U.S. earns 15% of chip sales revenues from China, according to the media report - USA Secures 15% of chip sales market in China
In a surprising turn of events, Nvidia and AMD have agreed to pay a 15% fee to the U.S. government for their AI chip sales to China. This deal, reported by The Financial Times and major U.S. media outlets, is said to have emerged from negotiations led by former President Donald Trump.
According to The New York Times, Jensen Huang, CEO of Nvidia, met with Trump at the White House on Wednesday before last Friday. The agreement involves Nvidia and AMD remitting 15% of their revenue from AI chip sales to China to the U.S. government.
The H20 chip Nvidia sells to China is described as "essentially old" or "obsolete," yet significant enough for China to have security concerns. The U.S. government's decision to restrict China's access to these chips has been in place since Joe Biden's predecessor, and the spring rules temporarily prevented Nvidia from shipping its AI chips to China.
However, this deal raises constitutional legal questions. Experts have questioned whether it constitutes an unconstitutional export tax, as the U.S. Constitution's export clause prohibits duties on exports. The deal's legal details are still being worked out by the U.S. Department of Commerce.
China's official response has been minimal, possibly because the fee is a revenue cut imposed on U.S. companies rather than a direct tariff or penalty on Chinese entities. Some analysts speculate China may not publicly respond since the arrangement primarily impacts U.S. corporate revenues and potentially expedites export licensing.
Nvidia estimated that it would sell H20 chips worth more than $20 billion (€17.14 billion) to China this year before the U.S. blockade in the spring. The company argues that the U.S. government's restrictions will lead China to develop its own technologies, creating new competitors for American companies in the global market.
Current estimates for AMD's sales to China this year range from $3 to $5 billion. The deal, if approved, could significantly impact both companies' revenues. The implications of this deal extend beyond the tech industry, reflecting complex geopolitics around advanced technology exports to China.
[1] The Financial Times: "Nvidia and AMD agree to pay 15% of AI chip sales revenue to U.S. government" [2] The New York Times: "Nvidia and AMD to Pay 15% Fee to U.S. Government for China Sales"
- The Commission, in light of the recent deal involving Nvidia and AMD, might consider drafting a directive that includes the protection of environmental standards in tech agreements, especially those involving the sale of AI chips to foreign governments.
- As the tech industry grapples with the implications of the Nvidia and AMD deal, politics plays a crucial role in shaping these deals and steering the flow of technology and finance between nations.
- Amidst the ongoing negotiations between Nvidia and AMD to remit 15% of their AI chip sales revenue to the U.S. government, questions have arisen about the potential impact of this arrangement on the finance sector, considering the large amounts of revenue at stake.
