US-China Trade Truce: A Strategic Inflection Point for Semiconductors and Energy

The US-China trade truce announced in June 2025 marks a pivotal shift in the global supply chain, reshaping opportunities in two critical sectors: semiconductors and energy. For investors, the deal's removal of EDA software restrictions and ethane export curbs opens a window to capitalize on the realignment of technology and commodity markets. This article explores how the truce creates strategic investment opportunities in EDA software leaders and energy infrastructure plays, while addressing the long-term implications of China's $50 billion chip fund pivot toward lithography and EDA technologies.

The EDA Software Rebound: A Golden Opportunity for US Firms

The lifting of export controls on EDA software—critical for designing advanced semiconductors—has immediate and profound implications. Companies like Synopsys (SNPS), Cadence Design Systems (CDNS), and Siemens EDA (part of Siemens AG), which collectively control over 70% of China's EDA market, are poised for recovery.

Before the truce, US export restrictions had slashed their China revenue: Synopsys' China sales fell to 16% of total revenue ($989 million in 2024), while Cadence's dropped to 12% ($550 million). With licenses no longer required, these firms can resume sales, reactivating a vital growth engine.

Why Invest Now?
- Market Dominance: The truce reinforces the near-monopoly of US EDA firms in China, as local alternatives like Empyrean Technology lag in advanced node capabilities.
- AI and HPC Demand: Global spending on AI chips, which rely on EDA tools for design, is projected to grow at 18% CAGR through 2030.
- Pricing Power: US firms can leverage their indispensable role to increase margins, as seen in Synopsys' 22% forward P/E ratio, below its five-year average of 25.

Ethane Exports: A Lucrative Commodity Play

The resumption of ethane exports to China under the trade deal offers another compelling investment angle. US ethane producers, such as Enterprise Products Partners (EPD) and Energy Transfer (ET), can now sell to China's booming petrochemical sector without prior licensing.

China's ethane demand is surging as it shifts from oil-based to ethane-fed ethylene production—a cleaner process for plastics manufacturing. The US, with its shale gas abundance, is well-positioned to supply this demand.

Profitability Drivers:
- Cost Advantage: US ethane prices are ~$0.10/lb lower than Middle Eastern alternatives, making US producers highly competitive.
- Infrastructure Gains: Companies with export terminals and pipeline networks (e.g., Enterprise Products' Mont Belvieu hub) can scale exports quickly.

China's $50B Chip Fund: A Double-Edged Sword

While the truce eases near-term pressures, China's strategic pivot of its $50 billion Big Fund Phase III toward EDA and lithography tools signals a long-term challenge—and opportunity.

• EDA Investment: Funds are backing domestic firms like Empyrean, but these companies remain years behind in advanced design capabilities. This creates a complementary market: Chinese chipmakers will still rely on US EDA tools for cutting-edge designs.
• Lithography Headwinds: Despite support for companies like SMEE (Shanghai Micro Electronics), Chinese lithography tools for 7nm chips lag ASML by over a decade. The truce ensures US firms retain their edge in semiconductor manufacturing.

Investment Thesis:
- Buy EDA Stocks: Synopsys and Cadence are structural winners in a fragmented market.
- Hold Ethane Infrastructure: EPD and ET benefit from China's energy transition and the truce's stability.

Risks and Considerations

• Geopolitical Volatility: While the truce is durable (mutual compliance is verified), future disputes could reignite tensions. Monitor China's rare earth export approvals and US nuclear/equipment restrictions.
• Local Competition: Chinese EDA firms may erode margins over time, but US firms' lead in advanced nodes (e.g., 3nm designs) remains unassailable.

Conclusion: A Dual-Track Investment Strategy

The US-China trade truce is more than a temporary ceasefire—it's a catalyst for sector realignment. Investors should prioritize:
1. EDA Leaders: Synopsys and Cadence offer exposure to AI-driven demand and China's pent-up semiconductor growth.
2. Energy Infrastructure: Ethane exporters like EPD and ET profit from China's petrochemical ambitions.

The interdependence of tech and commodities—EDA enabling semiconductors, ethane fueling plastics—ensures these sectors will remain intertwined. For long-term investors, this truce is a rare chance to bet on global supply chain stability while riding the wave of China's tech resurgence.

The path forward is clear: align with the truce's winners.