The Trump administration has directed U.S. semiconductor design software companies—including Cadence, Synopsys, and Siemens EDA—to cease sales of their technology to Chinese firms, according to a Financial Times report citing informed sources. This directive was communicated through letters from the U.S. Commerce Department, which is conducting a broader review of strategic technology exports to China. Although a Commerce Department spokesperson declined to comment directly on the letters, they confirmed ongoing export reviews and mentioned that in some cases, existing export licenses have been suspended or additional licensing requirements imposed during the review process.

The news had an immediate impact on the stock prices of the affected companies. Cadence’s shares fell 10.7%, and Synopsys’ shares dropped 9.6%. However, Synopsys CEO Sassine Ghazi stated in an analyst call that the company had not received any formal letter or notification from the Commerce Department’s Bureau of Industry and Security (BIS), which oversees export controls. Ghazi noted that while Synopsys is aware of the reports and speculation, it has yet to receive official communication from BIS. The company reiterated its revenue forecast for 2025, and after market close, shares of both Synopsys and Cadence rebounded by about 3.5%. Siemens EDA did not respond immediately to requests for comment.

The software produced by these firms is essential for designing both advanced processors and simpler semiconductor products. The full extent of the policy’s scope remains unclear, but any efforts to prevent these software companies from serving Chinese customers could severely impact their revenues as well as the Chinese chip design industry, which relies heavily on leading U.S. design software. A former Commerce Department official described these companies as a "true choke point" for China’s semiconductor development.

Restrictions on the export of Electronic Design Automation (EDA) tools to China have been considered since the first Trump administration but were previously deemed too aggressive and thus not implemented. China represents a significant portion of revenue for these companies—approximately 16% for Synopsys and 12% for Cadence.

Synopsys, a major partner to chip manufacturers like Nvidia, Qualcomm, and Intel, supplies critical software and hardware necessary for the design of advanced processors. The potential export restrictions could disrupt these partnerships and the broader semiconductor supply chain. The move is part of a larger strategic effort by the U.S. to curb China’s technological advancements in sensitive sectors, particularly in semiconductors, which are crucial for national security and economic competitiveness.

This policy comes amid heightened U.S.-China tensions, where technology export controls are a key tool used by the U.S. government to limit China’s access to advanced technology. The decision to restrict EDA software exports reflects the strategic importance of semiconductor technology and the critical role these design tools play in enabling China’s chip development capabilities.

Overall, while the exact details and implementation timeline of these export restrictions remain uncertain, the move signals a significant escalation in the U.S. effort to restrict China’s technological progress, particularly in the semiconductor sector, potentially reshaping the global technology landscape. The affected companies face a challenging balancing act of complying with U.S. regulations while managing business risks related to their Chinese market exposure.