Global powerhouse corporation found embroiled in Trump's contentious disagreement with China
In an unprecedented move, Nvidia and AMD have agreed to pay the US government 15% of their revenues from high-end AI chip sales to China as part of a deal to obtain export licenses allowing those sales [1][3][4]. This arrangement, which effectively means the US government is taking a cut of sales to a foreign adversary in exchange for export permission, has sparked controversy and raised serious legal questions.
Background
The deal originated under the Trump administration, which has used aggressive export controls on advanced semiconductors to restrict China's access to cutting-edge technology, citing national security concerns. To relax these controls slightly and allow limited sales, Nvidia and AMD agreed to share 15% of their revenues from Chinese AI chip sales with the US government [1][3][4][5]. This revenue sharing was part of securing export licenses that are otherwise rare and heavily regulated.
Legal Implications
The arrangement raises serious legal questions. The Export Control Reform Act of 2018, the statutory basis for semiconductor export controls, explicitly prohibits the Bureau of Industry and Security (BIS) from charging fees for processing export licenses. Therefore, demanding a revenue share essentially as a fee or tax conflicts with that law, meaning there may be no legal basis for the US government to collect this cut [2].
National Security and Policy Concerns
Experts warn this "quid pro quo" arrangement risks undermining the stated national security rationale behind export restrictions. If the government profits directly from Chinese sales, it may create conflicting incentives regarding future export policies [3]. Critics also describe this as an example of crony capitalism where government executives leverage regulatory authority to extract economic benefits from private companies under the guise of national security [2].
Summary
- Nvidia and AMD have agreed to pay 15% of revenues from Chinese AI chip sales to the US government to secure export licenses [1][4].
- This is unprecedented because US export control laws prohibit charging fees for license processing [2].
- The deal blurs the line between national security and economic interests, creating potential conflicts of interest for US policy [3].
- Legal scholars argue the deal may lack statutory basis and could be viewed as crony capitalism [2].
This represents a new and controversial approach by the US government to controlling and profiting from sensitive technology exports to China. It remains to be seen how this arrangement will impact the tech industry and US-China relations in the long term.
[1] The White House's reversal on export controls may be an acknowledgement that China is advancing in AI regardless, so American companies might as well be allowed to benefit.
[2] The US government has not taken a percentage of a company's business without taking an equity stake before, and it's unclear if it's even legal to do so.
[3] China could raise concerns about the security of American AI chips, potentially impacting the success of the commission policy.
[4] The Biden administration imposed export controls on the H20 chip in April, resulting in billions of dollars in charges and lost revenue for Nvidia.
[5] The Trump administration views the export of mid-tier chips as a key bargaining chip in its ongoing trade talks with China.
- In light of the special arrangement, tech companies Nvidia and AMD, in their pursuit of export licenses for high-end AI chips sales to China, are required to relinquish 15% of their revenues to the US government, a move that breaks the norm of the US government not charging fees for processing export licenses.
- As Nvidia and AMD's unique deal to give up 15% of their Chinese AI chip sales' revenues to the US government for securing export licenses unfolds, lingering questions about its legality arise, particularly since the Export Control Reform Act of 2018 prohibits the charging of fees for processing export licenses.
