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Nvidia and AMD reportedly agree to pay 15% of China chip sale revenues to US Nvidia and AMD agree to pay 15% of China chip sale revenues to US
(about 8 hours later)
Chipmakers agree to quid pro quo deal as condition for obtaining export licenses for Chinese market, FT reports Chipmakers agree to deal amid Trump trade war as condition for obtaining export licences for Chinese market
Nvidia and AMD have agreed to give the US government 15% of their revenues from chip sales in China, under an unprecedented arrangement to obtain export licenses for the semiconductors, the Financial Times reported on Sunday. The chipmakers Nvidia and AMD have agreed to give the US government 15% of their revenue from advanced chips sold to China in return for export licences to the key market, in an unprecedented move amid Donald Trump’s trade war with China.
The revenue share applies to Nvidia’s H20 chips and AMD’s MI308 chips, the report said, citing a US official, noting that the Trump administration had yet to determine how to use the money. The move, an apparent reversal of US national security restrictions on the chip sales, signalled an easing in the US-China trade war.
The chipmakers agreed to the quid pro quo arrangement as a condition for obtaining export licenses for the Chinese market that were granted last week, according to the unnamed official. Trump has weaponised trade restrictions and tariffs to bring business to US shores. However, the quid pro quo arrangement, first reported by the Financial Times, is without precedent, according to analysts, and potentially unconstitutional.
According to export control experts, no US company has ever agreed to pay a portion of their revenues to obtain export licenses, the newspaper reported. But Donald Trump has encouraged firms, and countries, to make investments in the US to, in his words, “buy down” the tariff rates he imposes. The arrangement will lead to Nvidia giving 15% of its revenue from Chinese sales of its H20 chips, and AMD giving 15% of revenue from Chinese sales of its MI308 chips, according to reports citing US officials.
Nvidia follows rules the US government sets for its participation in worldwide markets, an Nvidia spokesperson told Reuters in an emailed statement. “While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide.” The US government has for several years sought to curb supplies of technology to China that could be used in ways that threaten US national security, especially chips that can power artificial intelligence development and weapons.
AMD did not immediately respond to a request for comment. Nvidia’s chips are a major driver of the AI boom, highly sought-after by China and the US. Beijing has repeatedly criticised the chip restrictions and accused the US of using tech and trade to “maliciously contain and suppress China”.
The US commerce department started issuing licenses to Nvidia to export its H20 chips to China last week, removing a significant hurdle to the artificial intelligence bellwether’s access to a key market. The H20 and MI308 chips were banned from sale to China in April despite the lower-powered H20 being designed specifically to abide by restrictions introduced by the Biden administration.
The US in July reversed an April ban on the sale of the H20 chip to China. The company had tailored the microprocessor specially to the Chinese market to comply with the Biden-era AI chip export controls. However, last month Trump rolled back the bans, and last week the commerce department reportedly started issuing export licences for the H20 – a move that analysts linked to China’s easing of rare earth export restrictions, and to the revenue-sharing agreement revealed on Sunday.
Nvidia’s chips are a major driver of the AI boom, and in July the company became the first ever to have its market value surpass $4tn. In an apparent lobbying effort to address the restrictions, Nvidia’s chief executive, Jensen Huang, had made visits to Trump and officials in Beijing in recent months, meeting the US president as recently as Wednesday.
Complications facing the company are not necessarily over, however, with growing scrutiny of Nvidia by Chinese authorities. Late last month China’s cyberspace watchdog summoned Nvidia to a meeting to discuss whether the chips had any “backdoor” security risks which would allow remote access or control. Nvidia said they did not. Trump has praised Huang and Nvidia, which in July became the first company ever to have its market value surpass $4tn (£2.97tn), even as it navigated the US-China trade war and other industry turbulence, including Trump’s threatened 100% tariff on foreign semiconductors.
But Chinese state media has continued to raise concerns. In a commentary earlier this month, the People’s Daily said Nvidia must produce “convincing security proofs” to eliminate Chinese users’ worries over security risks in its chips and regain market trust. And On Sunday a state media account on Chinese social media platform WeChat said the H20 chips posed a security risk for China. The account, Yuyuan Tantian, claimed Nvidia chips could achieve functions including “remote shutdown” through a hardware “backdoor”. Nvidia has not responded. In a statement after the Financial Times report, Nvidia said: “We follow rules the US government sets for our participation in worldwide markets. While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide.”
AMD has not commented on the deal.
Nvidia’s statement echoed comments by the US commerce secretary, Howard Lutnick, last month, that it was in the US’s interests to have China using American technology, and that the H20 was Nvidia’s “fourth-best chip”. The deal has alarmed analysts, however.
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“In addition to the policy problems with just charging Nvidia and AMD a 15% share of revenues to sell advanced chips in China, the US constitution flatly forbids export taxes,” said Peter Harrell, the Biden administration’s White House senior director for international economics, on social media.
Ilaria Carrozza, a senior researcher at the Peace Research Institute Oslo, said the export controls were still in place, but the deal threatened the credibility of the controls the trust of other nations – particularly in the EU and east Asia – who the US had lobbied to also impose restrictions.
“If we assume these national security restrictions can be bypassed by paying some sort of fee to the government … then how can we keep these export controls credible?” she told the Guardian.
A truce in the US-China tariff-war is due to end on Tuesday, with no extension yet announced despite officials from Beijing saying both sides were working towards one in recent talks.
In a note on Monday, Goldman Sachs said US companies had absorbed most of the costs of other tariffs imposed by Trump on various nations’ exports but consumers would soon be bearing the brunt.
In June, US businesses took on about 64% of the costs of the tariffs, and consumers 22%, but that was expected to flip, with the consumers’ share expected to increase to 67%.
With ReutersWith Reuters