^{Synopsys says it is blocking sales and fulfillment in China and halting new orders until it receives further clarification. File photo: AFP}

In a dramatic move signaling the intensifying U.S.-China tech standoff, Synopsys has pulled its full-year financial guidance after receiving a restrictive notice from the U.S. government limiting its business dealings with China.

The Silicon Valley-based software firm, which provides crucial tools for designing semiconductors, announced on Thursday that it is evaluating the long-term impact of newly imposed export controls that target sales to Chinese customers. The company’s stock fell 1.6% following the announcement.

Export Restrictions Shake Confidence

Synopsys said it received an official letter from the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), which imposes tighter restrictions on the export of its electronic design automation (EDA) software to Chinese entities. The agency reportedly cited national security concerns, specifically related to the potential military end use of Synopsys’ advanced design tools.

The company is now assessing how these export restrictions will affect its overall business strategy, earnings, and revenue flow. In a press release, Synopsys stated:

“Synopsys is currently assessing the potential impact of the BIS Letter on its business, operating results and financial condition.”

The decision to withdraw full-year guidance is rare among S&P 500 companies and highlights the unpredictability of current U.S.-China trade dynamics — especially in the strategically critical semiconductor sector.

CEO Denies Rumors of Government Orders — Then Pulls Forecast

Ironically, just a day before pulling its guidance, Synopsys CEO Sassine Ghazi had attempted to quash media speculation that the White House had ordered U.S. chip toolmakers — including Synopsys, Cadence, and Siemens EDA — to halt sales to China.

During a Wednesday earnings call, Ghazi acknowledged softening demand in China, noting that roughly 10% of the company's $1.6 billion in second-quarter revenue came from Chinese clients. He emphasized that the company has faced compounding challenges over the past 18 months.

“We have been communicating since FY 2024 that both the macroeconomic conditions in China and cumulative impact of restrictions have continued to intensify... This headwind has grown stronger each quarter.”

China’s Push for Self-Reliance Adds Pressure

The geopolitical landscape isn’t the only factor complicating Synopsys' outlook. The Chinese government has actively encouraged local chip companies to reduce their reliance on Western software and tools. It has also poured capital into domestic semiconductor ventures through state-backed investment funds.

These initiatives are part of Beijing's broader effort to develop an independent chip design ecosystem, which poses long-term risks to foreign companies like Synopsys that have historically dominated the EDA market globally.

Cadence and Siemens Also Under Scrutiny

Synopsys is not alone in this crackdown. According to a regulatory filing by Cadence Design Systems, the company was informed last week by the BIS that it must now obtain a specific license to export chip design software to Chinese customers.

The BIS warned that such shipments represent an “unacceptable risk” due to the potential for use by Chinese military end users or for military end uses. Siemens EDA, another competitor in the space, is believed to be subject to similar constraints, though the company has yet to comment publicly.

What It Means for Synopsys and the Industry

Analysts say these restrictions could reshape the global semiconductor landscape by accelerating the technological decoupling between the U.S. and China. Synopsys, which generates nearly $6 billion annually, is now navigating a more fragmented market where future growth in China may become increasingly uncertain.

The firm had been enjoying strong momentum in AI-driven chip development, 5G infrastructure, and automotive semiconductors — sectors where China represents a significant opportunity. But with export licenses now required, delivery delays and compliance hurdles could dampen future revenues.

Bottom Line

Synopsys’ decision to withdraw its full-year outlook underscores how deeply geopolitical risks can impact even the most advanced and essential technology providers. As regulatory pressure mounts and China accelerates domestic alternatives, Synopsys and its peers face a high-stakes recalibration of global strategy.

Investors, policymakers, and tech industry leaders will be watching closely — because this isn’t just about one company. It’s a signal that the U.S.-China tech war is entering a new, more volatile phase.