NVIDIA and AMD to shell out 15% for Chinese sales, as Trump's AI chip tariff looms - "Striving to avoid a repeat of 5G blunder, America must maintain lead in telecom technology"
The US government has entered into a significant trade agreement with tech giants NVIDIA and AMD. The deal, announced by President Trump in a press conference on Monday, involves both companies agreeing to pay 15% of their revenue from the sales of specific AI accelerators (NVIDIA H20 and AMD MI308) to China to the US government in exchange for export licenses[1].
This arrangement formalizes a revenue-sharing mechanism tied to compliance with US export controls, effectively making NVIDIA and AMD partial "partners" with the US government on sales to China. The deal likely requires the companies to operate under strict regulatory oversight, ensuring that AI chip exports to China adhere to US national security laws and export restrictions. Failure to comply could result in penalties or revocation of licenses, raising the stakes for corporate governance and risk management at both firms[1].
The deal is aimed at addressing national security concerns surrounding the export of advanced AI technologies to China. Restricting these technologies from reaching China could prevent their use for military or surveillance purposes that challenge US strategic interests. The 15% revenue share acts as a financial control and monitoring mechanism, potentially deterring excessive AI chip exports[1].
This deal represents a geopolitical tool for the US to regulate the flow of cutting-edge semiconductor technology critical to AI development in China, balancing economic interests with security concerns. However, the deal has raised concerns among some, including US Rep. Raja Krishnamoorthi, the ranking member of the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party.
Krishnamoorthi's statement expresses concern that the deal may signal to China and America's allies that American national security principles are negotiable for the right fee. He also questions the contradiction in the policy, as the administration cannot simultaneously treat semiconductor exports as both a national security threat and a revenue opportunity. Furthermore, Krishnamoorthi has raised questions about the legality of the deal, how the funds will be used, whether the interagency referral process was followed, and whether Congress was consulted[1].
The export licenses for these chips were granted last week and began issuance on Friday. NVIDIA, in particular, has expressed a need for 300,000 more H20 AI chips from TSMC to meet China's demand. The NVIDIA B200 chip, based on the latest Blackwell architecture, was also mentioned in Trump's press conference[1].
It is unclear how long this newfound 15% kickback on select NVIDIA and AMD AI chips will remain in place. The deal between the US government and NVIDIA and AMD is not entirely legal, as it may violate the US Constitution's prohibition on imposing taxes and duties on goods exported from any state[1].
China has not officially responded to the deal, possibly because the deal impacts US companies' revenues, not Chinese firms directly, and may expedite export license approvals under tighter US scrutiny[1]. However, the potential implications of this deal for the tech industry and US-China relations are significant and will be closely watched.
[1] Source: The Verge, August 10, 2021.
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