US Restricts Tech Exports to China
Whoa, big news guys! Looks like the U.S. is telling a bunch of companies they gotta stop sending stuff to China unless they get special permission. Yep, even some companies that already had permission are getting those licenses taken away, or so say three folks who seem to know what's up.
This whole thing is probably gonna make things even more tense with China, you know? It really seems like they're trying to put the brakes on China getting certain things they need for their tech and stuff. One of my sources mentioned that. What kind of stuff, you ask? Well, things like the software and chemicals they use to make those tiny computer chips, also things like butane and ethane, and even some tools and aviation equipment. Crazy!
Apparently, a bunch of companies just got letters from the U.S. government like, super recently, telling them about these new rules. The companies that make that special software for designing chips, called EDA software, got their letters last Friday. They gotta have a license now to ship to China, like what? Two sources told me that. Some of the big names in that software game are Cadence, Synopsys, and Siemens EDA, which is part of Siemens. One source spilled the tea on that.
Now, these two sources also said the government will look at each request for a license case by case. So, it's not like a total ban, you know? It's not totally clear if this is all part of a bigger plan to get some leverage in trade talks while they're not putting those higher taxes on things. The government just said they're looking at sending important stuff to China, and yeah, sometimes they've stopped existing licenses or added new rules while they're figuring things out.
The White House didn't say anything right away when asked about it, by the way. So, shares for Cadence went down a bunch, over 10%, and Synopsys shares dropped too, almost 10%. Yikes! Cadence didn't wanna talk about it. Siemens said they're figuring out how this affects their software exports and will share more info soon as they can. China's foreign ministry is NOT happy, they told Reuters this messes up how things move around the world and that the U.S. is using tech and trade stuff to like, shut out and pick on China. They even said no amount of pressure or bullying will stop China from doing its own thing.
Synopsys' CEO, Sassine Ghazi, said on a call with people who analyze businesses that the company hasn't even gotten a letter or heard anything from the government office that deals with export rules. He said, 'We hear what people are saying and guessing, but Synopsys hasn't been told anything by that office... We haven't gotten a letter.' But get this, after the market closed, Synopsys actually stuck with their money prediction for next year. And, get this again, their shares and Cadence's shares went UP a bit, like 3.5%, in trading after hours. Wild!
Okay, so if Chinese companies can't get their hands on these design tools easily, that's a pretty big deal for them. They really rely on the fancy U.S. software to design their chips. Back in April, China's official news said that Synopsys, Cadence, and Siemens's Mentor Graphics together control more than 70% of that market in China. Some Chinese companies that use this software include firms like Brite Semiconductor, Zhuhai Jieli, and VeriSilicon, which provides stuff for designing chips. VeriSilicon and Brite didn't write back to emails asking about this right away, and calls to Zhuhai Jieli didn't get answered. Hmm.
But, like, three sources who know about the EDA tools world said on Thursday that business in China is still going on as usual. They're kinda waiting to see exactly how these rules are gonna work. One person, Nori Chiou, who's an investment director, thinks this is just another thing that won't work and will only help China do its own thing, kinda like with semiconductors. He also said there are lots of fake versions of these tools out there that aren't hard to get. He figures once the normal ways are blocked, a lot of Chinese companies that make their own EDA stuff will do really well.
Speaking of that, Chinese alternatives to the U.S. tools are companies like Empyrean Technology and Primarius Technologies. Their shares jumped a lot, like 17% and 20%! Back in 2023, Huawei said they made their own tools for designing chips that can be made with pretty advanced tech. They haven't been able to use U.S. suppliers since 2019.
Seriously though, if these software companies lose their Chinese customers, that could hit their wallets hard. One former government official said these companies are the 'true choke point.' He also mentioned that rules about stopping the export of these tools to China have been thought about since the first Trump time, but they were seen as too aggressive back then. China makes up about 16% of Synopsys' yearly money and around 12% of Cadence's. Synopsys works with chip companies like Nvidia, Qualcomm, and Intel, and they provide the software and tools for designing advanced processors. The Financial Times actually reported earlier that the Trump administration had told these software companies to stop selling their services to Chinese groups.
