The Biden administration (via Reuters) has ordered U.S.-based chipmaker GlobalFoundries to take action against U.S.-based chipmaker GlobalFoundries after it shipped more than $17 million worth of silicon wafers to China’s SJ Semiconductor (SJS), which is listed on the U.S. Entity List. announced a $500,000 fine. The list, maintained by the Bureau of Industry and Security (BIS), includes companies deemed to be national security threats and require special U.S. permission to export technology.
Notably, SJ Semiconductor was added in 2020 for its ties to Semiconductor Manufacturing International Corporation (SMIC), a top Chinese chipmaker that the US claims has ties to the Chinese military. . Between February 2021 and October 2022, GlobalFoundries shipped 74 silicon wafers, a key material in semiconductor manufacturing, to SJS.
The breach was reportedly caused by a data error that was not flagged to SJS during GlobalFoundries’ review process. Despite the violation, GlobalFoundries voluntarily disclosed the contents of the shipment and fully cooperated with BIS, resulting in a significantly reduced penalty compared to the maximum potential penalty.
The fine marks one of the few instances in which a prominent U.S. semiconductor company has faced financial consequences under U.S. export control policies. GlobalFoundries is a key beneficiary of the CHIPS and Science Act, which aims to strengthen U.S. chip production. The company received a $1.5 billion award and $1.6 billion in federal loans earlier this year to expand its New York manufacturing operations and triple production over the next 10 years.
BIS Assistant Secretary for Export Enforcement Matthew Axelrod emphasized the importance of vigilance in the semiconductor sector, particularly when dealing with Chinese regulated entities. While Mr. Axelrod emphasized that the government expects strict compliance with export controls, he also noted that government authorities will treat companies that proactively disclose compliance issues and take corrective action more leniently.
The Biden administration has introduced tough regulations on semiconductor technology sales to China, aimed at preventing U.S. advances from fueling China’s military development. But enforcement is proving complicated, with some businesses and allied governments raising concerns about the economic impact. Taiwan Semiconductor Manufacturing Company (TSMC) recently revealed that some of its chips are integrated into products from Chinese telecommunications company Huawei, which is under U.S. sanctions, effectively removing these restrictions. This indicates that there are still challenges in implementation.
