US Fines Major Chipmaker for Selling to Company Connected to Chinese Military

A screen displays the company logo for chip and semiconductor maker GlobalFoundries Inc. during the company's IPO at the Nasdaq MarketSite in Times Square in New York City on Oct. 28, 2021. Brendan McDermid/Reuters

The U.S. Department of Commerce on Nov. 1 fined GlobalFoundries U.S. Inc. $500,000 for shipping chips to Chinese firm SJ Semiconductor, a company that has been sanctioned by the United States for its ties to the Chinese military.

GlobalFoundries is headquartered in Malta, New York, and has 14 locations around the globe, supplying more than 200 customers worldwide.

The company sold roughly $17.1 million in semiconductor chips to SJ Semiconductor via 74 separate shipments, but it voluntarily disclosed the information to the Commerce Department’s Bureau of Industry and Security and cooperated with an investigation, resulting in a settlement, according to the bureau.

“We want U.S. companies to be hypervigilant when sending semiconductor materials to Chinese parties,” Assistant Secretary for Export Enforcement Matthew S. Axelrod said. “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.”

SJ Semiconductor was added to a U.S. Bureau of Industry and Security trade restriction list in 2020, and the GlobalFoundries shipments occurred in 2021 and 2022. According to officials, GlobalFoundries did not sell to SJ Semiconductor directly, and because of a data screening error, SJ Semiconductor was not identified as the contracted company that would assemble the purchased chips for a China-based direct client of GlobalFoundries.

SJ Semiconductor is tied to China’s Semiconductor Manufacturing International Corporation, which, along with its related entities, was sanctioned in 2020 for adhering to the Chinese Communist Party’s (CCP) “military-civil fusion doctrine.”

The United States has in recent years taken steps to prevent the CCP from acquiring advanced chips and the manufacturing technology needed to create its own, for national security reasons. A pillar of this initiative is the Biden administration’s CHIPS Act, aimed at boosting domestic innovation in semiconductor technology.

On Nov. 1, the administration announced CHIPS funding for two research and development centers on opposite coasts.

In Albany, New York, the government announced an $825 million investment in the NY Creates Albany NanoTech Complex with the aim of supporting a national extreme ultraviolet (EUV) accelerator project.

Advanced chips measure in the single-digit nanometers, which means the manufacturing of these chips requires technology capable of making layers the height of a single atom. EUV technology is necessary in such manufacturing, and Dutch company ASML is currently the only company capable of producing the EUV systems needed to create 5-nanometer (nm) and 3-nm chips.

“The research and development component of the CHIPS and Science Act is fundamental to our long-term national security and ensuring the U.S. remains the most technologically competitive place on earth,” Secretary of Commerce Gina Raimondo said in a statement accompanying the announcement.

On the same day, the government announced the opening of a second research and development facility, focused on design, in Sunnyvale, California. It will be headed by the public–private National Semiconductor Technology Center.