GlobalFoundries Fined $500K For Violating US Sanctions

Updated The US Department of Commerce is issuing a half a million dollar penalty against US-based semiconductor wafer manufacturer GlobalFoundries for violating sanctions and sending chips to SJ Semiconductor (SJS), an affiliate of a blocklisted Chinese chipmaker.

The banned chipmaker? Semiconductor Manufacturing International Corporation (SMIC).

The department specified that GlobalFoundries fessed up to 74 unauthorized shipments made without a license between February 2021 and October 2022.

The shipments had a collective value of more than $17.1 million and included nearly 5,700 wafers, the department said on Friday.

"GlobalFoundries' voluntary self-disclosure (VSD) and extensive cooperation throughout the investigation resulted in a significant reduction in the monetary penalty, which is the main incentive of our VSD policies," said John Sonderman, director of the Office of Export Enforcement (OEE) within the Commerce Department.

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GlobalFoundries, according to the department, cited the misstep as a consequence of a data entry error. GlobalFoundries says SJS is a third party outsource assembly and test (OSAT) service provider that simply wasn't properly vetted by its transaction screening system.

SMIC and SJS were both placed on the trade-restricted Entity List in 2020 due to SMIC's suspected connections to China's military.

By then, SJS had already been handling GlobalFoundries chips as a third-party OSAT provider, so its involvement didn't trigger any "red flags" internally when GlobalFoundries' direct customer reengaged, shipping direct to SJS.

It went unnoticed digitally in GlobalFoundries' Oracle Global Trade Management software module because the "ship to" party was incorrectly recorded as the direct customer.

GlobalFoundries maintained a similar situation with another direct customer that employed SJS OSAT services, but had obtained the proper licenses in that scenario, lending credence to its narrative that the 74 shipments were done in error.

While it may be an unfortunate mistake, it's a much less costly error than it could be. The maximum civil penalty allowed is $364,992 per violation or twice the value of the transaction. The latter amounts to $34.2 million in this scenario. Violators of the sanctions can also be denied export privileges.

In April of 2023, the Commerce Department hit data storage company Seagate with a $300 million fine, its largest ever standalone administrative penalty for export control violations after it allegedly shipped seven million drives worth $1.1 billion to Huawei.

GlobalFoundries presumably would like to keep on the good side of Uncle Sam given it is set to receive $1.5 billion in CHIPS and Science Act funding to expand its manufacturing. ®

Updated to add on November 5

Folks at GlobalFoundries have been in touch to say they "regret the inadvertent action," explaining it thus in a statement: