China's largest maker of chip design tools, Empyrean Technology, has handed over full control of its company to the state-owned China Electronics Corporation, according to the South China Morning Post. This surrender of control comes thanks to heavy American sanctions leveled against the Chinese tech industry earlier this month, which placed Empyrean on the US's "Entity List".
Empyrean's latest corporate filings reveal that its board of directors gave China Electronics Corporation (CEC) full control of the company on Monday. Four directors from Empyrean stepped down, allowing CEC to take 6 total seats on the 11-member board (CEC already held two seats as a 34% equity holder). A full shareholder meeting will follow to authorize the change. Empyrean stock on the Shenzhen Stock Market rose 9% to 134 yuan (~$18.48) in response to the news.
Empyrean Technology is the world's fourth-largest EDA (electronic design automation) firm in the world, behind the US-based Cadence, Synopsys, and Siemens EDA. EDA firms create digital and analog tools for semiconductor design, and Empyrean being famous for partnering with Huawei to help the vendor achieve 7nm and 5nm processes. Empyrean is also the largest domestic EDA firm in China, controlling 5% of the market share against the US-based top dogs.
After it was placed on the Entity List, Empyrean released a statement saying the "impact would be controllable," and assured shareholders that being placed on a major U.S. blacklist would not be its end. This leadership change to CEC may have been what the company was talking about — CEC's access to government assets and ministries may keep Empyrean afloat and perhaps prove helpful to the company in the long run.
Empyrean was one of 140 Chinese groups or assets added to the "Entity List" on Dec. 2, in the U.S. Department of Commerce's third major salvo of sanctions in as many years. The Entity List outlines entities that are risks to U.S. security, totally barring trade with the named companies under major legal penalties. This is a continuation of the current government's years-long "Chip War" trade war with China, which is an offensive focused on stopping China's domestic chip manufacturing from threatening U.S. interests, commerce, and security.
Of note in the latest major Entity List overhaul is the targeting of 24 types of chipmaking tools that were previously left alone, likely including EDA technologies like those used by Empyrean to serve major customers such as Huawei. Huawei has been a target of U.S. commerce regulations since the Trump administration, but the company is still thriving domestically and globally despite years of sanctions. The United States is next set to vote on a $3 billion defense bill to flush all Chinese telecoms equipment from U.S. infrastructure, a goal which will likely cost upwards of $5 billion to fully purge all Huawei and ZTE hardware.
