Synopsys Pauses China Sales Amid New Chip Design Export Controls

American electronic design automation (EDA) company Synopsys (SNPS) has directed its staff in China to halt all sales and services in the country, following new restrictions on design exports to China. Synopsys has also asked its offices to stop taking new orders until further clarity is sought on the matter. The news was first reported by Reuters, citing an internal letter viewed by the publication. The new restrictions apply to the export of semiconductor design software and chemicals to China, effective May 29.

Trade War Hits Synopsys

On May 28, Synopsys reported better-than-expected results for the second quarter of fiscal 2025 and also lifted its full year fiscal 2025 outlook. However, following the receipt of a letter from the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce, the company suspended its guidance for Q3 and FY25. SNPS stock fell 1.6% on the news yesterday.

According to TipRanks’ Revenue Breakdown Chart, China is Synopsys’ second-largest market in terms of sales after the U.S. The new export curbs are expected to have a material impact on the company’s revenues.

EDA Firms Face Increased U.S. Scrutiny

The BIS sent letters to EDA companies Synopsys, Cadence Design Systems (CDNS), and Siemens (SIEGY), among others, informing them of new license requirement for the export, re-export, or in-country transfer of EDA software and technology to China. Accordingly, Synopsys informed its staff that the curb applies to all customers in China, including employees of global customers working there, and Chinese military users located anywhere. Additionally, Synopsys stopped its Chinese customers from accessing its customer support portal, SolvNetPlus.

The three companies together control over 70% of China’s EDA market, according to Chinese news agency Xinhua. Their software and technologies are used for designing semiconductors for smartphones, computers, and even automobiles. The U.S. has taken a strict stance on China’s use of American software to promote its industries, citing national security concerns. After restricting semiconductor and chip exports to China, the administration has turned to the next logical step of stopping the export of chip design tools to the country.

Is Synopsys a Good Stock to Buy?

On TipRanks, SNPS stock has a Strong Buy consensus rating based on 11 Buys and one Hold rating. Also, the average Synopsys price target of $605.67 implies 33.1% upside potential from current levels. Year-to-date, SNPS stock has lost 6.3%.

Please note that these ratings were given before the company announced the halt of all sales and services to China, and they are subject to change once analysts revisit their views on the stock.

See more SNPS analyst ratings