Cadence fined $140M for China export violations • The Register
Electronic design biz Cadence has agreed to plead guilty and pay more than $140 million in fines over charges that it unlawfully sold semiconductor design tools to a university linked with the Chinese military.
However, this will be offset by reduced tax payments due to US President Donald Trump’s budget bill.
The US Department of Justice (DoJ) says that Cadence Design Systems has agreed to plead guilty to settle the matter. It has charged the corporation with violating export controls by selling hardware, software, and semiconductor design intellectual property (IP) to the National University of Defense Technology (NUDT) in China.
According to the DoJ, NUDT is under the control of the Chinese Central Military Commission, and was added to the Commerce Department’s Entity List in February 2015 because of its use of American tech to build supercomputers it believes were deployed to support nuclear blast simulations, among other military uses.
Despite this, Cadence and an indirectly owned Chinese subsidiary, Cadence Design Systems Management (Shanghai) Co. Ltd, are accused of conspiring to provide electronic design automation (EDA) tools to NUDT in a period between February 2015 and April 2021.
Reuters points out that Intel’s new chief exec, Lip-Bu Tan, was CEO at Cadence from 2009 until 2021, which includes the period of the alleged violations.
These sales are said to have been fulfilled through Central South CAD Center (CSCC), an alias for NUDT, and another associated entity, Phytium Technology Co. Ltd, without Cadence seeking or obtaining the necessary licenses from the Commerce Department’s Bureau of Industry and Security (BIS).
Cadence and Cadence China are claimed to have exported EDA tools at least 59 times through September 2020, when Cadence terminated Cadence China’s business relationship with CSCC due to its association with NUDT.
The DoJ claims that Cadence admits employees of Cadence China installed hardware on NUDT’s campus and university staff downloaded EDA software and IP technology from Cadence’s portals, all while the company was aware that NUDT had been added to the Entity List.
As evidence for this, the DoJ points to an email from Cadence’s export control officer to its employees and those of Cadence China notifying them that NUDT had been added to the Entity List, explaining that this meant “export licenses will be required if sales are made.” This message was sent on the same day that BIS added NUDT to the list.
The Justice Department also claimed that employees of Cadence China concealed from other corporate personnel, including the company’s export compliance staff, that shipments marked for CSCC were being delivered to NUDT.
The fine is understood to include a 20 percent reduction off the statutory maximum penalty, in light of Cadence’s cooperation with the investigation, willingness to accept responsibility for the actions of its employees and agents, and efforts to tighten up its export control compliance program.
However, the plea agreement is subject to the approval of a federal district judge in the Northern District of California.
Cadence yesterday reported financial results for the second quarter of 2025 ending June 30, showing a 20 percent growth in revenue to $1.275 billion, compared with $1.061 billion for the same period last year.
In its Form 8-K filing [PDF] with the Securities and Exchange Commission, Cadence notes its agreement to plead guilty to conspiracy to commit export controls violations, and said this has a three-year probationary term with obligations to implement additional compliance programs and policies.
Cadence also disclosed in the filing that it had agreed to pay BIS and the DoJ its aggregate net penalty of $140.6 million during the current fiscal quarter ending September 30.
In a happy twist of fate, it also expects to benefit from approximately $140 million in reduced cash tax payments due to changes enacted in the Trump administration’s budget bill, neatly wiping out the fine it has to pay.
Cadence also raised its outlook for the year following the US government lifting its export restrictions on chip design software to China earlier this month.
“I am pleased to report that Cadence delivered excellent results for Q2, with broad-based strength across all businesses, more than offsetting the impact of the temporary restrictions on exports to China imposed on May 23,” said chief financial officer and senior veep John Wall.
“We are raising our 2025 revenue outlook to 13 percent growth year-over-year, and non-GAAP operating margin to 44 percent,” he said. ®
