Trump Administration Orders U.S. EDA Companies to Halt Semiconductor Software Sales to China

As reported by the Financial Times, the Trump administration has instructed American providers of semiconductor design software to halt all sales and services to Chinese entities. This move, intended to restrict China’s ability to advance its semiconductor capabilities, was issued by the Bureau of Industry and Security, an agency within the U.S. Department of Commerce responsible for export control oversight.

Key electronic design automation (EDA) firms including Cadence, Synopsys (NASDAQ:SNPS), and Siemens EDA were said to have received official communication from U.S. authorities requiring the suspension of technology transfers. While the Department of Commerce declined to comment directly on the notices, it confirmed that a review is underway concerning strategic exports to China. In certain instances, existing export licenses have either been paused or made subject to new licensing terms during the evaluation process.

Following these developments, Cadence shares dropped by 10.7% at market close, and the company declined to provide further remarks. Synopsys experienced a 9.6% decline in its stock price. On a call with analysts, the Synopsys CEO clarified that no notification had yet been received from the Bureau of Industry and Security. The company maintained its full-year revenue outlook, based on its interpretation of current regulatory conditions and anticipated reductions in Chinese market contributions. After-hours trading saw both Synopsys and Cadence rebound by 3.5%. Siemens EDA did not issue a comment at the time of reporting.

Together, Cadence, Synopsys, and Siemens EDA hold an estimated 80% share of China’s EDA market. Although EDA software comprises a small portion of the semiconductor sector by revenue, it is indispensable for designing and testing new chip technologies. A former official from the U.S. Department of Commerce referred to EDA tools as a critical pressure point, revealing that such export limitations had been discussed since the initial Trump administration, though previously considered too extreme to implement.

Synopsys currently derives around 16% of its annual income from China, while Cadence reports approximately 12%, highlighting the significant financial exposure these firms face amid tightening restrictions. The impact is also substantial for Chinese chipmakers, many of whom depend on high-end U.S. software to sustain their design capabilities.