The Trump administration told U.S. companies to provide software for designing semiconductors to stop selling their services to Chinese groups to make it harder for China to develop advanced chips.
Several people familiar with the move said the U.S. Department of Commerce told the so-called electronic design automation team, including rhythm, summary and Siemens EDA - to stop providing technology to China.
According to the people, the U.S. Department of Commerce, which oversees export controls, issued instructions to companies through letters. It is not clear whether every American EDA company has received a letter.
The move marks a major new effort by the government to stop China from developing its leading AI chips as it seeks technological advantages over its geopolitical competitors. In April, Washington restricted exports of NVIDIA-specific AI chips.
A Ministry of Commerce official said this was "a review of exports to China's strategic significance."
“In some cases, commerce has suspended existing export licenses or imposed other licensing requirements during the pending period of review review.”
While EDA software accounts for a relatively small share of the overall semiconductor industry, it allows chip designers and manufacturers to develop and test next-generation chips, making it a key part of the supply chain.
Synopsys, Cadence Design Systems and Siemens EDA account for about 80% of the Chinese EDA market. None of the three companies immediately responded to a request for comment.
Synopsys reported nearly $1 billion in sales in China in fiscal 2024, accounting for about 16% of its revenue. Cadence said China accounts for 12% of its revenue, or about $550 million.
Synopsys shares fell 9.6% on Wednesday, while Cadence shares fell 10.7%.
In 2022, the Biden administration's sales restrictions on China's most complex chip design software, but these companies continue to sell products that meet export controls to the country.
Donald Trump banned China's Huawei from using U.S. EDA tools during his first term as president. Huawei is seen as an emerging competitor to NVIDIA, with its "rise" AI chips.
NVIDIA CEO Jensen Huang recently warned that the U.S. government's continuous attempts to use export control to block China's AI ecosystem have failed.
Last year, Synopsys signed an agreement to buy ANSYS, a simulation software company for $35 billion. The deal still requires approval from Chinese regulators. ANSYS shares fell 5.3% on Wednesday.
Export restrictions have encouraged Chinese competitors, and in recent years, three leading EDA companies (Empyrean Technology, Primarius and Semitronix) have greatly increased their market share.