President Donald Trump has ordered some American chip designers to halt sales to China.
Late Wednesday, the U.S. Commerce Department instructed a handful of electronic design automation software makers that include Cadence Design Systems Inc., Synopsys Inc., and Siemens EDA, to stop selling their software to China, according to a Financial Times report, citing people familiar with the matter.
A Commerce Department spokesperson would only say it is reviewing exports of strategic significance to China, though “in some cases, Commerce has suspended existing export licenses or imposed additional license requirements while the review is pending.”
“We are aware of the reporting and speculations, but Synopsys has not received a notice from BIS (Bureau of Industry and Security). 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,” Synopsys CEO Sassine Ghazi told analysts in a conference call Wednesday. “We have not received a letter.” (On Thursday, Synopsys said it suspended guidance for its third-quarter earnings results after receiving a letter from BIS.)
Cadence declined comment, and Siemens was not immediately available for comment.
The FT’s report sent shares of Cadence tumbling 11% while Synopsys’ stock fell nearly 10%.
The scope of the policy change — the latest in a series of trade war moves against China highlighted by steep tariffs — was immediately unclear, but any attempt to put a spigot on business with China would amount to a lethal blow to the revenue streams of chip designers and their customers, industry experts said.
China accounts for about one-sixth of Synopsys’ annual revenue, while Cadence relies on China for about 12% of its annual revenue.
The Trump administration’s order is but the latest move by the federal government the past several years as it grapples with slowing China’s advances in artificial intelligence (AI). The rub is how to do so without severely hurting U.S.-based chipmakers that also sell into China’s gargantuan market.
Past administrations have cut off the most advanced semiconductor manufacturing equipment to China, but Wednesday’s action by the Commerce Department would attempt to cease the leading chip design software technologies as well.
