Cadence Pays $100M to US for China Sales Deal
US Probes Cadence Over Alleged Sales to Chinese University Linked to Nuclear Simulations
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San Jose, California – U.S. authorities are reportedly investigating San jose-based Cadence Design Systems over alleged sales of electronic design automation (EDA) software to China’s National University of defense Technology (NUDT), a university previously placed on a U.S. trade restriction list due to its suspected involvement in nuclear explosive simulation and military activities.
The investigation, which has been ongoing for over four years, centers on “ancient sales by Cadence to customers in China,” according to a company filing. Cadence, a leading provider of EDA tools essential for chip design, received a subpoena from the U.S. Commerce Department in February 2021, requesting records related to specific Chinese clients.This was followed by a subpoena from the Justice Department in November 2023 concerning the company’s business dealings in China.
NUDT’s Supercomputing and U.S. restrictions
NUDT has been on the Commerce Department’s restricted trade list since 2015. This designation aims to prevent the university from acquiring U.S.technology to power its advanced supercomputers, which are believed to support nuclear explosive simulation and military simulation activities. The U.S. Commerce Department has added further aliases and locations associated wiht NUDT to this list in 2019 and 2022, including Hunan Guofang Keji University, Central South CAD Centre, and CSCC.
sources familiar with the probe indicate that Cadence allegedly sold its EDA technology to NUDT approximately 50 times between 2015 and 2020, frequently enough through the CSCC or Central South CAD Center alias. Chip developer Tianjin Phytium Data Technology, which has roots in NUDT and was added to the restricted trade list in 2021, has also been linked to Cadence sales for the university.
Broader Implications for U.S.-china Trade
The potential settlement discussions between Cadence and the U.S. government come at a time when the U.S. and China are engaged in new trade talks.This situation highlights the U.S.’s continued commitment to enforcing export controls on China, even as some restrictions are being eased as part of broader negotiations. However, sources indicate that any potential deal is not yet finalized.
Entities are placed on the U.S. entity list for activities deemed contrary to U.S. national security or foreign policy interests. U.S. companies are generally prohibited from shipping goods and technology to these entities without specific licenses from the Commerce Department, which are typically denied.
Cadence’s Financials and China Market
Cadence, whose clients include major semiconductor manufacturers like Nvidia and Qualcomm, reported that 12% of its revenue came from China last year, a decrease from 17% in 2023. This decline is attributed to regulatory developments and ongoing geopolitical tensions. The company is scheduled to hold a call regarding its second-quarter financial results on Monday.
NUDT has been known to develop its own chips for its supercomputers, including the Tianhe-2, which was once recognized as the world’s most powerful supercomputer. The U.S. government has expressed concerns that Tianhe-2 may have been utilized in research or growth related to nuclear explosive devices.
Several employees at a Chinese subsidiary of Cadence have reportedly been terminated in connection with these alleged sales, according to one of the sources involved in the investigation.