Rumored ban would be a tough reality check on Chinese chipmaking
Further controls targeting the EDA chokepoint for chip manufacturing could deepen divisions with Beijing and set China back in the competition to both innovate and diffuse.
What’s happening? The US has reportedly issued further orders for companies to stop shipping electronic design manufacturing (EDA) software to China.
Letters sent by the Bureau of Industry and Security (BIS) at Commerce told EDA providers that they would need further licensing to ship to China and that some existing licenses had been revoked, according to the reports.
So what? The orders mean significant uncertainty in the forecast for EDA suppliers and even more on the outlook for Chinese chip manufacturing.
There were already some bans on EDA tooling in place, but the recent orders could extend them to more advanced 3 to 7 nanometer architectures.
Why? Specialized EDA software is crucial to developing chips, as components contain billions of intricate transistor arrangements that cannot be arranged manually. EDA assists with the design phase, as well as debugging, wire routing, and subsequent optimization.
What does it mean for China? While domestic Chinese companies like Empyrean, Primarius, and Semitronix have made advances in recent years, they still fall short of the cutting-edge fabrication capabilities on smaller architectures.
As Trump’s tariff regime met with a brief defeat in the courts, and is likely to see some protracted litigation, the pendulum may swing back towards direct controls on exports of national security sensitive products. Tougher measures on EDA are low hanging fruit.
From one perspective, the EDA chokepoint is a huge problem for China. China’s industry has relied on imported American technology for decades, and stricter controls on access could force the entire industry to transition.
As our friend, Dr. Jost Wübbeke at Sinolytics, points out, many Chinese foundries rely on American EDA, and Chinese solutions account for only 14 percent of the market in China itself.
Wübbeke argues it’ll take at least five years for any Chinese provider — likely Empyrean — to catch up, and that the process will be a difficult one.
On the other hand, China could see it as an opportunity. The complexity of EDA software tools is a profound challenge, and so is its integration into the lifecycle of chip production.
The recent order to stop American companies from exporting EDA to China will further incentivise domestic firms to accelerate and integrate more deeply across the end-to-end supply chain for advanced chips.
The upshot? More information about the specifics of the rumored order are forthcoming. In any case, EDA software, given the concentration of the supplier market, is a significant chokepoint.
Further narrowing could mean that Chinese firms can no longer access fundamental capabilities for making the most advanced chips. The pathway for those firms to catch-up is long and complex.
The US addition of EDA software to anti-China trade measures will almost certainly complicate the ability to conclude a bilateral negotiation. US Secretary of Treasury Scott Bessent said on May 30 that US-China trade negotiations have “stalled.”