New US export controls on electronic design automation software seeks to box China out of the 3-nm and lower chip markets
By JEFF PAO
Beijing aims to boost its chip-design software sector in response to new United States-imposed bans on shipping to China electronic design automation (EDA) software used in making the most cutting-edge 3-nanometer (nm) semiconductors.
The United States Commerce Department’s Bureau of Industry and Security (BIS) announced on August 12 its decision to establish new export controls on four technologies that support the production of advanced semiconductors and gas turbine engines.
The controlled technologies include electronic computer-aided design (ECAD) software that is used in a variety of applications by the military and aerospace defense industries for designing complex integrated circuits. The new export controls took effect on August 15.
Chinese analysts said the new US export controls of EDA software might not have an immediate impact on China, which does not currently design 3-nm chips. At the same time, they said China would have to self-supply chip-design software or the future development of its chip-design sector would be limited.
Shares of Chinese chip-design software providers surged during trading in the morning of August 15 as investors speculated they would see more business opportunities. Shanghai-listed Primarius Technologies jumped 12.5% while Shenzhen-listed Empyrean Technology gained 12% on Monday morning from last Friday, though both eased afterward.
On August 9, US President Joe Biden signed the CHIPS and Science Act to boost domestic semiconductor production and scientific research to enhance US competitiveness vis-a-vis China. The new law grants US$54 billion of subsidies and tax benefits to US-based chip makers over the next five years.
The effect of the US legislation is not yet clear. The law may discourage some chip makers, including Taiwan’s TSMC, from building new fabs in mainland China. At the same time, some South Korean chip makers may opt out of the US program to maintain their market in China, said analysts.
On August 12, the BIS announced the implementation of the new export control of ECAD software specially designed for the development of integrated circuits with Gate-All-Around Field-Effect Transistor (GAAFET) structures.
It said GAAFET technologies are essential for the design of 3-nm and lower chips that can advance many commercial as well as military applications including defense and communications satellites.
Alan Estevez, a US undersecretary of Commerce for Industry and Security, said: “Technological advancements that allow technologies like semiconductors and engines to operate faster, more efficiently, longer and in more severe conditions can be game changers in both the commercial and military context.
“When we recognize the risks as well as the benefits, and act in concert with our international partners, we can ensure that our shared security objectives are met, innovation is supported and companies across the globe operate on a level playing field.”
Chinese state media described the decision to control the technology as a heavy punch in the US “boxing combination” that is aimed at limiting the future growth of China’s chip sector.
“The US wants China to be stopped at 5-nm in chip design and 7-nm in chip manufacturing so China’s growth in high-speed computing and artificial intelligence will slow,” Hong Shibin, an IT industry expert, told the Beijing Business Today.
Hong said it would cost about US$40 million to design a 5-nm chip with foreign EDA software but up to $7.7 billion without them.
He said Huawei’s Hisilicon and Sanechips Technology could design world-class semiconductors but the Chinese companies relied on foreign EDA software.
Fu Wei, an assistant researcher at the Center for Internet Governance at Tsinghua University, told the Beijing News that the US was very cautious when making its latest decision as it did not want to disrupt the existing semiconductor global supply chain.
Fu said China’s self-developed EDA software urrently had about 10% of China’s domestic market share. He said there was a long way to go before China could fully self-supply its EDA software, which is very sophisticated and involves the collective efforts of a large number of chip makers and designers.
“The successful listing of Empyrean Technology showed that China attached great significance to the development of the EDA software sector,” he added.
In 2008, China started implementing its National Science and Technology Major Project (2006-2020), which put the development of EDA software as a top priority among all tasks.
The Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and Vision 2035 also highlighted the importance of EDA software.
Globally, the EDA software market is dominated by America’s Synopsys and Cadence and Germany’s Siemens EDA, both of which provide a full range of EDA software across 40 procedures of chip design.
According to Yicai.com, China currently has about 30 EDA software firms, including Primarius Technologies, Empyrean Technology, Semitronix, SMIT Holdings, Xpeedic and Xepic Corp. They are specialized in some chip-design procedures but have not yet been able to provide a full range of EDA software.
Founded in 2009, Empyrean Technology debuted on the Shenzhen stock exchange last month with a market cap of 37.5 billion yuan ($5.5 billion). In its listing prospectus, the company said its software could support the design of some, but not all, 5-nm chips.
CCIDnet.com, an IT website owned by China’s Ministry of Industry and Information Technology, said local chip makers’ fundraising activities had significantly increased since 2020, creating more business opportunities for EDA software makers.
The website said China’s EDA software market could reach 11.5 billion yuan by 2025, with an average annual growth of 17% between 2020 and 2024.
An Changguang, a senior analyst at ICWise, a Shanghai-based industry research group, said: “The ban of GAAFET technologies and related EDA software may not have an immediate impact on China at this stage as currently no Chinese firm is designing 3-nm chips.
“But the ban will seriously limit the future growth of China’s chip design industry. It’s urgent for China to speed up the development of its EDA software sector.”
An pointed out that a lack of specialized software engineers in China remains a big problem for the sector. He estimated that there were less than 3,000 EDA software engineers in China while Synopsys currently employed some 13,000 engineers.
Follow Jeff Pao on Twitter at @jeffpao3