On February 16, SK hynix confirmed it has begun an urgent review of the Chinese Electronic Design Automation (EDA) software it currently uses, following increasing concerns that the U.S. government may impose tighter restrictions on South Korean companies' use of Chinese software. This move is seen as a precautionary measure, anticipating potential sanctions from the Trump administration's second term.

EDA software plays a crucial role in semiconductor design, used to simulate and verify integrated circuit (IC) designs. It is indispensable for detecting potential flaws before manufacturing, which helps avoid costly waste. The market is predominantly dominated by American companies like Synopsys, Cadence, and Siemens EDA, which hold more than 70% of the global market share. However, Chinese EDA firms, including Empyrean, Primarius, and Entasys, have recently emerged as cost-effective alternatives, quickly gaining market traction, particularly among South Korean semiconductor companies.

As U.S. trade restrictions on China have escalated, Chinese EDA companies have targeted South Korean firms like Samsung and SK hynix, expanding their business and pushing their software solutions into these companies' operations. Despite this, SK hynix's decision to reassess its use of Chinese EDA tools is based on a cautious approach to avoid jeopardizing its relationship with the U.S. semiconductor market, a crucial player for its long-term success.

The Rise of Chinese EDA and Its Impact on SK Hynix and Samsung

The rise of Chinese EDA companies has been largely fueled by cost-effective solutions, which have proven attractive to companies like SK hynix and Samsung Electronics. The latter, which has been using Chinese EDA software since 2022, could face a similar dilemma in the coming months, as both companies could be forced to rely more heavily on American alternatives. This switch would likely drive up semiconductor design costs significantly, as U.S. EDA software is typically twice as expensive as its Chinese counterparts.

Both SK hynix and Samsung have been adapting to the changing landscape of semiconductor design software. While U.S. EDA companies remain dominant, the increasing presence of Chinese solutions offers an alternative that could mitigate costs. However, as the geopolitical climate intensifies, these South Korean firms may have no choice but to abandon Chinese EDA products altogether to preserve their ties with the U.S., potentially resulting in a sharp rise in design-related expenses.

In addition to the rising tension in global trade, SK hynix and Samsung also face challenges from the slow development of a local EDA ecosystem in South Korea. Despite leading the global HBM (High Bandwidth Memory) market, South Korea still lacks advanced EDA technology capable of integrating AI with HBM, further compounding the issue for its semiconductor giants.

This evolving situation underscores the critical role of EDA software in the semiconductor industry and highlights the delicate balancing act facing South Korean companies like SK hynix and Samsung as they navigate the shifting trade dynamics between the U.S., China, and South Korea.