the shipments are no longer with the firm, according to BIS. Applied Materials said resolving the matter was in the best interests of stakeholders and reaffirmed its commitment to compliance.
The Department of Justice and the Securities and Exchange Commission closed related investigations without further action. BIS officials stressed that export regulations apply even when items are modified abroad, noting that the equipment originated in the United States.
Applied Materials has long supplied SMIC, selling $1.4 billion worth of tools between 2016 and 2020. Despite SMIC’s entity list designation, shipments continued, with the company assuming re-exports from South Korea were exempt. BIS rejected this interpretation.
Meanwhile, other US semiconductor firms have faced penalties for similar violations, including GlobalFoundries, fined $500,000 in 2024 for shipments to a SMIC subsidiary.
