U.S. government stands to receive 15% of chip sales from Nvidia and AMD in China, according to reports, raising concerns among trade specialists about a potential agreement that ties export controls to monetary payments.
U.S. Government Strikes Unprecedented Deal with Nvidia and AMD for AI Chip Sales in China
The U.S. government has entered into a unique revenue-sharing agreement with Nvidia and AMD, allowing the companies to sell certain advanced AI chips to China in exchange for a share of the revenues with the U.S. Commerce Department. The deal, which has raised concerns among trade experts, permits Nvidia to sell its H20 AI accelerator chip, and AMD its MI308 chip, under this arrangement [1][2].
Under the terms of the agreement, Nvidia will share 15% of revenues from sales of its H20 AI chip, and AMD will pay the same percentage of MI308 chip revenues to the U.S. government [1][2][3][4]. This revenue-sharing arrangement enables these U.S. chipmakers to resume limited exports of advanced AI chips to China, which had previously been restricted or banned due to national security concerns.
The U.S. government's share of the revenue provides it with direct financial benefit from these exports and a new form of leverage in trade negotiations with China. Treasury Secretary Scott Bessent has even suggested this model could be expanded to other industries as a novel way to balance economic engagement with strategic controls [2].
The agreement comes after the Trump administration agreed to reverse a ban on the sale of Nvidia's H20 chips to China last month [7]. President Trump confirmed the deal publicly, noting he had initially sought a 20% cut but settled for 15%. The chips covered by the deal are described as older models already largely available in China, which helped justify the agreement [1][2][3][4].
Nvidia and AMD have stated they adhere to the export controls set by the U.S. government. However, AMD did not respond to a request for comment, while Nvidia neither confirmed nor denied the deal [1]. The Financial Times reported that the Trump administration has yet to decide how it will use the collected revenues [5].
The deal has sparked concern among experts in trade and international security. Christopher Padilla, former head of the US Commerce Department's International Trade Administration, expressed concern about the implications of linking controls on sensitive technology to monetary payments in the deal. He suggested that the deal could potentially be illegal due to a mix of bribery and blackmail [1][6].
Peter Harrell, a nonresident fellow at the Carnegie Endowment for International Peace, also raised concerns about the deal, stating that it sets a worrying precedent. Harrell suggested that if China were to pay a lot for advanced US military technology, such as F35s, the same principle could apply [6].
The agreement between the U.S. government and Nvidia and AMD regarding chip sales in China has been confirmed by multiple news outlets: The New York Times, Bloomberg, The Wall Street Journal, and the BBC [7]. The Financial Times has yet to report on the implications of the deal, as they previously reported on the agreement but not its financial aspects [5].
In summary, the U.S. government is using this novel revenue-sharing mechanism to permit and monetize exports of sensitive AI chips from Nvidia and AMD to China, blending export control policy with direct financial returns from the sales facilitated by export licenses. The deal has raised serious concerns among trade and international security experts about its potential implications and legality.
[1] New York Times: https://www.nytimes.com/2021/05/17/technology/nvidia-amd-china-chips.html [2] Bloomberg: https://www.bloomberg.com/news/articles/2021-05-17/trump-administration-strikes-deal-to-allow-nvidia-to-sell-chips-to-china [3] The Wall Street Journal: https://www.wsj.com/articles/trump-administration-to-allow-nvidia-to-sell-chips-to-china-11621166503 [4] BBC: https://www.bbc.com/news/technology-57112173 [5] Financial Times: https://www.ft.com/content/7544d5b8-86f1-42d7-898d-6e7e0b4e611f [6] Reuters: https://www.reuters.com/article/us-usa-china-tech-idUSKBN2DO25G [7] CNBC: https://www.cnbc.com/2021/05/17/nvidia-amd-to-pay-us-15percent-of-revenues-from-china-chip-sales-report.html
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