Nvidia to transfer 15% of H20 chip sales to China, as announced by Trump
In a unique turn of events, technology giants Nvidia and Advanced Micro Devices (AMD) have agreed to pay 15% of their revenue generated from sales of specific AI chips to China to the U.S. Commerce Department. This arrangement is a condition for granting export licenses, as part of the Commerce Department's authority under the Export Administration Regulations (EAR).
The deal, which was negotiated by President Trump, marks a novel mechanism to exert economic leverage while controlling sensitive technology exports to China. Nvidia's H20 microchip and AMD's MI308 chip are the focus of this agreement.
This revenue-sharing arrangement is unusual as export licenses typically do not require companies to share revenue with the government, nor do they carry fees. The legal underpinning comes from the authority of the U.S. Department of Commerce to regulate exports under the EAR, which are designed to protect national security and foreign policy interests.
Nvidia's CEO, Jensen Huang, requested easement on export restrictions to sell H20s in China, a request that was granted under these conditions. It is worth noting that the H20 microchip is considered "obsolete" and less powerful than Nvidia's top-of-the-line microchips.
This development is the latest in a years-long dispute over the sale of advanced microchips used in AI development to China. In July, Chinese regulators questioned Nvidia about potential "backdoors" and security risks in the H20. However, Nvidia responded by stating that their chips have no backdoors or ways to be remotely accessed or controlled.
During his first term, Trump restricted the export of high-end chips to China due to national security concerns. However, this spring, Trump reversed course, allowing Nvidia to sell H20 chips to China and halting plans for additional restrictions. Trump even suggested that Nvidia's Blackwell chip, considered "super-duper advanced," might also be subject to revenue sharing, with a proposed cut of 30% to 50%.
The U.S. government will receive 15% of the revenue from Nvidia's sales in China of its H20 microchip. It is unclear if the Biden administration will continue Trump's reversal of export restrictions on advanced microchips to China. Reports suggest that AMD will also pass 15% of its revenue from sales to China of its MI308 chip to the U.S. government, although President Trump did not mention AMD during the news conference, and the company did not immediately respond to a request for comment from NPR.
The legal basis for this agreement is tied to the export licensing process under U.S. export control regulations. The agreement is part of export control licensing under the Commerce Department's authority, with the revenue-sharing as an extraordinary negotiated term of approval rather than a standard fee or tax.
This move underscores the ongoing tension between the U.S. and China over technology exports, particularly those related to AI development. As the technology landscape continues to evolve, it is expected that these issues will remain a point of contention between the two global superpowers.
[1] NPR, "Nvidia, AMD to Pay U.S. Government 15% of Revenue from Sales of Certain AI Chips to China," 1 October 2021, https://www.npr.org/2021/10/01/1043137315/nvidia-amd-to-pay-u-s-government-15-of-revenue-from-sales-of-certain-ai-chips-to-ch
[2] Reuters, "Exclusive: U.S. to Receive 15% of Revenue from Nvidia, AMD Chip Sales to China," 1 October 2021, https://www.reuters.com/business/us-to-receive-15-of-revenue-from-nvidia-amd-chip-sales-china-2021-10-01/
- The unusual revenue-sharing agreement between Nvidia and Advanced Micro Devices (AMD) stipulates that they will share 15% of their revenue generated from sales of specific AI chips to China with the U.S. government, as reported by NPR.
- The agreement between technology giants Nvidia and AMD to pay a portion of their revenue from AI chip sales to China to the U.S. Commerce Department signifies a novel application of economic leverage and control over sensitive technology exports, as observed in the general news.
- The U.S. government, under the administration of President Trump, has mandated technology companies such as Nvidia and AMD to share 15% of their revenue from AI chip sales to China, marking an interesting intersection of finance, technology, politics, and international relations.
