GlobalFoundries latest collateral damage from US chip war with China

‘BIS Imposes $500,000 Mitigated Penalty Against GlobalFoundries For 74 Shipments to Entity Listed Chinese Firm,’ crowed the Department of Commerce’s Bureau of Industry and Security late last week in a press release. The Chinese firm in question is SJ Semiconductor, which the US reckons is too close by half to SMIC, the Chinese chipmaker it’s trying to drive out of business.

It turns out that GF made $17 million of semiconductor wafer shipments to SJS in 2021 and 2022 but somehow didn’t realise it had done so for another year, at which point it owned up to the US authorities and threw itself on their mercy. While history shows they could have been a lot more vindictive, half a mil is still not pocket change, especially when you consider the transaction was a mere book-keeping error.

“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 OEE Director John Sonderman.

“We want U.S. companies to be hypervigilant when sending semiconductor materials to Chinese parties,” said Assistant Secretary for Export Enforcement Matthew Axelrod. “And when, as here, that vigilance falls short and semiconductor materials have gone where they shouldn’t, we want companies to make voluntary disclosures, remediate, and cooperate with us.”

The BIS filing reveals that SJS had been listed under a different name in the GF database, so the measures it took to avoid selling to it after SJS was added to the entity list didn’t work. Imagine the SJS people’s amusement when GF orders kept being fulfilled for years after they were supposed to be banned.

As much as anything, this is another illustration of the comical game of whack-a-mole the US keeps playing in its futile bid to suppress Chinese technological progress. If it has to fine some if its own companies for innocent mistakes every now and then, the US government clearly thinks that’s a price worth paying.

At the same time as sanctioning Chinese semiconductor companies for being too close to the Chinese government, the US CHIPS (Creating Helpful Incentives to Produce Semiconductors) act seems to be struggling. Politico reports that even Democrats are going off President Biden’s big scheme to chuck money at the domestic chip sector in a bid to make it more competitive. To be clear, they’ve got no problem with protectionism or government interference in private enterprise, they just want more guardrails concerning the environment and that sort of thing.

On top of that there’s a decent chance the Republican party will be in power from next year and decide the CHIPS act is a rubbish scheme for all sorts of reasons. You never know, it might even conclude the $39 billion may be better spent on things like hospitals and schools. The Republican House Speaker apparently indicated his party will try to repeal it before walking it back when he realised his statement might lose his party a few votes in a New York district.

It's hard to see how the US can justify such a hard line against Chinese companies for being too close to the government while pursuing initiatives like the CHIPS act but it doesn’t seem to even try. GF is just the latest company to be sacrificed in the name of perpetuating America's global hegemony for a bit longer, but it certainly won’t be the last.