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Chinese tech companies designing their own advanced chips for manufacturing in Taiwan are set to be the hardest hit by new US restrictions on software tools.
Smartphone maker Xiaomi is first in line to be affected, according to people with knowledge of the matter, after a US directive last month instructed electronic design automation (EDA) groups to stop supplying their technology to China.
Xiaomi unveiled a breakthrough self-designed mobile processor in May. Its chip is on a leading-edge 3-nanometre node of miniaturisation and is made in Taiwan with a mix of licences and tools from now-restricted US EDA companies.
The world’s third-largest smartphone maker has spent years developing its proprietary silicon, produced by Taiwan Semiconductor Manufacturing Company. Xiaomi chair Lei Jun said at a launch event that its new XRING O1 chip would be used in the group’s latest smartphones.
While such chips will only account for a small portion of handset sales initially, he envisions using them for all future high-end smartphones and tablets, according to people familiar with the company’s plans.
Other Chinese companies also using US EDA tools and TSMC’s contract manufacturing for their self-designed chips include the world’s biggest computer maker Lenovo and bitcoin mining specialist Bitmain, according to industry insiders.
Xiaomi, Lenovo and Bitmain did not respond to requests for comment.
Full details of the ban are yet to be released, but it is unlikely to lead to existing licences being revoked. Instead, Chinese companies would be cut off from future updates and the technical support crucial for their chips to continue being manufactured at Taiwanese factories that use the latest US systems, according to the same people.
TSMC is, in effect, banned by US restrictions from making advanced AI chips for Chinese companies, but smartphone and tablet categories, and other less advanced processors, have generally been exempted.
Big Tech groups in China, such as Alibaba and Baidu, have also designed their own chips, but the impact of the EDA ban on them is at present unclear.
The latest move by the Bureau of Industry and Security, the arm of the US commerce department that oversees export controls, extends chip industry restrictions to design software and represents a further tightening to restrict China’s ability to develop advanced technologies.
However, some industry observers argue that the restrictions may have come too late, as Chinese EDA makers, led by Empyrean Technology, have already developed a rival ecosystem of software increasingly used by Chinese chipmakers.
Huawei, the Chinese tech group that has been under US sanctions since 2019, has invested heavily in developing its own EDA tools in its chip development work, as well as supporting local suppliers such as Empyrean to build alternatives.
While these are not yet as mature as the products from EDA suppliers Synopsys or Cadence of the US, they are “usable”, especially for chip production at 7nm and above, say industry insiders.
The new ban means Empyrean can expect higher demand for software tools that cover the full circuit design process, including editing, simulation and optimisation. Primarius Technologies is another Chinese EDA provider, while Semitronix specialises in electrical testing to improve production yield. The share prices of all three jumped after the Financial Times reported the new restrictions.
Meanwhile, Chinese start-ups have been using localised versions of hacked US EDA software.
“It is very easy to hack into the system to get the support you need, and the underlying algorithm to build innovation on top of it,” said one semiconductor analyst, who declined to be named.
“This is the reason why Synopsys and Cadence have seen weaker China demand than capacity growth. Lots of customers have been using it without paying,” he added.
The latest US restrictions are expected to push more Chinese companies into using hacked software, as well as switching to local suppliers for both EDA and chip manufacturing.
Additional reporting by Ryan McMorrow in Beijing
