Cadence Design Systems, a leading U.S.-based electronic design automation (EDA) company headquartered in San Jose, California, has agreed to plead guilty and pay more than $140 million in criminal and civil penalties to resolve charges related to the illegal export of sensitive semiconductor design software, hardware, and IP to China's National University of Defense Technology (NUDT), a military-affiliated institution blacklisted by the U.S. government since 2015.

According to a joint statement issued by the U.S. Department of Justice (DOJ) and the Department of Commerce's Bureau of Industry and Security (BIS) on July 28, Cadence admitted to violating U.S. export control laws by providing restricted EDA tools to NUDT via a front company—China-based South China University Center for CAD (CSCC)—and its affiliate, Phytium Technology.

Court documents reveal that between February 2015 and April 2021, Cadence and its wholly owned subsidiary, Cadence Design Systems Management (Shanghai) Co., Ltd. ("Cadence China"), conspired to export, reexport, and transfer U.S.-origin EDA software, hardware, and semiconductor IP to NUDT without obtaining the required licenses from BIS. The violations occurred despite Cadence being notified as early as February 18, 2015—the same day NUDT was added to the Entity List—that any sales to the university would require an export license.

Cadence employees in China knowingly concealed the end-user relationship between CSCC and NUDT and continued to conduct business with the university. The DOJ noted at least 59 illegal transactions occurred before Cadence finally severed ties with CSCC in September 2020. These included on-site hardware installations, software downloads from Cadence's portal, and misleading internal communications instructing staff to refer to NUDT only in Chinese and to obscure references to the PLA in customer reports.

In October 2020, Cadence even permitted CSCC to transfer its EDA software contract to Phytium Technology, a Chinese semiconductor company with close ties to NUDT and the military. Cadence continued supplying U.S.-origin EDA tools to Phytium until February 2021, one month before it voluntarily suspended exports and ultimately terminated the business relationship. Phytium was later added to the Entity List in April 2021.

In addition to criminal charges, BIS brought a parallel civil enforcement action, which Cadence also settled. Under the coordinated resolution, Cadence will pay nearly $118 million in criminal fines and over $95 million in civil penalties, with partial offsets agreed upon between the DOJ and BIS, bringing the total financial penalty to over $140 million. The company must also undergo two rounds of independent export compliance audits from 2025 to 2028, with a particular focus on its China operations.

U.S. officials emphasized the national security implications of the case. "Cadence has accepted responsibility for unlawfully exporting sensitive semiconductor design tools to a restricted Chinese military university," said Assistant Attorney General John C. Demers. "This case underscores the United States' commitment to protecting its technological edge through rigorous enforcement of export control laws."

Federal prosecutors noted that Cadence's conduct involved deliberate concealment, use of intermediary entities, and failure to voluntarily disclose the misconduct. The company's cooperation in the investigation, including sharing internal documents and facilitating interviews, was recognized but deemed insufficient for full credit due to its delayed response and limited transparency regarding Chinese employees' involvement.

The DOJ and BIS have made clear that violations involving military-linked entities like NUDT will be met with aggressive enforcement. FBI Counterintelligence Division Assistant Director Roman Rozhavsky added, "Engaging with an institution long known for advancing China's military capabilities is unacceptable. The FBI will not tolerate the transfer of American innovation to adversaries."

The plea agreement is subject to final approval by the U.S. District Court for the Northern District of California. The case was investigated by the FBI and BIS, and is being prosecuted by attorneys from the DOJ's National Security Division and the U.S. Attorney's Office for the Northern District of California.

This case marks one of the most significant enforcement actions to date involving export controls and the semiconductor industry. It also reflects heightened scrutiny on multinational tech firms operating in China, as Washington continues to tighten controls on advanced technology exports amid rising U.S.-China tensions.