US lifts chip design export curbs on China; Cadence, Synopsys shares surge

Investing.com-- The U.S. Commerce Department has lifted restrictions on chip design technology exports to China, company statements showed on Wednesday evening, as part of a recent trade agreement between Washington and Beijing. 

Chip designers Synopsys Inc (NASDAQ:SNPS) and Cadence Design Systems Inc (NASDAQ:CDNS) shares rose sharply after the announcements, 24-hour trading data showed. Synopsys was up 6% at $555.0, while Cadence rose 5.1% to $326.99. 

Synopys said in a statement that it was informed by the U.S. Department of Commerce that restrictions on its exports to China, which were imposed in late-May, have now been rescinded effective immediately.

The company said it was now “working to restore access to the recently restricted products in China.” 

Bloomberg reported that Siemens AG (ETR:SIEGn) and Cadence Design Systems also issued similar statements, although the two could not be immediately reached for comment outside of business hours. 

The U.S. Department of Commerce also did not immediately respond to an email requesting comment. 

Synopsys, Cadence, and Siemens are the three largest manufacturers of chip design technology, and were in late-May instructed that they needed to acquire licenses to export goods such as chip-related software and chemicals to China. 

But a reversal of the mandate signals more progress in trade negotiations between Washington and Beijing, after the two said in June that they had agreed to a framework trade agreement. 

China had last week also signaled more progress towards a trade truce with the United States. Beijing had earlier said that U.S. export controls on chip technology were a major point of contention for the country. 

Still, it remained unclear whether Wednesday’s regulatory move heralded a further scaling back of chip exports to China. Majors such as Nvidia (NASDAQ:NVDA) were issued even tougher export controls on Chinese sales earlier this year, effectively blocking the company from selling its advanced artificial intelligence chips in China.

Nvidia had balked at the move, with CEO Jensen Huang calling U.S. export controls on China a “failure.” 

Former President Joe Biden’s administration had begun imposing tighter export controls on China from 2022, in a bid to block the country from access to advanced AI technology. These controls were tightened by the Trump administration earlier this year. 

China export ban easing limits revenue impact for Synosys, Cadence- Mizuho (NYSE:MFG)

Mizuho analysts said the development removed a "key overhang" related to China, and now sees only a one-month revenue impact on Synopsys and Cadence in the current quarter from the earlier restrictions.

The commerce department’s move also "reinforces" Mizuho’s view that Synopsys’ $35 billion takeover of engineering simulation firm Ansys (NASDAQ:ANSS) could close by the July 15 deadline, or at least move towards completion in 2025. 

The merger is currently being considered by Chinese regulators. A report earlier this week said Beijing’s potential approval of the merger was at an advanced stage.