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US restricts chip design software sales to China

Daniel Nenni

Daniel Nenni

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Staff member
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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.

 
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.
 
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.
 
tooLongInEDA said:
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.
Click to expand...

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
 
Daniel Nenni said:
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?
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Mr. Nenni, it would be wonderful if we could "all get along." However, the carnage of the 20th century was real, and I do not see anything showing that human nature has changed. The question is, will the US and China fall into Thucydides' Trap? I do not know. Also, are markets unlimited in size such that there is enough profit to support Chinese and American companies' ambitions? I don't have the answer and don't think shutting off EDA sales to China is 100% the answer, but I am skeptical enough to realize the world is and always has been a very dangerous place.
 
tooLongInEDA said:
This sort of action is only going to accelerate China's push to develop its own EDA industry.
Click to expand...
I don't buy this argument. American, German, and Japanese companies were selling cars in China. There were no sanctions on cars, and yet the Chinese learned from these auto companies through joint ventures and eventually took the lead in EV


Don't delude yourself into thinking China won't come for a piece of the pie in the EDA industry. China will go after any industry it deems to have fat, juicy profits and the potential to accelerate its domestic development.


Many Western companies had the same illusion when selling to China, hoping the Chinese would never enter their industry. Just look at what happened to the solar panel industry.


When the Chinese government sees an industry as profitable and ripe for disruption, there will be government-backed companies selling cheaper alternatives until they dominate the market. We've seen this play out too many times.

Huawei is another example. It started out copying Cisco down to the code. You can look up the lawsuit. Cisco deluded themselves thinking going easy on Huawei will help them gain Chinese market. LOL
 
Daniel Nenni said:
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?
Click to expand...
Regardless of whether it was the right or wrong move by America.


You think China won’t come after the EDA industry? You think piracy and IP rights matter to the Chinese? Haven’t we seen this play out in other industries before? Why do Westerners believe that if you sell to China, then China won’t eventually come after your industry?


You think China has abandoned "Made in China 2025"? You think they’re content with just making cheap goods?


You really don’t think China wants a piece of the EDA pie?
 
Replacing strategic industries with domestic alternatives is long term policy of CCP. And it has been policy long before Trump or Biden was in office.

This narrative that China is copying only because west done something wrong is just pure propaganda.

btw.: Those who have done some reverse engineering know, that access to real thing is great advantage.
 
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