Following two days of market rumors, two major U.S. EDA (Electronic Design Automation) firms—Synopsys (NASDAQ: SNPS) and Cadence Design Systems (NASDAQ: CDNS)—officially confirmed that the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has directed both companies to halt the supply of EDA software tools for semiconductor design to Chinese enterprises.
On May 29 (local time), Synopsys issued a statement disclosing that, subsequent to its Q2 FY2024 earnings announcement on the 28th, the company received a letter from BIS notifying it of new export restrictions related to China. Synopsys is currently evaluating the potential impacts of BIS’s communication on its business operations, financial performance, and fiscal health. The company emphasized that it would suspend and withdraw its financial guidance for Q3 and FY2025.
Meanwhile, Cadence Design Systems disclosed in an 8-K filing with the U.S. Securities and Exchange Commission (SEC) on the 29th that, on May 23 (local time), BIS had notified Cadence that licenses are required for the export, re-export, or domestic transfer of EDA software and technologies classified under Export Control Classification Numbers (ECCNs) 3D991 and 3E991 on the Commerce Control List (CCL) when either party to the transaction is located in China or designated as a “military end-user” in China. BIS asserted that the risk of these items’ use in China or by Chinese “military end-users,” or their diversion to “military end-uses,” is unacceptable.
Although Siemens EDA (formerly Mentor Graphics, now part of Siemens) had not issued an official statement prior to these developments, it appears to have received a similar BIS notification. The company has reportedly submitted clarifications to multiple Chinese clients, verified EDA software-related demands in China, and suspended upgrades for certain software. In a statement, Siemens noted that its EDA business was informed of the new export control measures last Friday. The company emphasized its “150+ years” of support for Chinese clients and reiterated its commitment to collaborating with global customers while mitigating the impacts of these new restrictions in compliance with applicable national export control regimes.
This implies that the “EDA trio”—dominating over 80% of China’s EDA market—will restrict new product supplies to certain Chinese clients.
Based on existing public disclosures from Synopsys and Cadence, the author assesses that BIS’s export controls may target only Chinese entities listed as “military end-users” (e.g., SMIC). Existing purchased EDA software remains usable, suggesting that the scale of this “supply halt” is significantly smaller than previously rumored “total EDA suspensions,” with relatively limited impacts on China’s semiconductor industry.
EDA, or Electronic Design Automation, encompasses a suite of software tools spanning design, layout, and verification in semiconductor manufacturing. As the most upstream and highly specialized segment of the integrated circuit (IC) industry, EDA serves as a cornerstone technology driving the trillion-dollar semiconductor supply chain, earning it the moniker “mother of chips.”
According to SEMI (the International Semiconductor Industry Association), the global EDA software market reached approximately USD 13.437 billion in 2022, a 1.8% year-over-year increase, and is projected to expand to USD 14.526 billion in 2023. In mainland China, the EDA software market was valued at RMB 11.56 billion in 2022, reflecting an 11.8% YoY growth, and is expected to reach RMB 13.05 billion in 2023, per Zhiyan Consulting.
Currently, Synopsys, Cadence, and Siemens EDA rank as the top three global EDA firms, commanding 32%, 29%, and 13% of the global EDA market respectively, collectively holding over 74% market share. In China’s EDA market, these three giants account for over 80% of market share.
Synopsys reported that its 2024 fiscal year sales in China approached USD 1 billion, accounting for approximately 16% of its total revenue. Cadence disclosed Chinese sales of USD 550 million, or 12% of its global revenue. Combined, the two companies’ 2024 fiscal year revenues from China exceeded RMB 10 billion.
“EDA technology represents a critical node in the integrated circuit industry, particularly under current circumstances—it is one of the most ‘chokepoint’ segments hindering China’s IC industry development,” stated Professor Zhang Wei, Dean of Fudan University’s School of Microelectronics. While China has initially established a domestic EDA ecosystem, he noted, its resilience remains fragile.
The U.S. EDA software firms subject to export restrictions must comply with ECCNs 3D001, 3D991, and 3E001 under BIS’s CCL, which applies to Chinese entities designated as “military end-users.” This suggests that U.S. firms are unlikely to impose a blanket ban on EDA supplies to China but may instead target specific enterprises or tools for restrictions.
On May 28, the U.S. Department of Commerce stated externally that it is “reviewing strategically significant exports to China” and that, “in certain cases, the Department has suspended existing export licenses or imposed additional licensing requirements during the review process.” However, a department spokesperson declined to specify which companies were involved.
During Synopsys’s Q2 earnings call on the 28th, CEO Sassine Ghazi remarked that the company had not yet received BIS’s letter. “Based on past experiences, our perspectives on this matter vary—some perceive clarity, others sense caution, while some remain unaware. I aim to clarify our current stance proactively,” he stated.
