Nvidia & AMD to Give 15% of China Chip Sales Revenue to the U.S.
Synopsis
Two of the largest U.S. chip manufacturers, Nvidia and AMD, will provide the American government with 15% of the revenue they receive from the sale of some advanced computer chips to China, a U.S.…
Two of the largest U.S. chip manufacturers, Nvidia and AMD, will provide the American government with 15% of the revenue they receive from the sale of some advanced computer chips to China, a U.S. official confirmed. The chips, like Nvidia's H20 model, are utilized in artificial intelligence technology.
The deal follows months of China trade restrictions and negotiations between the U.S. and China. The sales will resume shortly, but under this new payment term.
Why the Agreement Was Made
In the early part of this year, President Donald Trump's government blocked Nvidia from shipping H20 chips to China. The government, last month, announced that Nvidia could resume selling but only upon special permits. The 15% revenue fee is included in the agreement to obtain these permits.
The same regulation will extend to AMD's high-end chips, such as the MI308 model. The American government has not yet indicated how it plans to use the money it raises.
China accounts for a significant portion of the revenue of both firms. Last financial year, Nvidia generated $17 billion from China, or 13% of its sales. AMD generated $6.2 billion from China, roughly 24% of its overall revenue.
U.S. Views Sales of Technology as Strategic
U.S. Commerce Secretary Howard Lutnick explained that selling such chips to China was merely part of broader trade negotiations, including rare earth material agreements. The H20 chip was not the highest-technology chip from Nvidia, he said, but it enabled Chinese firms to continue utilizing American-produced technology nonetheless.
The U.S. feels this is preferable to allowing China to substitute American technology with its own or others'. The government asserts that selling these chips is not a threat to national security.
Criticism of the Deal
Not everyone favors the step. Some trade officials argue that the U.S. either should block the sales entirely if it poses a security threat, or allow them without additional payments if it does not.
Alasdair Phillips-Robins, who previously worked as an adviser at the Commerce Department, said the agreement may mean the U.S. is "trading away national security protections for extra money."
For now, no one knows when the 15% payment rule will begin or how it will be enforced. But for Nvidia and AMD, the move means that they can reenter a major market, even if it will cost them something.
FAQs
Q1: What did AMD and Nvidia have to do with the U.S. government?
They had to pay the U.S. 15% of what they earn from selling their chips to China.
Q2: Why is the U.S. receiving part of that money?
The U.S. wants to keep its supply of chips safe, ensure that trade is fair, and spend the money to produce more chips in America.
Q3: What will happen to their Chinese sales as a result of this deal?
They could make less money by selling in China, but it will enable them to have good business in the U.S. and not be subject to more trade regulations.
Q4: Will this alter chip prices globally?
Prices may fluctuate slightly, but most believe it won't make much of a difference for consumers at this point.
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