• The US has ordered electronic design automation software makers to stop sales to China without licenses.
• Companies like Synopsys, Cadence, and Siemens EDA are directly impacted by the new restrictions.
• The Commerce Department is reviewing export licenses on a case-by-case basis, suggesting a non-outright ban.
• Shares of Cadence and Synopsys fell significantly, though rebounded after hours of trading.
• These measures could significantly disrupt the Chinese chip design industry, which relies heavily on US software.

The United States has implemented new export restrictions on semiconductor design software, mandating that companies must secure licenses before supplying their products to Chinese clients. The companies affected include prominent electronic design automation (EDA) software makers such as Cadence, Synopsys, and Siemens EDA. Notifications of these changes were issued by the US Commerce Department, which affirmed its ongoing assessment of exports considered strategically significant for national security, according to Al Jazeera and Reuters.

The restrictions appear to cover a broad range of goods, not limited to semiconductor software, including chemicals, industrial machinery, and aviation equipment. A former official from the Commerce Department noted that these tools represent a significant choke point in the technological supply chain, suggesting that this move is intended to tighten the controls over critical technologies moving to China, according to India Times and Channel News Asia.

The Commerce Department stated it would evaluate requests for licenses to ship to China individually, indicating that this is not simply an outright ban but an increased oversight mechanism. Following this announcement, shares of Cadence and Synopsys fell by 10.7% and 9.6%, respectively; however, they experienced a rebound in after-hours trading, regaining about 3.5% of their value, as noted by Al Jazeera, Reuters, and Channel News Asia.

This action is likely to strain the relationship between the US and China at a time when tensions are already high, potentially affecting revenues significantly for American firms that depend on the Chinese market. Synopsys currently derives about 16% of its annual revenue from China, while Cadence counts China for 12% of its revenue, making these restrictions impactful on their business models, according to India Times and Channel News Asia.

As Chinese firms rely heavily on US-made EDA tools, any removal of access to these software products could undermine China's budding semiconductor industry. Manufacturers such as Brite Semiconductor and Zhuhai Jieli, which utilize these tools, may face significant challenges without access to the top-tier technology provided by US companies. "They are the true choke point," reiterated a former Commerce official, reinforcing the notion that restricting these exports could escalate China's endeavors toward self-sufficiency, aligning with comments from Al Jazeera, Reuters, and India Times.