In a situation that highlights the escalating conflict between national security and international technology markets, Cadence Design Systems Inc., a prominent semiconductor software company based in Silicon Valley, has consented to plead guilty to criminal charges and will pay over $140 million in fines after acknowledging the illegal export of sensitive technology to a university linked to the Chinese military.
Federal prosecutors revealed on Monday that Cadence, located in San Jose, California, intentionally breached U.S. export control regulations by providing semiconductor design tools and intellectual property (IP) to the National University of Defense Technology (NUDT)—a Chinese institution overseen by the People’s Liberation Army (PLA) and placed on the U.S. government’s blacklist since 2015.
The company is set to pay nearly $118 million in criminal fines along with an extra $95 million in civil penalties as part of a coordinated settlement with the Department of Justice (DOJ) and the Bureau of Industry and Security (BIS). After accounting for overlapping payments, Cadence’s total financial penalty exceeds $140 million.
A Decade of Covert Dealings
The unlawful exports occurred from 2015 to 2021, involving a subsidiary of Cadence in China—Cadence Design Systems Management (Shanghai) Co. Ltd. This entity, referred to as Cadence China, employed aliases and collaborated with third-party firms such as Central South CAD Center (CSCC) and Phytium Technology to mask the shipment of U.S.-origin electronic design automation (EDA) software and hardware to NUDT.
Despite NUDT being added to the Entity List—a U.S. government measure aimed at limiting technology access to foreign adversaries—Cadence personnel persisted in installing software on NUDT’s campus in Changsha, China, and permitted downloads of restricted materials from the company’s servers.
Internal communications disclosed that Cadence China staff took significant measures to conceal their activities, advising colleagues to refer to NUDT solely by its alias “CSCC” in English and restricting references to its military connections to Chinese characters or confidential channels.
A Wake-Up Call for Silicon Valley
“This is a clear case of putting profits over national security,” said Assistant Attorney General John A. Eisenberg. “Cadence knew NUDT was blacklisted, yet continued to supply them with critical tools that could be used in nuclear simulations and military operations.”
The case also included Phytium, a semiconductor firm with strong links to the PLA. Cadence admitted to ongoing exports to Phytium despite being aware of the company’s military ties and its association with NUDT.
Investigators claim that Cadence permitted Phytium to take over NUDT’s contracts, thereby advancing the illegal distribution of American technology.
In accordance with the plea agreement, Cadence has taken complete responsibility, terminated the employees involved, and initiated a new export compliance program. The company also worked with investigators; however, it did not receive full credit because of delays in providing evidence and restricted access to staff located in China.
“This case shows that U.S. authorities are not hesitating to hold even major players in the tech world accountable,” said U.S. Attorney Craig Missakian of the Northern District of California. “Export controls exist for a reason—especially in the semiconductor space.”
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