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China May Block One of the Largest American Tech Deals: Creating the One-Stop Shop for Chip Design

Synopsys is an American company in Sunnyvale, California; it provides its EDA (Electronic Design Automation), which assists customers in developing chips for products in numerous industries. Just some industries they service are transportation, medical, and manufacturing. Their EDA software suite even has AI-boosted assistance that helps make the design process easier for their partners to navigate. They have recently agreed to buy another American company named Ansys for a cash and stock acquisition of $35 billion, making this deal one of the largest in tech history. Ansys is headquartered in Canonsburg, Pennsylvania, with a multinational presence in India, France, the UK, Germany, Belgium, Sweden, and Japan. Ansys provides simulation technology to their clients so that they can test real-world scenarios on their products to enhance their designs. Ansys’s tech also has an AI-boosted component, adding directional synergy between the two companies. 

Synopsys and Ansys have been partnering for years to develop Ansys’s services. CEO of Synopsys, Sassine Ghazi, provided his rationale for why the new acquisition was necessary in his talk with CNBC. He has rationalized that the trend in AI will require further demand for chip/silicon design development and that partners will need more in-depth analyses of their designs. Synopsys has established partnerships with companies like Microsoft and Apple to assist in chip development and analysis for their products. With the acquisition of Ansys, Synopsys would further its capabilities by providing more in-depth analysis and functional design modifications by utilizing Ansys’s scenario simulation tech. 

Even though both American companies have agreed to the deal, Chinese regulators have a say in the deal's finalization. Synopsys generated 15.20% of its revenue from China in 2023 (data provided by the Bloomberg Terminal) – Ansys does not have a sizeable revenue from China. Mergers of this magnitude can impact global competition, which makes these huge deals liable to regulatory scrutiny by the markets affected. In this instance, Synopsys’s sizeable dealings in China give Chinese regulators approval authority over the acquisition. China has previously broken up other American deals, such as the Qualcomm & NXP Semiconductors deal in 2018. This was a $44 billion buy approved by eight other international regulators. Chinese regulators disapproved, and the deal was not finalized. There is speculation that China made this move due to growing trade tensions that have not dissipated today.

The question is whether China will also write off the Synopsys & Ansys deal to prevent such a competitive company from forming in the United States. The deal has a closing deadline within the first half of 2025, which may indicate that the companies foresaw potential pushback. There is also speculation that the deal may be pushed to the beginning of 2025 to close under a Trump presidency that would be more lenient on M&A deals.


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