Key Points
- Reports suggest the US Dept. of Commerce has asked major US EDA software companies (like Synopsys and Cadence) to halt sales to Chinese firms, aiming to restrict China’s high-end chip development.
- EDA software is critical for designing and verifying complex chips; restricting access is a key bottleneck technology control point.
- Following the rumors, US EDA stocks like Synopsys (down 9.6%) and Cadence (down 10.7%) dropped, while Chinese A-share EDA concept stocks saw significant surges (e.g., Primarius hit the 20% daily limit).
- US EDA giants Synopsys and Cadence have substantial revenue from China (approx. 16% and 12% of total revenue, respectively).
- Analysts believe the potential ban will accelerate the rise of domestic Chinese EDA companies, who are already making progress, particularly through M&A to build comprehensive platforms.
The US-China tech rivalry just got another jolt, with fresh rumors suggesting the Trump administration is looking to choke off China’s access to critical semiconductor design software.
Reports are swirling that US companies specializing in Electronic Design Automation (EDA) software have been asked to halt sales to Chinese firms.
This is a big deal, folks. It’s the latest chess move aimed squarely at hindering China’s ambitions to develop cutting-edge chips.
The market reaction was swift and telling.
On Wednesday evening (May 28th, Beijing time), shares of US EDA giants Synopsys (Xinsi Keji 新思科技) tumbled 9.6%, and Cadence (Cadence) dropped 10.7%.
But on the flip side? It was a green light for China’s A-share EDA concept stocks (EDA Gainiangu EDA概念股).
These stocks collectively surged, with Primarius (Gailun Dianzi 概伦电子) hitting the 20% daily limit.
Guangli Micro (Guangli Wei 广立微) and Huada Jiutian (Huada Jiutian 华大九天) both jumped over 15% at one point, and other related stocks also saw solid gains.
So, just how big an impact could this potential ban have? Let’s break it down.
The Whispers: A New US Ban on EDA Exports to China?
Sources close to the situation are saying the US Department of Commerce (Meiguo Shangwubu 美国商务部) has discretely told EDA powerhouses to cut off China.
The companies reportedly in the crosshairs include:
- Cadence (Cadence)
- Synopsys (Xinsi Keji 新思科技)
- Siemens EDA (Siemens EDA) (part of the German giant Siemens AG’s Siemens Digital Industries Software – Deguo Ximenzigongsi Ximenzishuzi Gongye Ruanjian Gongsi 德国西门子公司西门子数字工业软件公司)
The directive, according to these sources, came via letters from the Bureau of Industry and Security (BIS) (Gongye he Anquan Ju 工业和安全局) – the Commerce Department’s export control arm.
It’s still unclear if every US EDA company got one of these letters.
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Why EDA Software is a Critical Chokepoint
You might be wondering, what exactly is EDA software and why is it so vital?
Think of EDA tools as the digital blueprints and testing grounds for semiconductor chips.
They allow chip designers and manufacturers to map out, simulate, and verify unimaginably complex integrated circuits before they even think about expensive physical production.
Without sophisticated EDA tools, creating next-generation chips for things like Artificial Intelligence (AI) (Rengong Zhineng 人工智能), high-performance computing, and advanced communications is practically impossible.
While EDA software sales represent a relatively small slice of the massive global semiconductor (Bandaozi 半导体) industry pie, its strategic importance is off the charts.
It’s a genuine bottleneck technology.
This latest move is a significant escalation in the US effort to limit China’s capabilities in producing high-end AI chips.
Remember, back in April, Washington already restricted exports of Nvidia’s (Yingweida 英伟达) AI chips specifically tailored for the Chinese market. (Potential link: Article on Nvidia chip restrictions)
Company Responses and Market Impact
Synopsys (Xinsi Keji 新思科技) CEO Sassine Ghazi addressed the rumors during their second-quarter earnings call on Wednesday (May 28th).
He stated, “We are aware of the reports and speculation, but Synopsys (Xinsi Keji 新思科技) has not yet received notification from the US Department of Commerce’s Bureau of Industry and Security.”
Ghazi added, “As such, our reaffirmed full-year guidance reflects our current understanding of BIS export restrictions and our expectation for a year-over-year decline in China market revenue.”
Meanwhile, a US Department of Commerce official commented, “Exports of strategic importance to China are under review. In certain cases, during the review process, [the Department] has paused existing export licenses or imposed additional licensing requirements.”
The financial stakes are high.
The Big Three – Synopsys (Xinsi Keji 新思科技), Cadence (Cadence), and Siemens EDA (Siemens EDA) – reportedly command about 80% of the Chinese EDA market share.
For fiscal year 2024, Synopsys (Xinsi Keji 新思科技) reported sales in the Chinese market nearing ¥7.2 billion RMB ($1 billion USD), which is roughly 16% of its total revenue.
Cadence (Cadence) stated its sales in China were ¥3.96 billion RMB ($550 million USD), making up 12% of its total revenue.
These aren’t small numbers, hence the significant stock drops for Synopsys (Xinsi Keji 新思科技) (down 9.6%) and Cadence (Cadence) (down 10.7%) on Wednesday.
