U.S. authorities receive 15% of the chip sales heading to China.
In a move that could reshape the global tech landscape, an unprecedented agreement has been reached regarding the sale of advanced AI chips to China. The deal, known as the "Trump Deal," involves American tech giants Nvidia and AMD agreeing to give 15% of their revenue from AI chip sales in China back to the U.S. government in exchange for export licenses.
Negotiated by former President Donald Trump, this arrangement is expected to allow Nvidia to sell its H20 chips and AMD to sell its MI308 chips to China. Initially, Trump demanded a 20% cut, but he settled for 15% after negotiations. The chips in question are crucial to China, as indicated by the involvement of the Cyberspace Administration due to security concerns about potential remote tracking or shutdowns.
However, this deal has raised eyebrows due to its potential constitutional challenges. The U.S. Constitution's export clause, which prohibits duties on exports, could be questioned in this context, as this sort of financial cutback tied to export licenses lacks precedent in U.S. history. Legal experts have noted that this arrangement, still theoretical with legal details being finalized by the Department of Commerce, could face challenges on export duty grounds.
The implications of this deal are far-reaching. It signals a new form of revenue extraction from corporate sales in foreign markets tied to export licensing. It could also lead to constitutional challenges and strategic leverage by the U.S. over China’s access to advanced AI technology. The deal also increases scrutiny of U.S. companies' sales to China, encompassing both economic and national security considerations.
The deal's announcement comes after a period where Nvidia, the AI chip leader, was prevented from shipping its H20 systems to China due to the U.S. government's tightened rules for semiconductor sales to China earlier this year. The restriction was seen as a potential factor that could give American companies new global competitors.
Nvidia CEO Jensen Huang met with President Donald Trump at the White House on Wednesday to lobby for the deal. Current estimates for AMD's sales of AI chips to China this year range from $3 to $5 billion. Before the U.S. blockade, Nvidia was estimated to sell H20 chips worth over $20 billion (€17.14 billion) to China this year.
Despite the restrictions, Nvidia argues that the U.S. government's actions will not effectively slow China's progress in AI. The U.S. government announced it would again allow shipments of toned-down AI chips to China in July, a move that could accelerate China's AI development.
This arrangement marks a distinct and controversial approach by the U.S. government to influence high-tech exports through financial arrangements, potentially shaping future trade and export policy debates. As the legal and practical implications of this deal unfold, it is clear that the global tech landscape will continue to evolve in response.
[1] Source: Reuters, Bloomberg, and The Wall Street Journal.
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