Эlectronic Compromise: The US and China Ease Mutual Restrictions

Since 2022, the technology partnership between the US and China has been weakening. Washington imposed trade restrictions, closing China’s access to advanced chips, lithography equipment, and software. The culmination came in May 2025, when the US Bureau of Industry and Security (BIS) banned American companies like Synopsys and Cadence from providing services to Chinese clients. This move deprived local manufacturers of the ability to design modern microchips, hitting Huawei, Xiaomi, and Lenovo especially hard.

China responded in kind, tightening rare earth metal exports in April 2025 — resources that account for 70% of global mining and 85% of processing. Elements such as neodymium and dysprosium are irreplaceable for manufacturing electronics, electric vehicles, wind turbines, and military technology. The restrictions led to price hikes and shortages in the West, especially in the US, where domestic processing covers only a small portion of demand. Both sides found themselves in a stalemate where the sanctions harmed everyone.

What’s changed: an unexpected turn

In June 2025, the presidents of the US, Donald Trump, and China, Xi Jinping, held a phone conversation. Details remain undisclosed, but within days, Chinese engineers reported that access to the Synopsys SolvNetPlus and Cadence Support Portal platforms was restored. This was an unexpected twist: just a week earlier, Synopsys had suspended operations in China, citing new BIS export rules, according to Digitimes.

At the same time, China began issuing licenses for rare earth metal exports. For example, Baotou Tianhe Magnetics received permission to supply magnets to Volkswagen, marking the first indication of a policy shift. According to CNN, the sides have reached a preliminary trade truce, as confirmed by sources close to the negotiations in Geneva.

Why is this important? Electronic design automation software (EDA, Electronic Design Automation) is the foundation of modern microelectronics. Tools from Synopsys and Cadence allow the creation of schematics for processors used in smartphones, servers, and AI accelerators. Without them, chip development on advanced process nodes (5nm and below) would be impossible. China, despite developing its own solutions like Empyrean Software, is still lagging behind: local alternatives are only suitable for older nodes (7nm and above). A ban on access to American software threatened to paralyze the industry, especially for companies focused on AI and 5G.

The removal of restrictions gives Chinese manufacturers a chance to regain their position. This is extremely important for Huawei, which has been battling sanctions for several years, and SMIC, the largest chip contract supplier in China. Restoring access to EDA enables the acceleration of the development of competitive products and attracting investments. Moreover, the relaxation opens doors for startups and small businesses in China, which previously couldn't afford expensive foreign software licenses or bypass routes through intermediaries. Now, small companies developing IoT devices or specialized chips have access to professional tools, which could stimulate innovation and competition in the domestic market.

Rare earth elements, in turn, are the "vitamins" for the high-tech industry. The U.S. imports 80% of these resources from China. A shortage caused by Beijing's restrictions led to increased production costs in the automotive and energy sectors. The easing of export controls reduces costs for Western companies like Tesla and Raytheon, and stabilizes global supply chains. It also lessens pressure on electronics manufacturers, who faced rising prices for components due to material shortages.

Market Reaction and Expert Opinions

The market reacted to the news with a rise. Shares of Synopsys and Cadence gained 2–4%, while Chinese SMIC and Huawei attracted new investments. Prices for rare earth metals stabilized after months of unpredictable volatility. This indicates a restoration of confidence, though analysts disagree on the reasons. Some see this as a move by Trump, driven by pressure from American businesses advocating for trade normalization. Others believe Washington made concessions due to its dependence on Chinese resources.

Experts warn that the possibility of a new wave of restrictions remains. The complete removal of sanctions is not yet on the table, and political instability could disrupt the fragile balance. As noted by Bloomberg, "the current truce is not peace, but merely a pause for negotiations".

The events of June 2025 are only the first stage. China aims to achieve further easing of sanctions, particularly in the area of lithographic equipment from ASML and Tokyo Electron, to develop its own chip production. The US, on the other hand, is interested in guarantees of stable rare earth supply and access to the Chinese market. Forbes reports that Beijing has already offered the EU easing on resource exports in exchange for technology, and a similar scenario with Washington is not ruled out.

This opens up new opportunities for the global electronics industry. China could accelerate the development of its semiconductor industry, while Western companies could reduce costs through stable supplies. The easing of restrictions also has an environmental context: the extraction and processing of rare earths in China is often criticized for environmental damage, and easing could push Beijing to modernize production under pressure from international partners. But there are also geopolitical risks: the increasing dependence of the West on Chinese resources could give China more leverage in future negotiations. Diplomatic uncertainty or increased state control over the electronics industry sector in China could deter foreign partners. Technological competition is structured in such a way that every decision is a well-thought-out strategic move, not improvisation.

The current thaw in US-China relations is a temporary relief for the industry but not the end of the confrontation. Access to design software and the easing of export barriers give China a chance to strengthen its position, while the world hopes for the stability of supply chains. In any case, companies involved in the electronics industry can take a breath and prepare for a new round of negotiations.