It’s worth noting that even before this, the US has been tightening the screws.
In 2022, the Biden (Baideng 拜登) administration restricted the sale of the most advanced chip design software to China, though companies could still sell compliant products.
And during his first term, Trump famously prohibited China’s Huawei (Zhongguo Huawei 中国华为) from using US EDA tools. (Potential link: Article on Huawei EDA ban)
Adding another layer to this, last year Synopsys (Xinsi Keji 新思科技) agreed to acquire US simulation software company Ansys for a cool $35 billion USD.
This megadeal still needs a green light from Chinese regulatory authorities.
Ansys stock also felt the heat, falling 5.3% on Wednesday.
Separately, the U.S. Federal Trade Commission (FTC) announced on Wednesday that Synopsys and Ansys must divest certain software tools to get approval for their merger.
China’s Domestic EDA Stocks Explode: An Opportunity in Disguise?
While US EDA giants are feeling the pressure, this news has acted like rocket fuel for Chinese domestic EDA companies.
The market shares of three leading domestic EDA firms have already been on the rise in recent years:
- Huada Jiutian (Huada Jiutian 华大九天)
- Primarius (Gailun Dianzi 概伦电子)
- Semitronix (Semitronix)
This morning, China’s A-share EDA concept stocks (EDA Gainiangu EDA概念股) saw a full-blown rally.
Analysts See Accelerated Rise for Domestic EDA
One major brokerage research institution commented that if Siemens EDA (Siemens EDA) does suspend services, it will only accelerate the rise of domestic Chinese EDA.
They noted that the progress of homegrown EDA is exceeding expectations.
Key achievements include:
- Full process capabilities for analog, panel, memory, and RF (Radio Frequency) chips.
- Integration of AI capabilities into design platforms.
- GPU-accelerated RF design.
- Addition of OPC (Optical Proximity Correction) features for high-end applications.
Looking ahead, the brokerage sees the industry making faster progress from 2025 to 2026 in critical digital electronics bottlenecks like layout and routing, and in wafer manufacturing with TCAD (Technology Computer-Aided Design).
- Developed a general analog design platform.
- High-end memory products gaining recognition.
- Manufacturing point tools used by top ten global wafer fabs.
- Achieved software-hardware synergy in noise/parameter testing.
Primarius (Gailun Dianzi 概伦电子) has developed a general analog design platform, and its high-end memory products are gaining recognition.
Its manufacturing point tools are used by clients that include the top ten wafer fabs globally.
The company has also achieved software-hardware synergy in noise/parameter testing.
- Built a software-hardware synergistic product matrix.
- Focuses on semiconductor electrical testing.
- Software-to-hardware revenue ratio of 3:7.
Guangli Micro (Guangli Wei 广立微) has built a software-hardware synergistic product matrix focused on semiconductor electrical testing, with a software-to-hardware revenue ratio of 3:7.
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M&A Heats Up in China’s EDA Scene
The domestic EDA landscape is also seeing a flurry of mergers and acquisitions.
Developing specialized point tools for different segments from scratch is a tough, time-consuming slog – often taking up to 5 years.
Under new M&A regulations from the China Securities Regulatory Commission, domestic EDA companies are frequently engaging in M&A to consolidate and expand their offerings rapidly.
Potential M&A targets and key players in specialized areas include:
- Hejian Gongruan (合见工软) (digital verification + systems and design)
- Xingxin Technology (Xingxin Keji 行芯科技) (Signoff toolchain)
- Hongxin Weina (鸿芯微纳) (digital backend tools)
- SiEngine (Sierxin 思尔芯) (digital EDA)
- Xingxing Ji (芯行纪) (layout and routing)
- Dongfang Jingyuan (东方晶圆) (OPC tools)
There’s also a growing trend towards collaborative EDA research and a push for cost-effectiveness, which is expected to boost the market share of domestic EDA solutions.
Previous research from Minsheng Securities (Minsheng Zhengquan 民生证券) highlighted this trend, stating that the EDA industry is seeing accelerated M&A consolidation, leading to the gradual construction of a full-process + IP platform for domestic Chinese EDA.
The EDA and IP (Intellectual Property) industries are marked by high technical complexity, steep requirements for continuous innovation, and long product maturity cycles.
This makes M&A the most efficient path for EDA companies to broaden their capabilities.
According to Semiconductor Industry Watch, in the 30 years leading up to 2024, the EDA industry saw nearly 300 M&A transactions.
The industry leader, Synopsys (Xinsi Keji 新思科技), itself has made over 40 acquisitions.
Since the start of this year, China’s two leading EDA companies, Huada Jiutian (Huada Jiutian 华大九天) and Primarius (Gailun Dianzi 概伦电子), have raised funds specifically for acquisitions, further speeding up the integration of the domestic EDA platform.
The capabilities of these leading domestic EDA and IP vendors are expected to improve significantly, gradually narrowing the gap with global giants.
This ongoing saga underscores the critical, and often unseen, role of EDA software in the global tech ecosystem and highlights the intense geopolitical currents shaping the future of the semiconductor industry and China’s domestic EDA landscape.
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