China’s top chip design tool maker acquires loss-making Hong Kong software firm in sign of expansion amid US restrictions

China’s leading electronic design automation (EDA) developer Empyrean Technology said it will acquire a loss-making Hong Kong software firm for US$10 million in sign that the nation’s self-sufficiency drive in chips is accelerating despite tighter US sanctions.

The Beijing-based company, seen as one of China’s best hopes in cutting reliance on imported chip design tools, said in a stock exchange filing this week that its Shenzhen subsidiary would buy Hong Kong-based XinDA Design Automation for US$10 million cash.

Founded in 2018 by Ken Tsang, a former engineer with US EDA company Cadence Design Systems, XinDA specialises in software for designing digital and mixed-signal circuits and embedded memories, according to the company’s website.

Empyrean, which listed on the Shenzhen stock market earlier this year, said the deal will “complement shortcomings in digital design and wafer fabrication EDA tools”, and help it build “internationally leading” tools, even though XinDA made a loss of 1.3 million yuan (US$180,518) in 2021.

The expansion of Empyrean, which held a 5 per cent share of China’s EDA market in 2020 and reported revenue of US$80.4 million last year, reflects the sense of urgency among Chinese chip companies to improve their research and development capabilities as Washington tightens access to advanced chip technologies.

The EDA market is dominated by Cadence and Silicon Valley-based Synopsis, as well as No 3 player Mentor Graphics which was founded in the US but acquired by Germany’s Siemens in 2017.

In 2019, Washington began restricting the export of US chip design tools to China, but in August the Bureau of Industry and Security blocked the sale of advanced EDA software for Gate-All-Around Field Effect Transistors, a new transistor structure that enables chip designs to go beyond 3-nanometre.