Ismail J. Ramsey, U.S. Attorney | U.S. Attorney for the Northern District of California
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 after selling electronic design automation (EDA) tools and semiconductor intellectual property to the National University of Defense Technology (NUDT) in China. The announcement was made by the U.S. Attorney’s Office for the Northern District of California and the Department of Justice’s National Security Division.
NUDT is under the control of China’s Central Military Commission and 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 simulations.
A criminal information was filed against Cadence in federal court, charging the company with conspiracy to commit export control violations. Under a plea agreement, Cadence will pay nearly $118 million in criminal penalties.
In a parallel civil enforcement action, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) resolved charges with Cadence, resulting in over $95 million in civil penalties. The coordinated resolution between DOJ and BIS means that after credits are applied, Cadence will pay more than $140 million in total penalties and forfeiture.
“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—through its wholly controlled subsidiary Cadence Design Systems Management (Shanghai) Co., Ltd.—conspired to provide EDA tools subject to Export Administration Regulations (EAR) without required licenses via intermediaries including Central South CAD Center (CSCC), an alias for NUDT, as well as Phytium Technology Co., Ltd.
Employees installed hardware on NUDT's campus and allowed downloads from company portals while aware that NUDT had been placed on an export restriction list by U.S authorities on February 18, 2015.
Internal communications indicated employees used aliases or concealed references when discussing business with CSCC/NUDT due to sensitivity about their military connections; sales commissions incentivized such transactions.
Even after learning that items exported were destined for NUDT in violation of regulations, Cadence allowed contract assignments related to these exports be transferred from CSCC—an alias for NUDT—to Phytium Technology Co., Ltd., another closely associated entity later also added to the Entity List.
The Justice Department considered factors such as failure by Cadence to voluntarily disclose misconduct under enforcement policy guidelines; seriousness involving sensitive technology linked with nuclear simulation; willingness by Cadence management team—including those responsible at subsidiaries—to accept responsibility; steps taken since then by Cadence towards compliance improvement; cooperation during investigation; but noted limitations regarding full transparency about certain internal communications or employee interviews relevant abroad.
The plea agreement awaits approval by a federal judge.
The case was investigated by BIS's Office of Export Enforcement and FBI agents.
Assistant U.S. Attorney Eric Cheng along with officials from DOJ's Counterintelligence section are prosecuting.
