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Cadence sold chip design tools to Chinese military

university

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Settlement discussions between Cadence and US began in

December

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Resolution comes as US and China engage in new trade talks

(Adds Cadence agreeing to plead guilty, pay charge in

paragraphs 1,4, shares rise in paragraph 5)

By Karen Freifeld

July 28 (Reuters) - Cadence Design ( CDNS ) agreed to

plead guilty and pay more than $140 million to resolve U.S.

charges for selling its chip design products to a Chinese

military university believed to be involved in simulating

nuclear explosions, the Justice Department said on Monday.

Cadence was accused of violating export controls by illegally

selling chip design software and hardware to front companies

representing China's National University of Defense Technology.

NUDT's supercomputers are thought to support nuclear explosive

simulation and military simulation activities, according to U.S.

Commerce Department notices restricting shipments to the

university.

San Jose, California-based Cadence noted a charge related to the

legal proceedings in its quarterly results, also released on

Monday.

Cadence shares rose 7.8% after it posted the news and its

quarterly results.

The deal, which comes as the U.S. and China meet for new trade

talks, shows the U.S. is still willing to enforce U.S. export

controls on China, even as it relaxes some of the restrictions

as part of negotiations.

NUDT was put on the Commerce Department's restricted trade

list in 2015 to keep it from using U.S. technology to power its

supercomputers, according to department postings. Other aliases

and locations were added to the university's listing in 2019 and

2022, including Hunan Guofang Keji University, Central South CAD

Center, and CSCC.

The U.S. investigation into Cadence, which began more than four

years ago, involved "historical sales by Cadence to customers in

China," according to a company filing. Cadence received a

subpoena from the U.S. Commerce Department in February 2021,

demanding records related to certain customers in China. A

related November 2023 subpoena followed from the Justice

Department over the company's business activity in China.

Entities are placed on the restricted trade list, formally

known as the entity list, for activities deemed contrary to U.S.

national security or foreign policy interests. U.S. companies

are not allowed to ship goods and technology to them without

licenses from the Commerce Department, which are generally

denied.

Cadence will hold a call about its second-quarter financial

results at 2 p.m. Pacific Time (2100 GMT) on Monday. Cadence,

whose customers include major semiconductor manufacturers and

companies such as Nvidia ( NVDA ) and Qualcomm ( QCOM ), is known for its

electronic computer-aided design software.

Electronic design automation (EDA) tools are key to

designing chips and verifying that they are bug-free. NUDT has

developed chips to power university supercomputers, including

Tianhe-2, once touted as the world's best supercomputer, which

the U.S. believes has been used in research on or the

development of nuclear explosive devices.

Twelve percent of Cadence's revenue came from China last

year, down from 17% in 2023, amid regulatory developments and

geopolitical tensions.