The Department of Justice (DOJ) has launched a criminal probe into the largest semiconductor equipment manufacturer in the U.S. for allegedly violating sanctions through exports to China, according to Reuters.

The DOJ is investigating top chip equipment maker Applied Materials for sending hundreds of millions of dollars of equipment to the partially CCP-owned Semiconductor Manufacturer International Corporation (SMIC) through South Korea without an export license, according to Reuters. The alleged move from Applied Materials would violate restrictions placed on SMIC by the U.S. Commerce Department in the ongoing trade war between China and the U.S.

Applied Materials allegedly produced semiconductor manufacturing equipment from its plant in Gloucester, Massachusetts, and then repeatedly shipped that equipment to its subsidiary in South Korea, which it then exported to SMIC, according to Reuters. It is not clear whether the company violated the law or whether the investigation will result in any formal charges.

SMIC was placed on the U.S.’ entity list by the Commerce Department in December 2020, barring American companies from exporting to the company without a special license, according to Reuters. The chip manufacturer was placed on the list following suspected ties with the Chinese military, which it has previously denied.

The U.S. and China are currently in a trade war over the semiconductor industry, with both countries vying for a technological advantage to assist in artificial intelligence research and military capabilities. In October 2022, the Biden administration blacklisted several Chinese companies involved in the chip industry from working with Chinese firms and introduced more restrictions in October, closing loopholes in the previous restrictions.

The Biden administration in October effectively granted an indefinite waiver on the restrictions to two South Korean companies, Samsung and SK Hynix Inc., allowing them to use equipment covered under U.S. intellectual property laws in their Chinese semiconductor operations. The companies were first granted a temporary waiver in October 2022.

The news comes one day after Applied Materials posted its earnings for the fourth quarter of 2023, with annual revenue rising 3% year-over-year but remaining flat from the previous quarter, according to a press release from the company. The company’s total sales in China jumped from 20% of all revenue in the last quarter of 2022 to 44% in the last quarter of 2023.

Applied Materials and the DOJ did not immediately respond to a request to comment from the Daily Caller News Foundation.

Will Kessler on November 17, 2023

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