The company said it got a letter from the Commerce Department’s Bureau of Industry and Security informing it of the new curbs on Thursday. “Synopsys is currently assessing the potential impact of the BIS Letter on its business, operating results and financial condition,” the company said in a statement.
The stock closed down 1.6% following the announcement, bringing its two-day losses to more than 10%. Cadence Design Systems Inc., Synopsys’ biggest rival, closed down 1.4% following a similar steep loss Wednesday. That company confirmed it had also received a letter, in a regulatory filling submitted after the close Thursday.
Bloomberg News reported on Wednesday that the Trump administration was moving to restrict the sale of chip design software to China. BIS sent letters to some of the leading providers of electronic design automation, or EDA, last Friday telling them to halt shipments to Chinese customers, according to people familiar with the matter. Top makers of the technology include Synopsys, Cadence and Germany’s Siemens AG.
When reporting financial results on Wednesday, Synopsys Chief Executive Officer Sassine Ghazi said the company hadn’t gotten the notice from BIS. “We cannot speculate about any potential impact to a notice that we have not received,” he said on a conference call at the time.
Synopsys and rival Cadence get less than 20% of their revenue from China. But the region is one of the fastest-growing areas of the chip industry, both in terms of its demand for semiconductors and investment in new capacity.
“The letter stated that BIS has determined that these shipments pose an unacceptable risk of use in or diversion to a ‘military end use’ in China or for a Chinese ‘military end user,’” Cadence said in its filling. “The new requirements are complex, and we are engaging with BIS to obtain further clarification, as we assess the impact on our business and financial results.”
Modern chips consist of billions of transistors and connectors. Laying out that microscopic circuitry is only possible using advanced software, which also verifies that the chips will function as intended before the design is sent to the production stage.
The companies’ products are an essential part of the process of creating the kind of chips, such as those sold by Nvidia Corp., that lie at the heart of artificial intelligence systems.
China has found itself increasingly cut off from US chipmaking technology due to Washington’s stricter rules. The government has cited national security concerns as the reason for limiting exports.
The US chip industry has pushed back, arguing that its growing exclusion from the Chinese market will provide an opportunity for local competitors to fill the void.
Separately, Synopsys won approval from the US Federal Trade Commission for its planned $34 billion buyout of software developer Ansys Inc. The deal, announced in early 2024, still needs regulatory clearance in China.
