Chip design software giant Synopsys probed for potential forbidden deals with Huawei

This is why the US Department of Commerce subpoenaed biz last year

Updated Synopsys is being investigated by the US government over concerns the biz may have flouted restrictions placed on the flow of American chip-making technologies to certain Chinese companies.

US outfits like Synopsys must obtain explicit permission from Uncle Sam before doing business with organizations placed on the Department of Commerce's Entity List.

Investigators are said to be probing Silicon Valley-based Synopsys, a top maker of chip design and simulation software, to see whether it has broken this rule.

Specifically, Synopsys is suspected of working with Huawei's hardware subsidiary HiSilicon and chip foundry SMIC behind Uncle Sam's back, Bloomberg reported this week. We're told Synopsys may have, via Chinese partners, handed over software tools and chip blueprints to HiSilicon to produce semiconductor parts at SMIC factories against the US government's wishes.

HiSilicon and SMIC were placed on the Entity List in 2019 and 2020, respectively, for national security reasons.

In a public filing to America's financial watchdog, the SEC, for its fiscal year to October 2021, Synopsys revealed it had been subpoenaed by the Dept of Commerce's Bureau of Industry and Security (BIS) and told to disclose details of business deals with the Middle Kingdom operations.

"Due to the nature of our business and technology, governmental authorities may inquire into transactions between us and certain foreign entities," Synopsys' SEC filing [PDF] stated.

"For example, we recently received an administrative subpoena from BIS requesting production of information relating to transactions with certain Chinese entities.

"We believe we are in full compliance with all applicable regulations and are currently working with BIS to respond to its subpoena. However, inquiries, such as this one, are subject to a number of uncertainties, and we cannot predict the outcome of this inquiry or its potential effect on our operations or financial condition."

A company spokesperson told us Synopsys was subpoenaed in November. "A number of companies have received similar inquiries and it's not surprising, given the current environment," the spokesperson told The Register in a statement on Thursday.

A number of companies have received similar inquiries and it's not surprising, given the current environment

Though Synopsys' SEC filing was submitted and published in December, media coverage this week of the subpoena, and the linking of it to Huawei and the Entity List, downed the company's stock price 3.90 percent as of writing.

Semiconductors are of national and economic importance to the US now more than ever. The global supply chain of electronic components has been choked by repeated factory shutdowns around the world, thanks to the COVID-19 pandemic and natural disasters, prompting private and public-sector efforts to expand chip manufacturing on American soil. That expansion could decrease America's reliance on overseas suppliers, and allow products to ship again.

The Biden administration hopes $52 billion in public funding can be unlocked this year by Congress and injected into domestic chip research and fabrication to achieve these goals of manufacturing independence.

Officials warned the United States' competitiveness to manufacture semiconductors has slipped due to "decades of disinvestment in domestic semiconductor manufacturing capacity." In 1990, the US had 40 percent of the market in global chip manufacturing, but it fell to just 12 per cent in 2020 as foundries shut down and had to rely on operations overseas.

The Register has asked the BIS for comment. ®

Updated to add

"While the Department does not comment on the potential existence of investigations, BIS vigorously investigates allegations of violations of the Export Administration Regulations, including attempts to transfer controlled items or technologies to or among parties on the Entity List," a BIS spokesperson told The Register.

"Any enforcement action resulting from an investigation is made public after that investigation has concluded."