The Joe Biden administration has imposed a $500,000 fine on GlobalFoundries, one of the world’s leading contract chip manufacturers, for shipping silicon wafers to SJ Semiconductor (SJS), a Chinese company that is on the U.S. Entity List. This list, managed by the Bureau of Industry and Security (BIS), prohibits U.S. companies from doing business with entities deemed a threat to national security.
Shipping Control Error
According to official sources, the fine was due to an error in GlobalFoundries’ customer screening system, which did not effectively filter SJS as a restricted entity. Between February 2021 and October 2022, the company shipped a total of 74 batches of silicon wafers, valued at over $17 million, to this Chinese firm. The fine, relatively low compared to the value of the shipments, has raised concerns in the U.S., where the administration is urging companies to be extremely cautious in their business dealings with China.
Matthew Axelrod, Under Secretary for Export Enforcement in the U.S., stated, “We want U.S. companies to be hyper-vigilant when sending semiconductor materials to Chinese entities.” Axelrod emphasized the importance of protecting the advanced technology supply chain to prevent it from falling into the hands of entities that pose a risk to national security.
SJS: A Company Linked to the Chinese Military
SJ Semiconductor, the company that received the shipments from GlobalFoundries, is known for its relationship with semiconductor manufacturer SMIC, which is considered a strategic piece in China’s technological development. The U.S. government has identified SJS as a company linked to the Chinese military, leading to its inclusion on the Entity List. This measure aims to prevent critical technologies developed in the U.S. from being used for military purposes in China.
GlobalFoundries’ Cooperation with Authorities
Despite the violation, the Biden administration reduced the fine because GlobalFoundries voluntarily disclosed the shipments to the BIS and fully cooperated in the investigation. This was a decisive factor in preventing a larger penalty, although it has not been revealed what the maximum amount could have been had the company concealed the information.
Sources close to the case indicate that GlobalFoundries’ collaboration was key in keeping the fine from reaching higher amounts, reflecting BIS’s policy of favoring cooperation in cases of administrative errors, as long as companies assist in the investigation.
TSMC Under Scrutiny for Its Links with Huawei
This incident comes amid a series of U.S. government investigations into the business ties between chip manufacturers and Chinese companies. Recently, the BIS launched an investigation into TSMC, the Taiwanese semiconductor giant, for its possible relationship with Huawei, despite the company claiming to have severed business ties with the Chinese manufacturer since September 2020.
The investigation into TSMC arose after it was found that Sophgo, a Chinese company, was purchasing chips from TSMC and redirecting them to Huawei for use in artificial intelligence and wearable devices. Although no charges have been filed against TSMC to date, the Biden administration continues to closely monitor the business activities of semiconductor companies that may be indirectly related to Huawei.
A Context of Control and Caution in the Semiconductor Market
The tensions between the U.S. and China in the technology sector have placed the semiconductor industry in a situation of extreme caution. The Biden administration is increasing controls and sanctions on any business activity that could compromise national security, especially concerning advanced technologies like AI chips. The GlobalFoundries case underscores the strict oversight the U.S. is applying to the export of sensitive materials and highlights the need for companies to strengthen their verification protocols.
Impact on the Semiconductor Industry
The current situation reflects the growing complexity and pressure faced by semiconductor companies operating globally. The fine imposed on GlobalFoundries and the ongoing investigation of TSMC demonstrate the attention the U.S. is paying to any potential breaches of its export policies to China, particularly regarding advanced chip technology.
This environment requires companies to enhance their internal controls and adopt transparency measures to comply with U.S. regulations. However, it also presents significant operational challenges in a market that increasingly demands agility and precision to keep pace with restrictions imposed by geopolitical tensions.
The GlobalFoundries case serves as a reminder of the importance of complying with export requirements and the growing influence of security policies on high-tech trade.
via: el Chapuzas Informático and Reuters