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Chinese technology companies designing their own advanced chips for manufacturing in Taiwan are potentially set to be impacted the most by new U.S. curbs on software tools, the Financial Times reported.
Xiaomi (OTCPK:XIACF) (OTCPK:XIACY) is among the first to be impacted, the report added citing people with knowledge of the matter, after a U.S. ordered American electronic design automation, or EDA, companies to stop supplying their technology to China.
Last month, the Bureau of Industry and Security of the U.S. Department of Commerce sent letters to EDA companies informing them of new export restrictions related to China. Synopsys (SNPS), reportedly, directed its employees in China to suspend services and sales in the country and stop taking new orders to adhere to new U.S. export curbs. Other companies affected by the new controls include Cadence Design Systems (CDNS), Keysight Technologies (KEYS) and Ansys (ANSS), which is currently in the process of being acquired by Synopsys.
In May, Xiaomi’s Founder and CEO Lei Jun said that the company had started mass production of its in-house developed advanced mobile chip Xring O1.
The chip is on a leading-edge 3-nanometre node of miniaturization and is produced in Taiwan with a mix of licenses and products from now-restricted American EDA companies, the report noted.
Xiaomi has spent years developing the proprietary silicon, made by Taiwan Semiconductor Manufacturing (TSM). Lei Jun said at the launch event in May that XRING O1 chip would be used in the group’s latest smartphones.
While such chips will only account for a small part of phones sales initially, he hopes to use them for all future high-end smartphones and tablets, the report added.
Other Chinese companies also using U.S. EDA tools and TSM’s contract manufacturing for their in-houese chips include the computer maker Lenovo and bitcoin mining specialist Bitmain, as per industry insiders, the report noted.
Xiaomi, TSM, Lenovo (OTCPK:LNVGY) (OTCPK:LNVGF) and Bitmain did not respond to a request for comment from Seeking Alpha.
Full details of the ban have not yet released, but it is unlikely to lead to existing licenses being cancelled, the report added.
Chinese companies could be barred from future updates and the technical support crucial for their chips to continue being made at Taiwanese factories that use the latest U.S. systems, the report stated.
TSM is, in effect, banned by U.S. curbs from making advanced AI chips for Chinese companies, but smartphone and tablet categories, and other less advanced processors, have generally been exempted, according to the report.
Big Tech companies in China, such as Alibaba (BABA) and Baidu (BIDU), have also designed their own chips, but the impact of the EDA ban on them is not clear presently, the report noted.
The restrictions may have come too late, as Chinese EDA makers, led by Empyrean Technology, have already developed a competing ecosystem of software increasingly used by Chinese chipmakers, the report noted.
Huawei Technologies has invested heavily in developing its own EDA tools and supporting local suppliers such as Empyrean to build alternatives. However these are not yet as mature as the products from EDA suppliers Synopsys or Cadence, they are “usable”, especially for chip production at 7nm and above, the report added.
The new curbs mean Empyrean can anticipate higher demand for software tools that cover the full circuit design process, including editing, simulation and optimization. Primarius Technologies is another China-based EDA provider, while Semitronix specializes in electrical testing to improve production yield. The share prices of all three jumped after the news outlet reported the new restrictions, the report noted.
Chinese start-ups have been using localized versions of hacked U.S. EDA software. The latest curbs are expected to push more Chinese companies into using hacked software, and switching to domestic suppliers for both EDA and chip making, the report added.