US Restricts Tech Exports to China
So, the US government just told a bunch of companies they gotta stop shipping certain stuff to China unless they get special permission. And get this, they even took back some passes that companies already had! Three folks who know what's up spilled the beans on this whole thing.
Apparently, these new rules are meant to make it harder for China to get their hands on things they need for important industries. It sounds like they're trying to hit China where it hurts, right at the 'choke points,' as one person put it. What kind of stuff are we talking about? Well, things like software for designing computer chips, special chemicals for semiconductors, and even airplane parts. Pretty wild, huh?
Lots of companies got letters from the government in the past few days about these new rules. For example, companies that make that fancy software for designing chips, the EDA software, got letters last Friday saying they'd need a license to send it to their Chinese customers. Some of the big names in that game are Cadence, Synopsys, and Siemens EDA. Two of the sources said the government is gonna look at each license request one by one. So, it's not like a total ban, but it's definitely a hurdle.
Idk, itâs not totally clear if this is part of a bigger plan to get an edge in trade talks, especially since they paused putting on higher taxes, called tariffs. The government did say they're checking out certain exports to China and mentioned that sometimes they've stopped existing export passes or added new rules while they're looking into things. The White House didn't say anything right away when asked.
When this news came out, the stock prices for Cadence and Synopsys took a hit. Cadence didn't say anything. Siemens said they're trying to figure out how this will impact their EDA software exports and will share more info when they can. China's foreign ministry wasn't too happy, saying the US is messing up global supply chains and using tech and trade like weapons to shut China out. They said nothing can stop China's progress and that China won't be bullied.
Synopsys' CEO actually said he hadn't gotten a letter or heard from the government department that handles export stuff. He said he knows about the reports and rumors, but his company hasn't gotten a notice or a letter. After the market closed though, Synopsys said their money forecast for 2025 is still good. And guess what? Their stocks, and Cadence's too, bounced back a bit after hours.
Taking away China's access to these EDA tools could really hurt their chip industry. Chinese companies that design chips really rely on this top-notch software from the US. Back in April, a Chinese news agency said Synopsys, Cadence, and Siemens's Mentor Graphics together pretty much control over 70% of that market in China. Some Chinese companies that use their software include design firm Brite Semiconductor, Zhuhai Jieli, and VeriSilicon.
Interestingly, three insiders in the EDA tools world said on Thursday that business in China is still going on as usual while companies wait for more details on how these new rules will work. One investment director, Nori Chiou, thinks this is just another thing that will push China to rely on itself more, just like with semiconductors. He also mentioned there are lots of pirated versions of these design tools out there, and they're not hard to get. He figures once the regular ways are blocked, lots of Chinese EDA companies will do really well.
For example, there are Chinese alternatives to the US tools like Empyrean Technology and Primarius Technologies. Their stock prices actually jumped a lot! And get this, back in 2023, Huawei said they developed their own EDA tools for designing chips. They haven't been able to use US suppliers since 2019.
Taking away Chinese customers from these software makers could definitely hurt their bottom line. A former government official said these software companies are the real 'choke point'. He also mentioned that they've been thinking about rules like this since way back, but thought they were too harsh back then. Apparently, China makes up about 16% of Synopsys's yearly money and about 12% for Cadence.
Synopsys works with big chip companies like Nvidia, Qualcomm, and Intel, providing software and hardware for designing advanced processors. The Financial Times had reported earlier that the previous government had told these software companies to stop selling to Chinese groups. Itâs a complicated situation, right?
