US Authorizes AI Chip Sales to China with Revenue-Sharing Agreement, Sparking National Security Concerns
WASHINGTON D.C. – In a move drawing immediate criticism from some lawmakers, the Biden administration has reportedly authorized the sale of advanced artificial intelligence (AI) chips to China, but with a novel condition: Nvidia and AMD will be required to hand over 15% of their China-based sales revenue to the US government. This unprecedented agreement, revealed this week, aims to circumvent existing export restrictions imposed to limit China’s access to cutting-edge technology with potential military applications.
the agreement centers around Nvidia’s H20 chip, specifically designed for the Chinese market following initial US export controls enacted in 2023. Sales of the H20 were further restricted by the trump administration in April of this year, but now appear poised to resume under the new revenue-sharing model. Democratic Congressman Jake Auchincloss voiced concerns on X (formerly Twitter), questioning whether the financial incentive to sell AI to China could compromise national security and foreshadow potential complications with a possible TikTok deal.
Background: The Escalating Tech War & AI Chip Restrictions
This growth is the latest chapter in the ongoing tech war between the US and China, fueled by concerns over economic competition and national security. The US has increasingly sought to limit China’s access to advanced technologies, particularly in areas like semiconductors and AI, fearing their potential use to bolster the People’s Liberation Army (PLA).
The initial export restrictions in 2023 targeted high-end chips crucial for AI development, aiming to slow China’s progress in this strategically important field. Though, Chinese companies quickly adapted, developing alternatives like the H20, prompting further US action. The Trump administration‘s subsequent ban on H20 sales proved ineffective, as evidenced by Nvidia CEO Jensen Huang’s months-long lobbying efforts to resume exports, culminating in a recent meeting with former President Trump.Details of the Agreement & Expert Analysis
The 15% revenue-sharing arrangement is being described as “unprecedented” by industry analysts. Charlie Dai, vice president and principal analyst at Forrester, noted the agreement highlights the significant cost of accessing the Chinese market amidst escalating trade tensions, creating “considerable financial pressure and strategic uncertainty for tech vendors.”
Concerns remain about the end-use of these chips, despite assurances of civilian applications. A letter sent last month to Commerce Secretary Howard Lutnick by a group of 20 security specialists warned that even chips sold to civilian companies in China are likely to find their way into military applications, including autonomous weapons systems, surveillance platforms, and battlefield decision-making tools. Nvidia, in a statement to the BBC, argued that the US must maintain its leadership in AI, stating, “America cannot repeat 5G and lose telecommunication leadership. America’s AI tech stack can be the world’s standard if we race.”
Broader Implications & Intel’s Involvement
The situation extends beyond Nvidia. The CEO of rival chipmaker Intel, Lip-Bu Tan, also met with Trump at the White House this week, following Trump’s public call for his resignation due to alleged ties to Chinese companies. Intel characterized the meeting as “candid and constructive,” emphasizing the company’s commitment to US technology leadership. Trump described the meeting as “vrey interesting” and indicated his cabinet will review suggestions from Tan in the coming week. Tan has refuted claims of conflicts of interest, labeling them as “misinformation.”
Crucial Details Not in the Original Article:
Specific chip Model: The agreement specifically concerns Nvidia’s H20 chip, a direct response to US export controls.
Revenue Threshold: While 15% of sales is the agreement, the total potential revenue stream is substantial, given the size of the Chinese market.
Previous Attempts at Circumvention: The article doesn’t detail the specific methods Chinese companies used to develop alternatives to restricted chips.
5G Reference: Nvidia’s statement explicitly draws a parallel to the US losing ground in 5G technology, framing AI as a critical area for maintaining global leadership. Trump’s Role: The article highlights Trump’s direct involvement in meetings with both Nvidia and Intel CEOs,and his public criticism of Intel’s CEO.
AMD’s Involvement: The article mentions AMD is also part of the agreement, but doesn’t detail their specific role or sales figures.
This situation is likely to continue evolving as the US navigates the complex balance between economic interests, national security concerns, and the rapidly advancing field of artificial intelligence. The long-term impact of this revenue-sharing agreement remains to be seen, but it signals a significant shift in US policy towards technology exports to China.
