Synopys and Ansys’ merger will go forward on the condition that some assets are divested to Keysight Technologies
Semiconductor design company Synopsys is facing headwinds, as new trade restrictions from the Trump administration have forced the semiconductor design company to stop sales to China.
The move seeks to further undermine the semiconductor industry in China by targeting tools used for design and simulation. Non-Chinese electronic design automation (EDA) software tools are widely used in China; a Financial Times report said that Synopsys, Cadence and Germany-based Siemens account for 80% of the Chinese EDA market. All three of those companies have received notices to cease Chinese software sales unless they receive a license to do so, according to published reports.
Synopsys had posted strong quarterly results last week and reaffirmed its guidance, with CFO Shelagh Glaser saying that Synopsys was “poised to deliver a solid second half.” After receiving notice from the U.S. government’s Bureau of Industry and Security (BIS) that it had to cease sales to China, Synopsys promptly pulled its financial guidance for the next quarter and the full year, as it tries to figure out what the fallout will be.
Synopsys has not commented further on the results of the restrictions, but according to published reports, the company has halted all sales, including to global companies with outposts in China, and disabled access for China-based customers to its customer support portal.
Revenues from China account for about 10% of Synopsys’ revenues—although the percentage has been declining, due to what CEO Sassine Ghazi said on the call was due to a combination of the macroeconomic environment in China and the “cumulative impact of restrictions” on the country.
Keysight will pick up assets from Synopsys and Ansys
Meanwhile, Synopsys had better news from the Federal Trade Commission, which last week gave conditional approval to Synopsys’ $35 billion acquisition of Ansys. The FTC wants Synopsys and Ansys to divest some assets, however due to anticompetitive concerns. The requirements mirror divestments that have already been approved for the merger to pass regulatory muster in the European Union.
Synopsys executives expressed confidence last week that the Ansys deal would close within the first half of the year. But that was before it became clear that the new export regulations would affect Synopsys’ operations in China—which also happens to be where the company is still working on regulatory approval for the Ansys acquisition to go through. Trade and tariff negotiations between the U.S. and China are increasingly fraught, with negotiations still underway in regards to the so-called “90-day tariffs”, President Donald Trump accusing China of violating restrictions and Chinese student visas also in the cross-hairs.
The assets that Synopsys and Ansys have to divest are related to semiconductor design and photonic light simulation, and are widely used. The FTC said that it had anticompetitive concerns about the merger in three areas: optical software tools, photonic software tools for designing and simulating photonic devices, plus power consumption analysis tools.
Keysight Technologies has already been named as the company that will purchase those assets.
Specifically, the FTC said that Synopsys will have to let go of its optical software tools that allow engineers to design and simulate devices that generate, reflect or refract light, such as LED screens; and its photonic software tools for design and simulation of things like fiber optic cables. According to the proposed consent order, that includes Synopsys’ CODE V, LightTools, RSoft, LucidShape, Visualization and ImSym. (Read the FTC’s proposed consent order for the transaction here.) Ansys will have to divest its Register Transfer Level (RTL) power consumption analysis tools, with Keysight picking up those as well.
The Synopsys/Ansys merger was first announced in January 2024, with some asset divestitures announced this past January. It is by far the largest recent M&A transaction in the design, test and measurement space.
“The FTC’s action today protects Americans from higher costs for the countless everyday products that use computer chips, LED screens, fiber optic cables, and many other high-tech components,” said Daniel Guarnera, director of the FTC’s Bureau of Competition. “The FTC’s divestiture order ensures that competition can thrive across software markets that are critical to designing the digital products that power Americans’ daily lives.”
