Cadence to Pay Over $140 Million & Plead Guilty in Export Control Case Tied to Chinese Military University

Key Takeaways

• Cadence to Plead Guilty: The company admitted to criminal export control violations for unlawfully transferring U.S. semiconductor design technology to China’s NUDT via front companies.
• Over $140 Million in Penalties: Cadence will pay nearly $118M in criminal fines and over $95M in civil penalties, with coordinated credits.
• Intentional Concealment: Employees referred to NUDT only in Chinese and removed references to the PRC military to evade detection.
• Broader Compliance Crackdown: The case follows recent DOJ actions against Grosfillex ($4.9M) and MGI subsidiaries ($6.8M), showing heightened federal scrutiny on trade and export violations.
• Partial Cooperation Credit: Cadence’s lack of full cooperation with investigators resulted in only a 20% penalty reduction.

Deep Dive

Cadence Design Systems, a California-based multinational semiconductor software firm, has agreed to plead guilty and pay more than $140 million in combined criminal and civil penalties after unlawfully exporting sensitive U.S. design tools to a Chinese military university, U.S. officials announced Monday.

The Department of Justice (DOJ) and the Bureau of Industry and Security (BIS) said Cadence violated export controls by transferring electronic design automation (EDA) hardware, software, and semiconductor IP to the National University of Defense Technology (NUDT), a university controlled by China’s Central Military Commission and blacklisted by the U.S. since 2015 for its role in nuclear explosive simulations and military supercomputing.

Under a plea agreement filed in the Northern District of California, Cadence will pay nearly $118 million in criminal fines and over $95 million in civil penalties. Coordinated credits between DOJ and BIS bring the total net penalty to more than $140 million.

“Cadence has agreed to accept responsibility for unlawfully exporting sensitive semiconductor design tools to a restricted Chinese military university,” said Assistant Attorney General for National Security John A. Eisenberg. “The National Security Division will vigorously enforce U.S. export control laws to protect the technological advantage we enjoy.”

U.S. Attorney Craig H. Missakian added that Cadence “admitted to unlawfully exporting its semiconductor design technology to a restricted PRC military university using a front company,” calling the remedial measures taken since then “a positive step toward rectifying the company’s violations.”

Willful Concealment and a Web of Front Companies

Between 2015 and 2021, Cadence and its wholly owned Chinese subsidiary, Cadence Design Systems Management (Shanghai) Co. Ltd., conspired to circumvent U.S. export laws. They knowingly transferred restricted technology to NUDT under the guise of transactions with intermediary entities including the Central South CAD Center (CSCC), an alias for NUDT, and later Phytium Technology Co. Ltd.

Employees concealed the relationship by scrubbing references to the People’s Liberation Army from internal communications and referring to NUDT only in Chinese characters to avoid raising red flags, according to court documents. Despite knowing the links between CSCC, Phytium, and NUDT, Cadence permitted software and hardware transfers to continue, making at least 59 unlawful exports before cutting ties in 2021.

Cadence’s export compliance officer had even warned colleagues on the day NUDT was added to the Entity List in 2015 that licenses would be required for any sales, but the exports continued. The company later attempted to assign the contracts to Phytium, which was added to the Entity List in 2021.

Cadence received only partial cooperation credit in the DOJ resolution due to its failure to proactively disclose key communications or make certain China-based employees available for interviews. Nonetheless, the company has since overhauled its compliance program and ceased business with the restricted entities.

Part of a Broader Crackdown

The Cadence case underscores a growing federal focus on trade, export, and supply chain compliance, one that’s playing out across both national security and economic fronts.

Just last week, the DOJ announced a $4.9 million False Claims Act settlement with Grosfillex Inc. for evading antidumping duties on Chinese aluminum parts by disguising them as fake furniture kits. That case, brought by a whistleblower and supported by Homeland Security Investigations, followed a $6.8 million resolution involving Global Plastics LLC and Marco Polo International LLC. Those firms, subsidiaries of MGI International, received more favorable treatment due to their voluntary self-disclosure and remedial efforts.

While the Cadence matter centers on national security and export controls rather than customs duties, the message from federal agencies is that organizations that mislead the government, whether by obscuring military ties or evading tariffs, can expect harsh penalties. But those who self-report and take compliance seriously may find a more forgiving path.

“Protecting the U.S. semiconductor industry is critical to our national defense,” said FBI Counterintelligence Assistant Director Roman Rozhavsky. “The FBI will stop at nothing to defend the homeland from China’s Communist Party.”

The Cadence plea agreement is subject to approval by the U.S. District Court for the Northern District of California.

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