US Government Summons Applied Materials Again... Strengthening Semiconductor Regulations on China

Commerce Department Issues Summons This Month

The U.S. government has intensified its investigation into Applied Materials, the country's largest semiconductor equipment company, over allegations of violating export sanctions to China, and has once again demanded the company's appearance. As the competition for advanced technology supremacy between the U.S. and China heats up, U.S. monitoring measures to fill the gaps in export controls to China are expected to continue strengthening.

According to Bloomberg on the 26th (local time), the U.S. Department of Commerce issued a subpoena this month to Applied Materials on suspicion of violating export controls by supplying semiconductor equipment to China. This is the second subpoena from the Department of Commerce following one issued in November last year.

The company is also under investigation by the Department of Justice for the same issue, and earlier this year, it received subpoenas from the U.S. Securities and Exchange Commission (SEC) and the Massachusetts Federal District Attorney's Office.

Applied Materials recently confirmed the Department of Commerce's subpoena request, stating that "we are fully cooperating with the government regarding this matter." They added, "There is significant uncertainty and it is difficult to predict the outcome," and explained that "the scale of any losses or fines related to this issue cannot be reasonably anticipated."

Previously, the U.S. government detected allegations that Applied Materials illegally exported semiconductor equipment to SMIC, China's largest foundry (semiconductor contract manufacturer), through its Korean subsidiary and launched an investigation last year. According to sources, the company transported semiconductor equipment worth hundreds of millions of dollars produced in Massachusetts to its Korean subsidiary, which then shipped it to SMIC. This constitutes a violation of U.S. export controls. The U.S. has designated SMIC as an export control target company since December 2020, citing its ties to the Chinese military. Accordingly, U.S. companies must obtain permission from the Department of Commerce to export advanced semiconductors or equipment to SMIC.

The U.S. is competing with China in advanced technology fields such as semiconductors and artificial intelligence (AI), implementing export control measures to actively exclude China from existing supply chains. This investigation into Applied Materials also aims to minimize attempts by companies to evade regulations that could create cracks in semiconductor controls targeting China. Applied Materials generated 43% of its total sales from China between February and April this year, and depending on the investigation's outcome, significant damage to its business performance is expected.