Synopsis
The Bureau of Industry and Security, which oversees U.S. technology controls on China, said GlobalFoundries had sent 74 different shipments of wafers, thin slices of silicon used in chipmaking, to SJ Semiconductor, a company in eastern China, from February 2021 to October 2022.
The Biden administration said Friday that it would impose a fine of $500,000 on the US chipmaker GlobalFoundries, after the company shipped more than $17 million of products to a Chinese company on a restricted trade list.
The Bureau of Industry and Security, which oversees US technology controls on China, said GlobalFoundries had sent 74 different shipments of wafers, thin slices of silicon used in chipmaking, to SJ Semiconductor, a company in eastern China, from February 2021 to October 2022.
The United States added SJ Semiconductor to the so-called entity list in December 2020 for its ties to Semiconductor Manufacturing International Corp., China's most advanced chip manufacturer. The Commerce Department said at the time that SMIC had ties with China's military industrial complex and posed a threat to US national security.
Once a firm is on the entity list, American companies are required to obtain a special license from the Commerce Department before shipping any technology. SJS was not properly identified in GlobalFoundries' screening system as a result of a data error, and was not screened, the government said.
The rare financial penalty is notable partly because GlobalFoundries is one of the biggest chip companies to receive money under the CHIPS and Science Act. The Biden administration announced a $1.5 billion award to the New York-based chipmaker earlier this year, along with another $1.6 billion in federal loans. The grants are expected to triple the company's production capacity in New York state over 10 years.
GlobalFoundries voluntarily disclosed the issue to the government and cooperated with the investigation, BIS said. Because of the extent of the cooperation, the government imposed a significantly smaller penalty than what was allowable under federal law.
"We want US companies to be hypervigilant when sending semiconductor materials to Chinese parties," said Matthew S. Axelrod, assistant secretary for export enforcement at BIS. "And when, as here, that vigilance falls short and semiconductor materials have gone where they shouldn't, we want companies to make voluntary disclosures, remediate and cooperate with us."
In a statement, GlobalFoundries said that, as a supplier to the Department of Defense, it had a "history of exemplary compliance" and that it regretted "the inadvertent action" that resulted in the company's shipping products to a company on the entity list.
"After discovering this, we voluntarily disclosed the situation to the US Bureau of Industry and Security," the company said.
The Biden administration has issued sweeping restrictions on the sale of advanced chips to China, in an effort to stop US technology from aiding China's military modernization.
But some Chinese and American companies have found ways to continue doing business, despite the restrictions.
Taiwan Semiconductor Manufacturing Co., the world's most advanced chipmaker, recently informed the US government that some of its chips had ended up in devices made by Huawei, a Chinese telecommunications giant under US sanctions. Some officials in the Biden administration have been pushing to tighten the controls, but have faced pushback from both allied governments and companies that could be hurt financially.