US lifts chip design software export ban to China after rare earths deal

What just happened? The US government has abruptly reversed course on a key technology restriction, lifting export controls on chip design software to China less than six weeks after imposing them. The decision, communicated this week to industry leaders Siemens, Synopsys, and Cadence, allows these companies to immediately resume unrestricted sales and support of their electronic design automation (EDA) tools to Chinese customers.

This policy shift marks a significant moment in the ongoing trade relationship between the United States and China, coming on the heels of a broader framework agreement between the two countries.

The deal, confirmed by both governments last week, involves China easing its own export controls on rare earth minerals in exchange for the US rolling back certain technology restrictions. The US Commerce Department has not yet issued a public statement explaining the rationale for the reversal, but the timing aligns closely with the rare earths agreement and a series of high-level trade talks in London and Geneva.

For the three EDA giants – Siemens (through its US-based Siemens EDA unit), Synopsys, and Cadence – the news brings immediate commercial relief.

All three companies had been forced to halt or severely restrict business with Chinese clients following a May directive from the Commerce Department's Bureau of Industry and Security, which required case-by-case export licenses for sales of advanced chip design software to China. The restrictions had rattled the global semiconductor industry, given that these firms collectively control over 70 percent of the global EDA market and dominate the Chinese sector.

Industry analysts noted that the move removes a major source of uncertainty for these companies, whose China sales account for a not insignificant portion of their global revenue – about 16 percent for Synopsys and 12 percent for Cadence.

The initial export controls were part of a broader US effort to curb China's access to advanced semiconductor technology, citing national security concerns and the potential for military applications.

The May restrictions on EDA tools followed earlier bans on the sale of high-end AI processors from companies like Nvidia and AMD to Chinese firms. However, the lack of detailed guidance and the abruptness of the restrictions had left the industry in a state of confusion, with many companies suspending operations in China pending clarification.

The new trade framework appears to represent a pragmatic compromise. In return for the US lifting restrictions on chip design software and other key technologies, China has agreed to accelerate export approvals for rare earth minerals, which are essential for a wide range of US industries.