Applied Materials, the biggest semiconductor equipment maker in the United States, is now under investigation for violating export restrictions on China’s main chipmaker, Semiconductor Manufacturing International Corporation (SMIC). Criminal prosecutors are looking into whether Applied Materials sent equipment to SMIC via South Korea without the needed export licenses, potentially involving hundreds of millions of dollars worth of equipment. The U.S. has been strict with its export controls in relation to China to prevent American technology from enhancing the Chinese military’s capabilities, and the Justice and Commerce departments have a task force to investigate and prosecute criminal violations of these export limits. Applied Materials stated it received a subpoena in 2022 from the U.S. Attorney’s Office in Massachusetts, and added that it is cooperating with the government to ensure compliance with export regulations.

Semiconductor equipment maker, Applied Materials, is now embroiled in a criminal investigation by the U.S. for potentially evading export restrictions related to China’s largest chipmaker, SMIC. This investigation sees a probe into whether Applied Materials violated the U.S. export controls by sending equipment to SMIC through South Korea without the necessary export licenses. This matter is escalated further because the U.S. government has rules that restrict shipments of advanced chips and chipmaking equipment to China in the interest of national security. These measures aim to constrain the flow of technology that could strengthen China’s military and intelligence capabilities.

This news is highlighted by the fact that Applied Materials’ shares fell 7.3% after this revelation, demonstrating the impact of these legal troubles on the company’s financial performance. The company said it was first notified of the U.S. Attorney’s Office’s inquiries in 2022 and is actively collaborating with the government to ensure its adherence to global laws and regulations pertaining to exports and trade. This case carries much uncertainty, with the potential for charges or significant penalties, and Applied Materials is unable to predict the specific outcome or quantify the range of losses it could experience.

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