Applied Materials CI [Applied Materials YouTube Capture]

Applied Materials, a U.S. semiconductor equipment company, and its South Korean subsidiary have agreed to pay a substantial fine to the U.S. government for violating U.S. export control regulations targeting China.

The Bureau of Industry and Security (BIS) under the U.S. Department of Commerce has reached an agreement with Applied Materials Inc. (AMAT) and Applied Materials Korea (AMK) regarding the illegal export of U.S. semiconductor manufacturing equipment to China.

The two companies will pay a fine of approximately $252 million (about 360 billion won), which is the second-largest fine ever imposed by BIS.

According to BIS, AMAT had been exporting ion implanters, a type of semiconductor manufacturing equipment, to SMIC (Semiconductor Manufacturing International Corporation), a Chinese foundry, which was added to the Department of Commerce's export control list in 2020.

However, AMAT sent this equipment to AMK in Korea in 2021 and 2022 for assembly before exporting it to China, without applying for or obtaining the mandatory government authorization. This resulted in 56 violations of export control regulations.

U.S. export control regulations apply even to re-exports made through other countries.

The value of the equipment illegally exported by AMAT and AMK to China is approximately $126 million (about 180 billion won).

BIS can impose fines of up to twice the value of the illegal transaction, according to regulations.

Under this agreement, AMAT will audit its export control compliance program, and employees and senior management responsible for the illegal exports will no longer be employed by AMAT and AMK, BIS stated.

The United States strictly controls the export of U.S. semiconductors and manufacturing equipment to prevent advanced semiconductor technology from falling into China's hands.

During the previous Biden administration, the U.S. also urged other major semiconductor equipment manufacturing countries, including South Korea, Japan, and the Netherlands, to join export controls on China.

BIS's announcement suggests that the U.S. has been concerned about semiconductor equipment potentially reaching China through subsidiaries of U.S. companies in South Korea, not just companies headquartered in South Korea.

South Korea is home to subsidiaries of U.S. semiconductor equipment companies that collaborate with Samsung Electronics and SK Hynix.