U.S. Reaches Agreement with Nvidia and AMD for Chip Exports to China

The U.S. government has reportedly reached an agreement with semiconductor companies Nvidia and AMD allowing them to continue exporting advanced chips to China, despite existing export controls. The deal involves a revenue-sharing component, where the companies will remit a portion of thier sales revenue from China back to the U.S. government. While the exact percentage isn’t publicly disclosed, sources indicate it’s designed to mitigate the impact of the export restrictions.

“This is a very unusual arrangement, but it’s consistent with President Trump’s approach to deal-making,” said Paul Triolo, practice lead at The Asia Group, in a CNBC interview. “He’s willing to make concessions if he receives something in return, and this sets a unique precedent.”

Analysts have described the revenue cut as an “indirect tariff at source,” according to Neil Shah, partner at Counterpoint Research. Daniel Newman, CEO of The Futurum Group, characterized the arrangement as a “sort of ‘tax’ for doing business in China” in a post on X (formerly Twitter).

However, experts believe this type of agreement is unlikely to be replicated across other sectors. Nick Patience, practice lead for AI at The Futurum Group, stated he doesn’t anticipate similar deals for industries like software and services.

The unique situation surrounding semiconductors stems from their strategic importance to the U.S. They are crucial components in technologies like artificial intelligence, consumer electronics, and military applications, leading the U.S. to implement stringent export controls on these chips – stricter than those applied to any other product.”Semiconductors are a unique case, and this ‘pay-to-play’ tactic works for Nvidia and AMD because their business relies on securing export approvals from the U.S. government,” explained Chen, also from The Asia Group. “Businesses like Apple and Meta face more complex considerations due to their different business models and services in China.”

China’s Response and Concerns

The agreement comes amidst heightened geopolitical sensitivity surrounding semiconductors. In recent weeks, Chinese regulators have expressed concerns regarding the security of Nvidia’s chips. Late July saw Chinese regulators requesting clarification from Nvidia regarding potential security vulnerabilities and alleged “backdoors” in their H20 chips. Nvidia has repeatedly denied the existence of such vulnerabilities. On August 10th, Nvidia again refuted claims of backdoors in its H20 semiconductors, responding to accusations from a social media account linked to Chinese state media.

China’s state-run Global Times newspaper criticized the U.S. approach, quoting an expert who argued that the deal “means that the US government has repudiated its original security justification to pressure US chip makers to secure export licenses to China through economic leverage.”

The Chinese government has not yet officially commented on the reported revenue agreement.

The deal is expected to elicit mixed reactions in China. While the country may disapprove of the financial arrangement, Chinese companies are likely eager to acquire these chips to further their own advancements in artificial intelligence.

“China faces a dilemma,” Shah of Counterpoint Research noted. “They need these chips to advance their AI ambitions, but the fee to the U.S. government could increase costs, and there are lingering doubts about potential U.S. ‘backdoors’ given the agreement to supply chips.”