Cadence Design Systems Inc., a technology company based in San Jose, California, has agreed to plead guilty to criminal violations of U.S. export controls. The company will pay over $140 million in penalties for unlawfully exporting electronic design automation (EDA) hardware, software, and semiconductor design intellectual property to the National University of Defense Technology (NUDT), a Chinese military university.
NUDT was added to the U.S. Department of Commerce’s Entity List in 2015 due to its use of American components in supercomputers believed to support nuclear and military simulation activities in China.
Federal prosecutors filed criminal charges against Cadence for conspiracy to commit export control violations. The plea agreement requires Cadence to pay nearly $118 million in criminal penalties. In addition, the Department of Commerce’s Bureau of Industry and Security (BIS) announced a parallel civil enforcement action with over $95 million in civil penalties. After crediting payments made between agencies, Cadence’s total net penalties and forfeiture will exceed $140 million.
“Export controls safeguard America’s advanced technological know-how from falling into the wrong hands, which is particularly important in the Silicon Valley as the epicenter of groundbreaking innovation,” said U.S. Attorney Craig H. Missakian for the Northern District of California. “With this plea, Cadence has admitted to unlawfully exporting its semiconductor design technology to a restricted PRC military university using a front company, and accepted responsibility for its wrongdoing. Cadence’s remedial measures are a positive step toward rectifying the company’s violations of export control laws and demonstrating corporate responsibility.”
“Cadence has agreed to accept responsibility for unlawfully exporting sensitive semiconductor design tools to a restricted Chinese military university and has implemented a strong export compliance program to help prevent any further illegal transmission of American technology,” said Assistant Attorney General for National Security John A. Eisenberg. “American ingenuity is one of our Nation’s most precious assets, and the National Security Division will vigorously enforce U.S. export control laws to protect the technological advantage we enjoy because of that ingenuity.”
“Protecting the U.S. semiconductor industry is critical to our national defense,” said Assistant Director Roman Rozhavsky of the FBI’s Counterintelligence Division. “Working with NUDT, which has been on the entity list for a decade for its work to advance China’s military capabilities, is unacceptable. The FBI will stop at nothing to defend the homeland from China’s Communist Party.”
“The United States leads the world in semiconductor innovation, with Silicon Valley at the forefront of that global leadership. The FBI, working alongside our partners at the Department of Commerce, is committed to protecting sensitive U.S. technology from falling into the hands of the PRC government,” said FBI Special Agent in Charge Sanjay Virmani. “Today’s guilty plea is a clear reminder that U.S. companies must take export control laws seriously and closely monitor where their most advanced technologies are headed. This case should serve as a wake-up call to the broader emerging tech and innovation ecosystem: safeguarding our technological edge is not optional – it is essential to national security.”
Court documents show that from February 2015 through April 2021, Cadence and its subsidiary Cadence Design Systems Management (Shanghai) Co., Ltd., conspired to provide EDA tools subject to Export Administration Regulations without required licenses through Central South CAD Center (CSCC), an alias used by NUDT, as well as Phytium Technology Co., Ltd., another associated entity.
Employees installed hardware on NUDT’s campus and enabled downloads despite knowing about NUDT’s Entity List status since February 2015; internal communications reveal efforts within Cadence China staff both not disclosing connections between CSCC/NUDT or concealing those relationships from other compliance personnel within Cadence.
The investigation found that sales commissions incentivized such exports even after knowledge emerged regarding NUDT’s designation on regulatory lists intended for entities involved with military applications.
After October 2020—when knowledge existed about unlawful exports—Cadence consented for CSCC contracts related to EDA tools be assigned instead directly Phytium; business relationships persisted until March 2021 when internal reviews led Cadence halting all transactions with Phytium before hardware transfers were completed.
The coordinated resolution took into account factors such as non-voluntary disclosure by Cadence regarding misconduct; seriousness involving transfer sensitive technologies; willingness accept corporate responsibility including enhancements compliance programs; partial cooperation during investigations but lack proactive measures securing interviews relevant employees or collecting communications evidence led only partial credit reducing fines below statutory maximums by 20 percent.
The plea agreement awaits approval by federal court authorities in Northern District California.
BIS Office Export Enforcement together FBI conducted investigation while prosecution handled by officials from both Northern District California US Attorney office National Security Division Justice Department.
