EDA software will be the next battlefront in the US-China chip war

EDA software is a small but mighty part of the semiconductor supply chain, largely controlled by three western companies. That gives the US powerful leverage, similar to the way it wanted to restrict access to lithography machines last month — another critical tool for chip-making. So how did the industry become so American-centered, and why can’t China just develop its own alternative software?

What is EDA?

Electronic design automation (also known as electronic computer aided design or ECAD) is the specialized software used in the creation of chips. It’s like the CAD software that architects use, except it’s more advanced because it handles billions of tiny transistors on an integrated circuit.

Screenshot of KiCad, a free EDA software.

JON NEAL/WIKIMEDIA COMMONS

There is no single dominant software program that represents the best in the industry. Instead, a series of software modules are often used throughout the design flow: logic design, debugging, component placement, wire routing, time and power optimization, verification, and more. Because modern chips are so complex, each step requires a different software tool.

How important is EDA for making chips?

Although the global EDA market was estimated to be only about $10 billion in 2021, making it a small part of the $595 billion semiconductor market, it is of unique importance to the entire supply chain.

Today’s semiconductor ecosystem can be thought of as a triangle, says Mike Demler, a consultant who has worked in the chip design and EDA industry for more than 40 years. On one corner are the foundries, or chip manufacturers like TSMC; on another corner are intellectual property companies such as ARM, which make and sell reusable design units or layouts; and on the third corner are the EDA tools. All three together ensure that the supply chain runs smoothly.

The name may sound like EDA tools are only important to chip design firms, but they are also used by chip manufacturers to check whether a design is feasible before production. A foundry cannot prototype a single chip; it has to invest in months of time and production, and every time hundreds of chips are manufactured on the same semiconductor base. It would be a huge waste if they had design flaws. Therefore, manufacturers rely on a special type of EDA tool to perform their own validation.

What are the leading companies in the EDA industry?

There are only a few companies that sell software for every step of the chip manufacturing process, and they have dominated this market for decades. The top three companies – Cadence (US), Synopsys (US) and Mentor Graphics (US but acquired by German company Siemens in 2017) – control about 70% of the global EDA market. Their dominance is so strong that many EDA startups specialize in one niche use and then sell themselves to one of these three companies, further strengthening the oligopoly.

What is the US government doing to limit EDA exports to China?

The undue influence of US companies on the EDA industry makes it easy for the US government to restrict China’s entry. In the latest announcement, it promised to add certain EDA tools to its list of technologies that are not allowed to be exported. The US will coordinate with 41 other countries, including Germany, to implement these restrictions.