Synopsys pulls full-year guidance, citing new China export restrictions

In a significant development, Synopsys has retracted its fiscal year guidance following a notification from the U.S. Commerce Department regarding new export limitations affecting sales of its products in China. The company's shares fell by 1.6% in response to this news. This announcement comes on the heels of Synopsys CEO Sassine Ghazi addressing recent rumors that the White House had instructed the company, along with competitors Cadence and Siemens, to halt sales to Chinese clients. Ghazi aimed to clarify the situation amidst growing speculation. In an official statement, Synopsys indicated that it is currently evaluating the implications of the Bureau of Industry and Security (BIS) letter on its business operations, results, and overall financial health. During a recent conference call with analysts, Ghazi noted a noticeable slowdown in business from China during the second quarter of the fiscal year, which concluded on April 30. Notably, approximately 10% of Synopsys' quarterly revenue, totaling $1.6 billion, originated from Chinese customers. The competitive landscape in China remains intense, with Synopsys highlighting that the Chinese government has implemented policies aimed at supporting domestic firms and fostering independent chip design expertise through investment funds. Ghazi remarked, "As we began communicating in FY 2024, we've observed the cumulative effects of both the restrictions in China and the broader macroeconomic conditions contributing to a persistent deceleration, with these challenges intensifying over the past year and a half." The fiscal year 2025 concludes in October. Additionally, Cadence recently received a similar notification from the Bureau of Industry and Security, indicating that it would require a license to export its chip design software to Chinese clients. According to Cadence, the BIS determined that these exports pose an unacceptable risk of being utilized for military purposes in China or by Chinese military entities.