China Pushes for Chip Design Independence; Analysis: Money Alone Cannot Overcome Obstacles

The image shows a schematic of a chip. (Public domain)

[November 5, 2024] In recent years, the tense U.S.-China relationship has brought electronic design automation (EDA) tools for chip design to the forefront of the tech competition between the two nations. Despite large subsidies from the Chinese government, the major hurdles in developing EDA remain unresolved.

What is EDA?

ECAD, or EDA (Electronic Design Automation), is an essential software tool in chip design.

Different EDA tools are required for different production processes. For the 22nm to 5nm process nodes, the mainstream architecture is FinFET, while GAA (Gate-All-Around) is considered the next generation and is used for 2nm nodes and below.

While the EDA industry accounts for only 1.6% of the $600 billion global semiconductor industry, it is a critical bottleneck in the supply chain for developing the latest advanced chips. The more advanced the chip process, the more dependent it is on EDA tools.

The global EDA market is dominated by three American companies: Synopsys, Cadence, and Siemens EDA, which together produce nearly all the software needed to design, produce, and test the most complex chips.

These three giants support the most advanced technology, reaching 2nm. In contrast, China’s Huada Empyrean has only one product that supports 5nm, and Empyrean’s other EDA products only support 28nm. This places Chinese technology far behind international standards.

According to data from Shanghai consulting firm ICWise Research, despite China’s efforts to produce domestic cutting-edge chips, these three companies still occupy nearly 80% of the Chinese EDA market.

Li Guan-hua, head of the Policy and Regional Research Group at Taiwan’s Industrial Technology Research Institute, told Epoch Times that EDA is a tool to help IC designers convert programming languages into physical chip layouts, which are then packaged and sent to foundries for manufacturing.

"As chip design advances to higher levels, such as Apple’s A17 Pro chip with nearly 19 billion transistors, the EDA’s functionality and computing power must be very robust."

Domestic EDA Achieves 3nm Certification?

In August 2022, the United States imposed an export ban on EDA for GAA technology, restricting China’s ability to develop chips below the 3nm node.

Soon after the 2023 U.S. sanctions, Huada Empyrean announced that its EDA software successfully supported the 3nm process node and had received orders and recognition from leading chip foundries like TSMC and Samsung. Chinese EDA company Gallium Electronics also claimed support for advanced nodes such as 7nm, 5nm, and 3nm.

However, Li Guan-hua expressed skepticism, noting that “the claims of orders from TSMC and Samsung seem questionable and do not align with my understanding of international standards.”

He analyzed that, in fact, for IC (integrated circuit) companies, in addition to requiring excellent layout capabilities, EDA tools rely on two other crucial factors: first, EDA providers must be able to offer a rich IP Library (also known as an intellectual property core library). This is because, as programming languages are transformed into actual transistor layouts, extensive pre-conversion verification is needed. International companies like Cadence and Synopsys focus on translating programming languages into reliable IP components that ensure yield.

"Secondly, during the development of IP components, close collaboration with wafer foundries is essential, and this requirement intensifies with more advanced processes. This collaboration ensures that the design can be perfectly manufactured at the foundry."

In conclusion, Li stated, "Considering layout capabilities, a robust IP library, and close cooperation with foundries, Huada Empyrean may have achieved the 3nm layout requirement, but I remain skeptical about the other two conditions."

Taiwan-based senior IC design manager Brad Liao told Epoch Times that to verify an EDA tool’s 3nm success, an IC design company must use the tool to create a chip, manufacture it at a 3nm-capable foundry like TSMC or Samsung, and test the chip’s performance.

"There is no evidence of any IC design company using Huada’s EDA to produce a 3nm product. So Huada’s announcement appears to be self-declared, without validation through actual market products," he said.

Chinese Subsidies Unable to Overcome Development Barriers

Facing comprehensive U.S. chip export controls, China is attempting to become self-sufficient. In its 2021 five-year economic plan, the Chinese government prioritized chip design software as a critical area for technological advancement.

In 2023, China established the National EDA Innovation Center in Nanjing, designating it as a key player to "break the U.S. monopoly on EDA software."

The government has also increased subsidies for the domestic EDA industry, aiming to expand market share for domestic companies.

In September 2018, China’s "Big Fund" invested 24 million yuan in Huada Empyrean’s equity. Following the U.S. Entity List ban on Huawei in May 2019, the Chinese Ministry of Finance and State Administration of Taxation announced a "two-year exemption, three-year half-reduction" policy for IC design and software companies.

Local governments have also implemented subsidy policies for the EDA industry: in May 2019, Shenzhen announced it would subsidize 20% of capital expenditures, 10% of operating income, and 30% of R&D expenses for EDA companies. In 2022, Shanghai offered a 30% subsidy for EDA investment, Hangzhou subsidized EDA R&D by 15%, and Beijing announced a 50% subsidy on EDA tool procurement in February 2023.

Huada Empyrean received 77 million yuan in government subsidies in the first half of 2024.

Li Guan-hua stated that subsidies are a strategic choice for China in the semiconductor industry, and even in the face of economic downturns, the government will continue to support it. For China, EDA is a key area for technological autonomy.

Brad Liao explained that designing a chip requires considerable human resources, capital, and time. Currently, Chinese EDA software lags behind the three leading international EDA companies. Many IC design companies in China use pirated versions of international EDA software, so the incentive to use domestic EDA tools is very low. If subsidies were withdrawn, the outlook for domestic EDA firms would be even gloomier.

Despite substantial short-term government investments, Chinese EDA companies still face long-term structural issues, including a shortage of talent, a weak EDA ecosystem, limited product maturity, and a lack of advanced foundry partnerships.

Li Guan-hua noted that China’s biggest hurdle in EDA development is the lack of cooperation with advanced foundries like TSMC. Thus, even if they succeed in development, it remains doubtful whether the yield and functionality will meet the original design expectations.

"Layout capabilities can be developed through computing, but advanced process nodes require cutting-edge technology and capital, which is difficult under current U.S. restrictions. The gap between China and the U.S. remains significant."

"The Chinese EDA industry may progress within China but is unlikely to succeed internationally."

Brad Liao added that the U.S. sanctions on EDA only target GAA transistor technology (2-3nm), which is highly advanced. No Chinese IC design companies currently use 2-3nm technology for mass production, and the restrictions do not apply to other process nodes.

"The technical barriers in EDA software aren’t as insurmountable as those for lithography machines, so I don’t expect a new round of EDA sanctions from the U.S."

Li Guan-hua noted that while EDA is only a support tool in chip manufacturing, the U.S. has already imposed sanctions on EDA tools for advanced designs, including strict controls on talent. The current sanctions have likely closed all possible loopholes, making new rounds of sanctions unlikely.

Edited by: Lin Yan