Synopsys (SNPS) shares surged over 5% Thursday after U.S. officials abruptly lifted recently imposed export restrictions on chip design software to China.
The decision, part of a broader U.S.-China trade détente, removes a key overhang for the electronic design automation (EDA) leader and revives optimism surrounding its pending $35 billion merger with Ansys.
Trade Truce Sparks Software Surge
The Bureau of Industry and Security informed Synopsys, along with rivals Cadence Design Systems (CDNS) and Siemens, that license requirements introduced in May had been rescinded, effective immediately. The initial restrictions, part of a raft of U.S. measures aimed at curbing China's semiconductor capabilities, had forced Synopsys to pull its financial guidance and spooked investors wary of long-term revenue losses.
Roughly 16% of Synopsys’ revenue comes from China, making access to the market critical. Shares rebounded sharply on the news, climbing more than 5% and recovering ground lost in the wake of the export ban. Analysts expect only a one-month revenue impact for the current quarter, with business operations expected to normalize quickly.
Synopsys Reclaims China Access
The removal of curbs also helps de-risk the company’s global growth plans. Synopsys, which had already reported robust second-quarter earnings in May—highlighting 10% year-over-year revenue growth and EPS above expectations—now sees renewed opportunity in a key market that had suddenly gone dark.
Management had previously flagged that even with China weakness, growth in regions like Europe and South Korea remained strong, particularly in the AI and high-performance computing sectors. Thursday’s news allows Synopsys to re-engage fully with Chinese customers, alleviating near-term uncertainty while keeping long-term competitive risks—like China’s push for domestic EDA solutions—in view.
Ansys Merger Prospects Strengthen
Perhaps equally important for investors is what the reversal signals for the pending Ansys acquisition. Synopsys has secured regulatory clearance in every major jurisdiction except China, where approval has been delayed. With tensions easing and commerce lines reopening, optimism is growing that the deal—originally targeted for closure in the first half of FY25—can move forward.
The merger is expected to generate $400 million in revenue synergies by year four, driven by cross-selling and product integration. Synopsys believes it can deliver adjusted earnings per share growth starting in year two post-close. Ansys shares also gained more than 3% Thursday as investors reassessed the likelihood of Chinese approval.
Conclusion
The Biden administration’s export control rollback marks a pivotal moment for Synopsys. With access to China reinstated and a major acquisition potentially back on track, the company regains momentum in both its current operations and future strategy. Investors responded accordingly, betting that the worst may be behind the EDA heavyweight—and that a new chapter of global growth is once again in play.
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