U.S. Blacklists Empyrean Technology, China’s Top Chip Designer Hands Control to State Firm

In a significant shift in the semiconductor sector, Empyrean Technology, China’s leading semiconductor design tool manufacturer, has transferred complete ownership to the state-owned entity, China Electronics Corporation (CEC), reports the South China Morning Post. This move is a direct response to severe sanctions imposed by the U.S., which recently added Empyrean to its “Entity List.”

Recent updates from Empyrean reveal that on Monday, its board consented to give full control to CEC. This change led to the resignation of four Empyrean directors, with CEC filling these vacancies to hold six seats on the 11-member board, having previously owned two seats through a 34% stake. A forthcoming shareholder meeting is expected to formalize this arrangement. Following these developments, Empyrean’s shares surged by 9%, reaching 134 yuan (approximately $18.48) on the Shenzhen Stock Market.

Empyrean Technology stands as the fourth largest global provider of EDA (electronic design automation) tools, trailing behind American firms like Cadence, Synopsys, and Siemens EDA. EDA companies specialize in creating software for both digital and analog semiconductor designs. Notably, Empyrean has collaborated with Huawei to advance its capabilities to the 7nm and 5nm chip processes. Within China, Empyrean dominates the EDA market with a 5% share, competing against leading U.S. firms.

Following its addition to the Entity List, Empyrean asserted that the repercussions were manageable and reassured investors that this inclusion in a critical U.S. blacklist would not spell the end for the company. The transition in leadership to CEC might be the strategic advantage Empyrean referred to, with CEC’s governmental connections potentially providing crucial support to sustain and possibly benefit the company in the future.

On December 2, Empyrean was one of 140 Chinese entities added to the “Entity List” by the U.S. Department of Commerce, marking the third significant round of sanctions in recent years. The Entity List specifies companies considered threats to U.S. national security, enforcing stringent trade restrictions under severe legal consequences. This action is part of an ongoing “Chip War,” a trade conflict aimed at curtailing China’s burgeoning domestic chip production, which poses a challenge to U.S. economic and security interests.

The latest update to the Entity List notably includes 24 types of chipmaking tools that had not been targeted previously, likely affecting EDA technologies like those Empyrean employs to serve major clients such as Huawei. Despite enduring extensive U.S. sanctions since the Trump administration, Huawei continues to thrive both within China and internationally. The U.S. Congress is poised to consider a $3 billion defense bill intended to eliminate all Chinese telecommunications equipment from U.S. infrastructure, an endeavor estimated to cost over $5 billion to completely remove all Huawei and ZTE components.