Applied Materials, Inc. (AMAT) and Applied Materials Korea, Ltd. (AMK) have agreed to payment of $252 million dollars in penalties for the illegal export of U.S. semiconductor manufacturing equipment. This settlement with the Bureau of Industry and Security (BIS), is the second largest imposed by the agency.
Applied Materials Specific Violations
The cited violations involved the export of ion implanters to AMK in South Korea for assembly before shipping them to Semiconductor Manufacturing International Corporation (SMIC), a Chinese company on the entity list. The penalties imposed were twice the value of the illicit transactions. AMAT will also undergo multiple audits of its export compliance program. Additionally, senior executives and compliance employees involved with the illegal shipments have had their employment terminated.
Possible Further Actions by the BIS
Under the agreement, BIS can debar AMAT and revoke the company’s active licenses if AMT fails to meet the any of the agreement’s conditions. Debarment restricts entities from participating in an transactions of items regulated under the Export Administration Regulations (EAR). This action, in effect, can put an organization out of business.
Takeaways from this Enforcement Action
The BIS is looking more actively into organizations that seek to bypass licensing requirements through transfers between international corporate entities, especially when these violations involve sensitive technologies subject to the EAR.
In the case of Applied Materials, use of the Customs regulations concept of substantial transformation did not meet BIS requirements. Under the EAR, according to the charging document, “U.S.-origin items or items physically located in the United States on which production begins in the United States are not rendered “foreign-made” when the items are exported and then undergo further assembly and testing in a foreign country“.
In this case, Applied Materials expanded AMK’s production capabilities to implement a “dual-build” strategy for circumventing license requirements after its long time customer SMIC was placed on the entity list. The specific violation in the charging letter refer to reexports as described in 15 C.F.R. § 734.3(a)(2) which states that all U.S. origin items are subject to the EAR, regardless of their location..
Recent Revisions to EAR Regarding Semiconductors
The Bureau of Industry and Security (BIS) released revisions to the limit semiconductor and advanced computing commodities to China and Macau. These changes were made in early 2026 to ensure that United States national security interests are met and that and that proposed exports would not reduce global integrated circuit production available to U.S. customers.
Previous controls for semiconductors include The National Security Guardrails for CHIPS which was established in an effort to prevent manufacturing subsidies for semiconductor manufacturing and research and development from being diverted into nations considered to be national security threats. Additionally, multiple measures have been undertaken to enhance the enforcement capabilities of the U.S. to prevent the unlawful acquisition of advanced technologies by foreign adversaries
BIS Enforcement and International Corporate Structures
In September of 2025, the BIS implemented its 50% Rule. The BIS 50% Rule requires that any entity owned 50% or more by parties on the BIS Entity List or Military End-User List is automatically subject to the same export restrictions. This rule aims to close loopholes that allow restricted entities to evade controls through subsidiaries or affiliates. This rule place the burden of determining if any entity an exporter engages with is owned 50% or more by a listed party.
CVG Strategy Export Compliance Management Programs
Organizations involved with export must adhere to ever changing regulations related to developing technologies. Remaining informed and having an effective export compliance program is essential for avoiding criminal and civil penalties.
Export Compliance Management Programs establish clearly defined policies and procedures for all departments within an organization. They ensure that registration, item classifications, license applications, denied part screening, and security measures are taken that will prevent violation. They also ensure that training, auditing, and record keeping are maintained according to requirements.
CVG Strategy can help you understand revisions to the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR), and help you establish a coherent and effective export compliance program. We can perform export control classifications, perform audits, assist in filings for export licenses and educate your team. Regardless of whether your business falls under EAR or ITAR, CVG Strategy has the expertise to help.