"How China acquires ‘the crown jewels’ of U.S. technology"

And then scooped up by the Germans.

In May 2018, Politico published How China acquires ‘the crown jewels’ of U.S. technology, a whopping 6,000-word “investigation,” vividly telling the story of - and leading with - a company called Avatar Integrated Systems.

How China acquires ‘the crown jewels’ of U.S. technology

The U.S. government was well aware of China’s aggressive strategy of leveraging private investors to buy up the latest American technology when, early last year, a company called Avatar Integrated Systems showed up at a bankruptcy court in Delaware hoping to buy the California chip-designer ATop Tech.

ATop’s product was potentially groundbreaking — an automated designer capable of making microchips that could power anything from smartphones to high-tech weapons systems. It’s the type of product that a U.S. government report had recently cited as “critical to defense systems and U.S. military strength.” And the source of the money behind the buyer, Avatar, was an eye-opener: Its board chairman and sole officer was a Chinese steel magnate whose Hong Kong-based company was a major shareholder.

Despite those factors, the transaction went through without an assessment by the U.S. government committee that is charged with reviewing acquisitions of sensitive technology by foreign interests.

……

A mysterious takeover

The case that occurred last summer in an obscure courtroom in Delaware seemed innocuous enough: one relatively small tech firm buying out a bankrupt competitor, a transaction that elicited about as much drama as mailing a letter.

The bankrupt semiconductor maker ATop Tech had only 86 employees when it was declared insolvent. But it had a more than a $1 billion market share of the electronic-design automation and integrated circuits markets, the company told the bankruptcy court, giving it potential value to any player seeking to enter the highly specialized semiconductor industry.

Avatar Integrated Systems, the company seeking to purchase ATop, was apparently such a player. But it was not well known to others in the semiconductor industry, and its precise ownership was a bit of a mystery. The sole director listed on its incorporation papers was a Hong Kong-based businessman named Jingyuan Han, and it issued shares to King Mark International Limited, a Hong Kong company in which Han was an investor. Avatar was set up in March 2017, according to the company.

The transaction went ahead despite concerns raised to the court by other players in the semiconductor industry, as well as those of a former senior Pentagon official who specifically suggested the Chinese government may be backing Avatar.

The former Pentagon official, Joseph Benkert, was enlisted by another American semiconductor company, Synopsys, to help recoup money it was owed by ATop. He warned the court that the deal might have national security risks.

“CFIUS has identified businesses engaged in design and production of semiconductors as presenting possible national security vulnerabilities because they may be useful in defending, or seeking to impair, U.S. national security, as semiconductor design or production may have both commercial or military applications,” Benkert, the former assistant secretary of defense for global affairs under the second Bush administration, wrote to the court.

Benkert argued that the question of Avatar’s ownership needed more review given that the company appeared to be “under the control of Han, a Chinese national.”

“In my opinion,” Benkert wrote, “the proposed transaction is likely to receive thorough CFIUS scrutiny and there is a material risk that it will not receive CFIUS approval.”

But despite those concerns, the deal to buy ATop Tech was not given a formal review by CFIUS, according to a senior administration official with direct knowledge of the process. A Treasury Department official, speaking on behalf of CFIUS, declined to comment on the merger.

An Avatar official, reached at the company office in Santa Clara, California, did not respond to questions or a request for an interview with Han. The company did not respond to multiple requests to discuss its relationship — if any — with the Chinese government or the details of its business.

Han, who has been described in media reports as one of China’s wealthiest men, has spent his career almost entirely in the iron and steel industries. Avatar’s scant history seemed to suggest that it was created for the sole purpose of acquiring an established American semiconductor firm like ATop Tech, according to several former national security officials who still work on CFIUS cases.

Attempts to reach Han through China Oriental Group, the iron and steel company that he runs, were also unsuccessful.

Officials familiar with the CFIUS process say that bankruptcy deals such as the Atop-Avatar case sometimes fall off their radar because of difficulty in discerning whether Chinese investors are working with the government. In other bankruptcy cases, Chinese investment in a potential buyer may not be visible in official filings, especially when a web of holding companies is involved…

Less than a month after the blockbuster journalism, EE Times, a leading industry publication, reported

EDA Startup Rises From Ashes of ATopTech

SAN FRANCISCO — A startup, formed from the auctioned assets of ATopTech, showed up at the Design Automation Conference (DAC) here this week open for business and with two well-respected EDA veterans newly added to its leadership team.

Avatar Integrated Systems features substantially all of the technology of ATopTech, including the popular Aprisa and Apogee place-and-route tools used by a number of chip companies. The company also features most of the former employees of ATopTech — including ATopTech co-founder and chief architect Ping San Tzeng — as well as former Cadence Design Systems executives Chi-Ping Hsu and Charlie Huang.

