The U.S. government has imposed a fine totaling approximately $252 million on Applied Materials (AMAT) for illegally exporting semiconductor equipment to China through South Korea. The penalty comes as Washington maintains strict controls on China's semiconductor ambitions while holding back on telecommunications and transportation sanctions ahead of President Donald Trump's planned visit to Beijing in April. Korean semiconductor companies say they see no direct impact but are closely monitoring the situation.
On Wednesday, the Bureau of Industry and Security (BIS) under the U.S. Department of Commerce announced it reached a settlement with AMAT and Applied Materials Korea (AMK) to pay approximately $252 million in fines for illegally exporting U.S.-made semiconductor manufacturing equipment to China. This marks the second-largest penalty ever imposed by BIS.
According to BIS, AMAT, the world's largest semiconductor equipment maker, was caught repeatedly exporting ion implanters to SMIC, a Chinese foundry company, in 2021 and 2022. AMAT violated export control regulations 56 times by shipping ion implanters to AMK in South Korea for assembly before sending them to China without applying for U.S. government approval. Ion implanters inject ions at high speed into semiconductor wafers and are classified as essential for manufacturing advanced memory chips.
SMIC was placed on the Commerce Department's export control list in December 2020. The list targets foreign companies and individuals deemed threats to U.S. national security, barring exports of advanced American technology and equipment. The rules apply strictly even when exports are routed through allied nations such as South Korea to circumvent U.S. regulations.
The equipment illegally exported by AMAT and AMK to China was valued at approximately $126 million. BIS regulations allow fines of up to twice the value of illegal transactions. AMAT received a subpoena from the Massachusetts federal prosecutor's office in 2022 and reported this to the Securities and Exchange Commission in August of the following year. In November 2023, Reuters reported that AMAT produced ion implanters in Massachusetts and repeatedly shipped them through AMK to SMIC. "We are strongly committed to protecting sensitive U.S. technology and deterring bad actors," said Jeffrey Kessler, Under Secretary for Industry and Security. "Companies that do not comply with the law when exporting products globally must face severe penalties."
AMAT proceeded with exports to China despite regulatory oversight because it could not afford to abandon Chinese revenue. AMAT's China sales ratio once approached 40% but reportedly fell to around 20% by November last year. Mukund Srinivasan, AMAT vice president, told reporters at a conference at COEX in Seoul's Gangnam district in March 2023, while the investigation was underway, that "equipment supplies to Samsung Electronics and SK hynix semiconductor plants in China depend entirely on the will of the U.S. government." Despite setbacks in China operations, AMAT reported surprise earnings on Wednesday, posting $7.01 billion in revenue for the first quarter of fiscal year 2026 (November 2024-January 2025), significantly beating market expectations amid the semiconductor boom.
Korean semiconductor companies with manufacturing facilities in China are also affected by U.S. government regulations. The Trump administration revoked "Validated End User" (VEU) status for Samsung Electronics and SK hynix in August last year, which had allowed them to import semiconductor equipment to their Chinese plants. This measure initially required both companies to obtain case-by-case U.S. approval for every equipment import to their Chinese semiconductor plants starting this year, though they eventually secured one-year export permissions. Commerce Secretary Howard Lutnick argued at a Senate hearing on Monday that "Nvidia must accept conditions for H200 export approval" to prevent Chinese military access to advanced AI chips for export, with rigorous verification still ongoing.
However, the U.S. has relaxed some regulations not deemed critical to national security, considering the planned April summit between President Trump and Chinese President Xi Jinping in Beijing. Reuters reported Wednesday that the Trump administration has suspended several measures targeting China, including banning China Telecom from U.S. operations and restricting sales of Chinese-made equipment for U.S. data centers. The administration also halted bans on TP-Link router sales in the U.S., restrictions on China Unicom and China Mobile's U.S. internet operations, and prohibitions on selling Chinese electric trucks and buses in the United States.