Cadence Design Systems to Pay $140 Million for Illegal Tech Exports to Chinese Military University
A Silicon Valley semiconductor software firm has agreed to plead guilty and pay over $140 million in penalties for illegally exporting sensitive American technology to a Chinese military university already blacklisted by the U.S. government. The case underscores the ongoing risks of technology diversion to China’s defense sector and highlights the critical importance of export controls.
The U.S. Attorney’s Office for the Northern District of California and the Department of Justice’s National Security Division allege that Cadence Design Systems Inc. knowingly sold crucial semiconductor design software and tools to the National University of Defense Technology (NUDT) through intermediary Chinese companies. Prosecutors claim this occurred despite NUDT’s well-established links to China’s military and its programs involving nuclear simulation.
“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,” stated U.S. Attorney Craig Missakian on Monday. “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.”
Between 2015 and 2021, Cadence and its Chinese subsidiary conspired to violate export control laws by providing technology to NUDT via Central South CAD Center and later Phytium Technology Co. Ltd., all without obtaining the necessary licenses. Court filings reveal that Cadence staff based in China directly installed the software at NUDT’s campus in Changsha. Furthermore, employees actively concealed the university’s involvement in internal communications by using Chinese characters instead of English.
The company’s own export compliance officer flagged NUDT’s restricted status as early as 2015, issuing a warning that “export licenses will be required if sales are made.” Despite this internal caution, sales continued through aliases and indirect contractual arrangements.
In a quarterly earnings call held Monday, Cadence president and CEO Anirudh Devgan characterized the settlements as “a mutually acceptable path forward for all parties, and we believe are in the best interest of our customers, partners and shareholders.” Devgan further emphasized that “Cadence is deeply committed to the highest standards of compliance, and we have significantly enhanced our compliance processes over the last few years, and continue to implement improvement measures to proactively address evolving trade restrictions.”
The FBI emphasized the broader implications of the case. “Protecting the U.S. semiconductor industry is critical to our national defense,” said FBI Counterintelligence Assistant Director Roman Rozhavsky. “Working with NUDT, which has been on the entity list for a decade for its work to advance China’s military capabilities, is unacceptable.”
According to Assistant Attorney General for National Security, John Eisenberg, Cadence has since “implemented a strong export compliance program to help prevent any further illegal transmission of American technology.”
The financial resolution comprises nearly $118 million in criminal penalties and over $95 million in civil fines levied by the Bureau of Industry and Security within the U.S. Department of Commerce. The agencies agreed to credit portions of the penalties to prevent duplicate payments, resulting in a combined net settlement exceeding $140 million. While Cadence did not voluntarily disclose the violations, the Justice Department acknowledged the company’s limited cooperation with the investigation.
The plea agreement remains subject to approval by a federal judge, as confirmed by the U.S. Attorney’s Office. This case serves as a stark reminder of the challenges in preventing the flow of sensitive U.S. technology to entities linked to foreign military advancements.
