US restricts chip design software sales to China

[Daniel Nenni]

FILE PHOTO: Illustration picture of semiconductor chips on a circuit board

(Reuters) - The U.S. has ordered companies that offer software used to design semiconductors to stop selling to China without first getting an export license, two people familiar with the situation said.

Electronic design automation software makers, which include Cadence, Synopsys and Siemens EDA, were sent notifications by the Commerce Department to cease supplying their technology, one of the people said.

The two sources, who said companies received the notifications on Friday, added the Commerce Department will review each request for a license to ship to China on a case-by-case basis, suggesting the action was not an outright ban.

A spokesperson for the Commerce Department declined to comment on the letters but said it is reviewing exports of strategic significance to China, while noting "in some cases, Commerce has suspended existing export licenses or imposed additional license requirements while the review is pending."

Shares of Cadence, which declined to comment, closed down 10.7% while shares of Synopsys fell 9.6%.

Synopsys' CEO said in a call with analysts that it had not received a letter nor had it heard from the Commerce Department's Bureau of Industry and Security, which enforces export controls.

"We are aware of the reporting and speculations, but Synopsys has not received a notice from BIS. So our guidance that we are reiterating for the full year reflects our current understanding of BIS export restrictions as well as our expectations for year over year decline in China. We have not received a letter."

After the market closed, Synopsys reaffirmed its revenue forecast for 2025. Its shares and those of Cadence bounced back 3.5% in trading after the close.
Siemens EDA did not immediately respond to a request for comment.

While the scope of the policy change was not immediately clear, any move to strip the software makers of their Chinese customers could deal a blow to their bottom line and to their Chinese chip design customers, which heavily rely on top-of-the-line U.S. software.

"They are the true choke point," said a former Commerce Department official, who added that rules restricting the export of EDA tools to China have been under consideration since the first Trump administration, but were ruled out as too aggressive.

Synopsys relies on China for about 16% of its annual revenue, while China accounts for about 12% of annual revenue for Cadence.

Synopsys, which partners with chip companies such as Nvidia, Qualcomm and Intel, provides software and hardware used for designing advanced processors.
The Financial Times earlier reported that the Trump administration had ordered the firms to stop selling their services to Chinese groups.

https://www.yahoo.com/finance/news/trump-tells-us-chip-designers-193709146.html

 

[Daniel Nenni]

Ridiculous. We fought so hard to reduce EDA piracy in China and now the floodgates will open again. Can't we just all get along for the greater good of the human race?

 

[siliconbruh999]

If US had brains China allows Piracy like no other.

 

[Barnsley]

Ridiculous. We fought so hard to reduce EDA piracy in China and now the floodgates will open again. Can't we just all get along for the greater good of the human race?

The amount these companies charge for a license , I suspect many customers wont be shedding a tear.

 

[Daniel Nenni]

EDA is now a world wide operation. It is no longer a group of local guys in Silicon Valley. EDA is a very diverse and international industry so good luck stopping it with a local law. My hope is that at some time the US and China can shake hands and come to terms for the greater good. Hopefully this is just another bargaining chip (pun intended) to be used later for good and not evil.

 

[tooLongInEDA]

It's becoming hard to judge whether these policy announcements are part of some sort of plan or just random ...

But perhaps there is more detail to come out. This is not an "outright ban", but something to be judged on a "case by case basis". So presumably targeted (in theory) at particular applications or designs.

But the law of unintended consequences still applies. I can easily see this being counterproductive for the US.

I would have thought that the US has a very strong interest in retaining effective control of the EDA industry (three dominant companies, essentially all US-based, though Siemens EDA is German owned). This sort of action is only going to accelerate China's push to develop its own EDA industry. I've always been sceptical about that happening as the barriers to entry here seem very high. But we might have assumed that about many other industries in the past (take wired telecoms for example). If China can reach critical mass - in terms of technical capability, customer adoption and support - they could easily become a serious player. Might be good news for users (greater choice, lower pricing), but not for the highly profitable US EDA industry.

 

[Barnsley]

It's becoming hard to judge whether these policy announcements are part of some sort of plan or just random ...

But perhaps there is more detail to come out. This is not an "outright ban", but something to be judged on a "case by case basis". So presumably targeted (in theory) at particular applications or designs.

But the law of unintended consequences still applies. I can easily see this being counterproductive for the US.

I would have thought that the US has a very strong interest in retaining effective control of the EDA industry (three dominant companies, essentially all US-based, though Siemens EDA is German owned). This sort of action is only going to accelerate China's push to develop its own EDA industry. I've always been sceptical about that happening as the barriers to entry here seem very high. But we might have assumed that about many other industries in the past (take wired telecoms for example). If China can reach critical mass - in terms of technical capability, customer adoption and support - they could easily become a serious player. Might be good news for users (greater choice, lower pricing), but not for the highly profitable US EDA industry.

Yeh the last line is apt!

They do like to put the squeeze on coz there are almost no other options.

Its a bit sad , but when you are shareholder driven in a triopoly what to do