United States receives 15% of its chip sales revenue from China.
The U.S. government's efforts to restrict China's access to high-tech chips, including AI chips, have led to a significant shift in the global tech landscape. This move, aimed at slowing China's progress in AI, could potentially create new global competitors for American companies.
Nvidia, a leading AI chip manufacturer, has been one of the hardest hit by these restrictions. The company faced potential billion-dollar losses due to the ban on AI chip sales to China, particularly for its H20 chip systems. Before the U.S. blockade earlier this year, Nvidia estimated it would sell H20 chips worth over $20 billion (€17.14 billion) to China this year.
In a bid to lift the export ban, Nvidia and another leading U.S. chipmaker, AMD, agreed to an unusual deal with the U.S. government. Known as the "Trump Deal," the companies agreed to pay a 15% cut of their revenue from AI chip sales to China to the U.S. government. This deal allowed Nvidia and AMD to obtain export licenses to sell certain AI chips, including the H20 chip and AMD's MI308, to the Chinese market.
However, this agreement has raised legal and geopolitical concerns. Critics argue that the deal could be unconstitutional, as it appears to conflict with the U.S. Constitution's export clause, which prohibits taxes or duties on exports. Legal experts refer to it as a possible "export tax," similar to attempts that were struck down by the Supreme Court in the 1990s.
Moreover, Chinese authorities have raised security concerns regarding the Nvidia H20 chip, fearing it could be remotely tracked or disabled. This geopolitical sensitivity adds another layer of complexity to the issue.
The deal, while intended to slow China's progress in AI, could potentially accelerate China's development of its own technologies. Nvidia argues that the restrictions will only prompt China to develop its own technologies, creating new global competitors for American companies.
The U.S. government's tightened rules for semiconductor sales to China were loosened in July, allowing shipments of weakened AI chips to China. However, no licenses for AI chip sales to China were granted for weeks, until last Friday. Nvidia CEO Jensen Huang lobbied the U.S. government for the resumption of AI chip sales to China, a move that could potentially save the company from significant financial losses.
The "Trump Deal" sets a risky new precedent with uncertain legal and policy implications. Analysts and experts view it as a potential undermining of U.S. government credibility and legal norms, and it could potentially weaken Washington's strategic position in the AI competition with China.
For AMD, current estimates for sales to China range from $3 to $5 billion. The future of these sales, and the broader AI chip market, remains uncertain as the U.S. government continues to navigate the complexities of this issue.
- The agreement between Nvidia and AMD, known as the "Trump Deal," involves giving a 15% cut of their revenue from AI chip sales to China to the U.S. government, in an attempt to lift the export ban and sell AI chips to the Chinese market.
- The deal could potentially accelerate China's development of its own technologies, as Nvidia argues that the restrictions will only prompt China to develop its own technologies, creating new global competitors for American companies.