ATopTech filed for bankruptcy last year and put its assets up for sale after losing a long-running legal battle with No. 1 EDA vendor Synopsys. ATopTech’s assets were quietly scooped up in bankruptcy court by Avatar’s Chairman, Jingyuan Han, a Hong Kong businessman and steel magnate who has been listed by Forbes magazine as the 136th richest person in China.

The bankruptcy and sale stemmed from a 2013 copyright infringement suit by Synopsys. In 2016, a jury in federal court found that ATopTech infringed patents associated with the command set instructions of the Synopsys PrimeTime static timing analysis suite, awarding Synopsys $30 million in damages and forcing ATopTech to declare bankruptcy.

Prior to the bankruptcy, ATopTech’s place-and-route technology had grown quite popular with multiple customers — including Samsung, Xilinx, and others — and was eating into Synopsys’s market share. At its peak, ATopTech had about $30 million in annual sales, according to Laurie Balch, research director at Pedestal Research.

“That all fell apart when the lawsuit was finalized,” said Balch. “Up to that point, business was good and the technology was quite popular with users and considered to be high-quality and useful.”

Hsu and Huang joined Avatar relatively recently. Both have had long careers in EDA and were most recently with Cadence — Hsu as chief strategy officer and Huang as executive vice president and general manager.

While some of ATopTech’s customers went away following the bankruptcy, many continued to use the tools and are now customers of Avatar, said Huang. Despite the legal maneuvering, the company’s technology has continued to keep the pace with technology node migration, according to Huang, who added that Avatar currently has three 7-nm projects with customers.

“If we had been stagnant [post-bankruptcy], there’s no way we could have done this,” said Huang.

Two years later, Siemens, the German company, said

Siemens acquires Avatar, expands EDA footprint with innovative Place and Route technology

Siemens has signed an agreement to acquire Santa Clara, CA-based Avatar Integrated Systems Inc., a leading developer of place and route software for integrated circuit (IC) design. Avatar helps engineers optimize power, performance, and area (PPA) for complex chips with fewer resources. Siemens plans to add Avatar’s technology to the Xcelerator portfolio as part of Mentor’s IC suite of software, capitalizing on the growing segment of place and route. Avatar will be integrated with existing market-leading products from Mentor, a Siemens Business…

Avatar’s products are built on technologies acquired from ATopTech Inc. in 2017….

Siemens’ acquisition of Avatar is expected to close in the second half of 2020. Terms of the transaction are not disclosed.

EE Times, the leading industry publication, looked back

Buying Avatar, Siemens Revives Legendary Place & Route Tool

Siemens has struck a deal to buy Avatar Integrated Systems Inc. (Santa Clara, Calif.), a developer of place & route software. Avatar’s tool was once highly rated but discredited by Synopsys back in 2017. The acquisition by Siemens revives it as a strong contender in the place-and-route software segment of the EDA market.

Calling Avatar’s tool a “gem,” Joseph Sawicki, executive vice president, Mentor IC EDA, Siemens Digital Industries Software, said that SoC designers working on finer node designs at 7nm and below will greatly benefit from Mentor/Siemens’ acquisition of Avatar.

To appreciate this deal and its irony, however, requires a little background on the checkered history of Avatar.

Avatar’s products are built on technologies originally developed by a legendary startup called AtopTech Inc. Founded in 2003, ATopTech was known for developing a “very strong technology” in place-and-route software, said Laurie Balch, research director of Pedestal Research. ATopTech, however, got sued by Synopsys in 2013 for copyright infringement. In December 2016, a California Federal District Court issued a permanent injunction against ATopTech in favor of Synopsys.

The multi-year lawsuit consumed the startup, causing disruption of its business and growth strategy, observed Balch. The company eventually filed for bankruptcy.

ATopTech didn’t quietly fade away, though. After the bankruptcy, it was acquired by a Hong Kong-based company and its team got spun out. It eventually became Avatar in 2017. Through thick and thin, “ATopTech’s key architect and many engineers stayed together,” noted Sawicki…

To appreciate this deal and its irony, however, requires a little background on the checkered history of Avatar.

Avatar’s products are built on technologies originally developed by a legendary startup called AtopTech Inc. Founded in 2003, ATopTech was known for developing a “very strong technology” in place-and-route software, said Laurie Balch, research director of Pedestal Research. ATopTech, however, got sued by Synopsys in 2013 for copyright infringement. In December 2016, a California Federal District Court issued a permanent injunction against ATopTech in favor of Synopsys….

The proposal must go through regulatory reviews, but Sawicki doesn’t expect them to be prolonged.

The acquisition did close later in 2020.

(Source: VARINDIA)

Why bring it up in 2024? A very recent paper from a well-known research institution that still cites the acquisition by Avatar Integrated Systems, now in German hands for four years, as an example of deviousness: