US goes for EDA jugular in China chips war
International Business Strategies report predicts new EDA tech restrictions on China will have ‘catastrophic impact worldwide’
The US-China chips war is heating up with new measures that will likely cause major disruptions for the global semiconductor industry. The US Commerce Department has been working on rules designed to deny China gate-all-around technology – the newest and most advanced method of building transistors.
“The latest restrictions by the US Department of Commerce’s Bureau of Industry and Security (BIS) on August 12, 2022, will potentially have the greatest impact on the trade between China and the US compared to all other actions taken to date,” declares a report issued by American consulting firm International Business Strategies (IBS).
How bad could the situation get? If export restrictions are applied in their broadest sense, they would be “clearly a disaster for many companies” in China, America and elsewhere, and could “have catastrophic impact worldwide,” says the IBS report, entitled “The US Department of Commerce Limitation on EDA Tools for Gate All Around to China.”
The phrase “gate-all-around” is the name a jargon-crazed industry has given to a technology for making semiconductors that have more computer power and use less energy than previous models.
“The limitation on electronic computer-aided design (ECAD) software affects certain EDA [Electronic Design Automation] tools for gate-all-around (GAA),” IBS CEO Handel Jones writes in the report. That “includes the 2-nm technology of TSMC and Intel as well as the 3-nm and 2-nm technologies of Samsung Electronics.”
These tools include products not only from EDA industry leaders Synopsys, Cadence Design and Siemens (Mentor Graphics), but also from Ansys and other suppliers as well.
EDA stands for Electronic Design Automation. Also referred to as electronic computer-aided design (ECAD), it consists of software, hardware and services used to design integrated circuits and printed circuit boards. Advanced semiconductor products cannot be designed without it.
A video explanation can be found below:
Gate-all-around is used to build transistors, which are basic components (along with resistors and capacitors) of integrated circuits.
Even if the US Commerce Department applies a narrow definition applying only to designs using gate-all-around, Jones writes, “Chinese fabless companies and equipment vendors such as those in smartphones, data centers, and autonomous transportation will be severely impacted in 2026 to 2030 by this limitation.”
But the same tools are used for 5-nm to 28-nm design rules, meaning that “If all EDA tools used for GAA are excluded, then all EDA tools will be effectively blocked from being licensed in China.”
Not only that but the shipment to China of integrated circuits designed using these EDA tools might also be banned. That would include products designed by Qualcomm, NVIDIA, MediaTek, Intel, Samsung and other companies and made by Intel, Samsung, TSMC and other foundries.
This broad definition not only would deprive Chinese makers of cell phones and other electronics of the advanced components they need, but would also lead to a serious loss of sales for foreign semiconductor design and manufacturing companies.
Last year, for example, Intel’s revenues in China were 50% greater than its revenues in the United States (US$21.1 billion vs. $14.1 billion; 27% of total revenues vs. 18%). Qualcomm gets about two-thirds of its revenues from China, and NIVDIA more than 25%.
Jones’ judgment on the matter: “The situation is very serious for China. The past pattern of the US government has been to expand the definition of its initial decision over time to increase the impact, and this will likely be the case with the present ruling.”
His conclusion is that “China will likely respond to the narrow definitions from the BIS once their implications are clear. The broad interpretation of its rules may be catastrophic for the US and China relationship. These broad definitions will likely result in major disruptions of the global electronics industry.”
Based in California, the consulting firm IBS provides strategic consulting services to senior electronics industry executives in the US, Europe, East Asia and around the world. Its client list includes IBM, Intel, Qualcomm, Cisco, Apple, Microsoft, STMicroelectronics, Nokia, Samsung Electronics, Fujitsu, Canon, Sony, Huawei, SMIC and others.
Jones is also the author of several books, among them ChinAmerica: The Uneasy Partnership That Will Change the World and When AI Rules the World: China, the US, and the Race to Control a Smart Planet.
Jones notes that “China is developing its own EDA tools, but they are not ready for broad-based commercial use.”
On the other hand, Brian Bailey, Technology Editor/EDA for the Semiconductor Engineering information website and forum, has written that:
“The rest of the world is content to look at the substandard attempts … [the Chinese] have made so far and write them off as not being capable of developing competitive EDA software. But in all likelihood, given the current political climate, China is hard at work on it.”
In Bailey’s assessment, China has the following advantages:
(1) Western EDA companies must be careful with customer information, but China can require its EDA research teams to share data and use AI to develop common solutions.
(2) Being new to the business, China does not have to accommodate legacy software in a rapidly changing environment.
(3) China can outspend Western EDA companies if it chooses to do so and is under no pressure to deliver strong quarterly earnings.
The greater the threat of American sanctions, the greater Chinese EDA spending is likely to become. And with imports taking about 90% of the Chinese market, the need is critical and the opportunity is immense.
As noted by Asia Times’ Jeff Pao in “EDA software ban latest blow to China’s chip makers,” “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.”
Which raises the question: Will the US push China to create for itself what its restrictions are intended to ban? Probably.
Will there be a catastrophe or will the US and China muddle through? Hope for the best, but prepare for the worst.
Scott Foster is an analyst with LightStream Research, Tokyo. Follow him on Twitter: @ScottFo83517667