Trade War: In a significant escalation of its technology clampdown on China, the Trump administration has directed leading US companies offering electronic design automation (EDA) software to stop selling their tools to Chinese customers. The US Department of Commerce’s Bureau of Industry and Security (BIS) reportedly issued letters to EDA giants — including Synopsys, Cadence, and Siemens EDA — instructing them to halt exports of their software, crucial for designing advanced semiconductors.
While Synopsys has stated it has not yet received a formal notice, it acknowledged a projected year-over-year revenue decline in China due to ongoing restrictions. Cadence and Siemens EDA have not publicly responded.
Slowing China’s AI ambitions
The directive underscores Washington’s broader strategy to obstruct China’s development of cutting-edge artificial intelligence chips. EDA software, though a small segment of the semiconductor ecosystem, is essential for designing and simulating the next generation of chips. The US action comes on the heels of a recent export ban on Nvidia’s China-specific AI chips.
The US firms targeted — Synopsys, Cadence, and Siemens EDA — collectively hold roughly 80% of the EDA market in China. In fiscal 2024, China contributed 16% of Synopsys’ revenue and 12% of Cadence’s. Shares of both companies fell sharply following the news, with Synopsys dropping 9.6% and Cadence down 10.7%.
US-China trade talks
The timing of the export crackdown is delicate, coinciding with a fragile 90-day tariff truce between the US and China following recent trade talks in Geneva. Officials reportedly debated delaying the blacklist of Chinese chipmakers to avoid jeopardizing negotiations. Nonetheless, the directive was issued, highlighting tensions within the Trump administration between trade hawks and diplomats.
Former CIA China analyst Christopher Johnson said the new restrictions reveal “the innate fragility” of the Geneva ceasefire. He warned that both sides still possess potent “chokehold capabilities” that could unravel the truce prematurely.
Chinese EDA firms rising
The restrictions have inadvertently bolstered domestic Chinese EDA firms like Empyrean Technology, Primarius, and Semitronix, which have gained market share as US firms face growing regulatory constraints.
Meanwhile, Synopsys’ $35 billion acquisition of US firm Ansys now faces dual regulatory hurdles, including FTC-mandated divestitures and pending Chinese approval — a process likely to be complicated by rising tensions.