US Export Controls Fuel China’s Chip Design Advances, Report Says

Those controls, including the addition of Huawei and Empyrean to the Bureau of Industry and Security’s Entity List in 2019 and 2024, respectively, have “severely restricted” China’s access to electronic design automation (EDA) tools and semiconductor intellectual property (SIP) from leading companies like Synopsis and Cadence, as well as Siemens EDA, all based in the U.S., the report said. As a result, China has been “investing heavily” in developing its own SIP and EDA tools, which include software, hardware and services.

The growth of domestic design capabilities in China and other countries “poses a significant threat to U.S. leadership in the semiconductor market,” CSIS said. The U.S. share of semiconductor design revenue has already fallen from more than 50% in 2015 to 46% in 2020. Synopsis, Cadence and Siemens hold about 70% of China’s EDA market, down from about 90% six years ago. While China still lags behind the U.S. in EDA software, its IP is “advancing at a rapid pace.”

"Empyrean’s ambitious goals to replace foreign EDA tools by 2025 and establish a comprehensive chip design ecosystem by 2030 reflect China’s long-term strategy to develop its own semiconductor capabilities," CSIS wrote. "The company’s EDA tools, which support chip designs down to 7 nm, are an important step toward reducing dependence on foreign EDA software. However, as of 2025, Chinese EDA tools were still far from replacing the full range of advanced capabilities U.S. firms offer, especially in areas like 5 and 3 nm chip design."

New license requirements that BIS outlined in May for Synopsys, Cadence and Siemens may further push China to reduce its reliance on the U.S., the report said. Although BIS later rescinded the requirements as part of a trade negotiation (see 2507030009), the situation showed that the U.S. could continue using export controls to gain leverage in negotiations.

Chinese firms also have taken steps to get around U.S. export controls on chip design technology, including by forming shell companies. “Shell companies can be established within days, and they can operate for years before being shut down by authorities,” CSIS wrote. "This exploitation of regulatory loopholes is made easier by the limited resources of BIS, which ... struggles with outdated databases and limited functionality, making it difficult to track and prevent illegal activity."

China further circumvents U.S. export controls by buying U.S. EDA tools from “intermediaries located in places like Hong Kong or other regions where the U.S. enforcement reach is limited.” In addition, it has enlisted academic institutions “to obscure the end users of U.S. technology.”

“The overall picture suggests that while U.S. export controls on EDA tools are intended to limit China’s chip design capabilities, these restrictions are complicated and have loopholes,” the report said. “With BIS’s resources stretched thin and the global semiconductor industry’s increasing reliance on cross-border collaborations, it seems likely that these restrictions will continue to inconvenience rather than completely stifle the development of Chinese semiconductor technologies.”

Another challenge that CSIS highlighted is the growing trend of EDA software piracy. “However, given the international footprint and legal exposure of EDA, hacking or using pirated EDA poses substantial risk, especially when legitimate licensing via shell entities or 'stockpiled' pre-embargo licenses may be more strategically viable,” the report said.

To maintain U.S. dominance in chip design, CSIS recommended that the U.S. strengthen its enforcement of export controls, enhance its IP protection and address a “critical workforce shortage” of thousands of highly trained engineers.