During the Synopsys earnings call on Wednesday, an investor asked management if they knew about the Trump administration’s letter telling EDA vendors to stop selling in China. Synopsys said no, it hadn’t received one, but Ansys, Cadence, and Synopsys shares tumbled yesterday on the thought that this might be real. Last night (Thursday), Synopsys said it had received a notification and was trying to figure out how to respond. The company suspended its revenue and earnings forecasts for Q3 and 2025, which it had just the day before discussed with investors. Today, Reuters reports that Synopsys has stopped taking new orders in China to comply with these new export restrictions.

Also yesterday, Cadence issued a press release saying it had also received a notification, adding that “The new requirements are complex, and we are engaging with BIS [Bureau of Industry and Security, in the US Department of Commerce] to obtain further clarification, as we assess the impact on our business and financial results.” They did not suspend or change their financial guidance.

And what about Siemens? The Register quotes Siemens as saying, “On May 23, the U.S. Government informed the Electronic Design Automation industry about new export controls on EDA software to China and Chinese military end users globally,’ German EDA vendor Siemens confirmed in a statement to El Reg on Thursday.” The Register goes on to say, “the Bureau of Industry and Security … determined that the sale of EDA software to Chinese companies posted “an unacceptable risk of use in or diversion to a ‘military end use’ in China or for a Chinese ‘military end user.”

Reuters adds, “Synopsys, Cadence and Siemens’s Mentor Graphics control more than 70% of China’s EDA market, Chinese state news agency Xinhua reported in April. Chinese companies that have said they use Synopsys and Cadence software include design firm Brite Semiconductor, Zhuhai Jieli and semiconductor IP portfolio provider VeriSilicon.”

OK, so what does this all mean? Synopsys said that it gets 16% of total revenue from China; Ansys had 4% of revenue from China and Hong Kong in 2024, while Cadence had 12% or so. Siemens says its Digital Industries division sees “a quarter” of its revenue from China, though it sells a lot more than EDA software there. Not selling to/in China will have a not insignificant impact on these three companies; we should expect them to revise their sales forecasts if necessary. BUT.

I get that the strategic importance of EDA, but I can’t help but wonder how this will play out. I remember reading that a couple of big Chinese electronics companies have created in-house EDA in case restrictions like this are put in place, so they may be able to continue, business as usual. Too, there are other commercial EDA vendors, so won’t this just skyrocket their growth? And/or won’t it just lead to more pirated software? This might not affect Chinese companies as much as the US hopes.

And, of course, I have to wonder: is this a bargaining tool as the US administration looks to negotiate a trade deal (all the tariffs, remember?) with China? Stay tuned; I don’t think this story is over. At all.