The US has ordered a broad swathe of companies to stop shipping goods to China without a license and revoked licenses already granted to certain suppliers, three people familiar with the matter said.
The new restrictions — which are likely to escalate tensions with Beijing — appear aimed at choke points to prevent China from getting products necessary for key sectors, one of the people said.
Products affected include design software and chemicals for semiconductors, butane and ethane, machine tools and aviation equipment, the people said.
Photo: Reuters
Many companies received letters from the US Department of Commerce over the past few days informing them of the new restrictions.
Firms that supply electronic design automation (EDA) software for semiconductors were sent letters on Friday last week that licenses would now be needed to ship to Chinese customers, two of the sources said.
The EDA makers include Cadence, Synopsys and Siemens EDA, one source said.
The two sources said the commerce department would review requests for licenses to ship to China on a case-by-case basis, suggesting the action was not an outright ban.
It is unclear whether the new restrictions are part of a broader strategy to create leverage for trade talks during a pause in the imposition of higher tariffs.
The commerce department said it is reviewing exports of strategic significance to China, adding that “in some cases, Commerce has suspended existing export licenses or imposed additional license requirements while the review is pending.”
Shares of Cadence, which declined to comment, closed down 10.7 percent, and shares of Synopsys fell 9.6 percent.
Synopsys CEO Sassine Ghazi said in a call with analysts that the company had not received a letter nor had it heard from the commerce department’s Bureau of Industry and Security (BIS), which enforces export controls.
“We are aware of the reporting and speculations, but Synopsys has not received a notice from BIS... We have not received a letter,” Ghazi said.
After the market closed, Synopsys reaffirmed its revenue forecast for this year. Its shares and those of Cadence bounced back 3.5 percent in trading after the close.
Any move to strip the software makers of their Chinese customers could deal a blow to their bottom line and to their Chinese chip design customers, which rely heavily on top-of-the-line US software.
“They are the true choke point,” said a former commerce department official, who added that rules restricting the export of EDA tools to China have been under consideration since the first administration of US President Donald Trump, but were then ruled out as too aggressive.
Synopsys relies on China for about 16 percent of its annual revenue, and China accounts for about 12 percent of annual revenue for Cadence.
Synopsys, which partners with chip companies such as Nvidia, Qualcomm and Intel, provides software and hardware used for designing advanced processors.
The Financial Times earlier reported that the Trump administration had ordered the software firms to stop selling their services to Chinese groups.
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