The Biden administration said on Friday that it would impose a fine of $500,000 on the U.S. 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 U.S. technology controls on China, said GlobalFoundries had sent 74 different shipments of wafers, thin slices of silicon used in chip-making, 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 Corporation, 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 U.S. 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 the state of New York 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 U.S. companies to be hypervigilant when sending semiconductor materials to Chinese parties,” said Matthew S. Axelrod, the 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.”
GlobalFoundries did not immediately respond to a request for comment.
The Biden administration has issued sweeping restrictions on the sale of advanced chips to China, in an effort to stop U.S. 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 Company, the world’s most advanced chipmaker, recently informed the U.S. government that some of its chips had ended up in devices made by Huawei, a Chinese telecommunications giant under U.S. 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.
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