From ban to profit sharing: Inside US deal with Nvidia, AMD on China chip sales
Nvidia told the BBC that while it has not shipped H20 chips to China for months, it hopes 'export control rules will let America compete in China and worldwide.' The company also warned that 'America cannot repeat 5G and lose telecommunication leadership,' adding that the US AI tech stack could become 'the world's standard if we race.'These payments apply only to chips that require special export licences, not to all products sold in China. Both companies must keep detailed sales records and report them regularly to US authorities. The money will be channelled into US chip research, technology security, and enforcement of export controls.AN UNPRECEDENTED TRADE-OFFThe US has long restricted the sale of its most advanced chips to China, fearing they could be used to enhance military capabilities. But an outright ban risked killing off a lucrative market for US companies and handing the advantage to Chinese rivals.Charlie Dai, vice president at Forrester Research, told the BBC the agreement is 'unprecedented' and warned it 'creates substantial financial pressure and strategic uncertainty for tech vendors.'Critics, however, say the deal blurs the line between national security and commercial interest. 'You either have a national security problem or you don't,' Deborah Elms, head of trade policy at the Hinrich Foundation, told the BBC. 'If you have a 15% payment, it doesn't somehow eliminate the national security issue.'THE POLITICS BEHIND THE DEALThe H20 chip was designed specifically for the Chinese market after the Biden administration's export restrictions in 2023. Its sale was later banned under the Trump administration earlier this year. Nvidia's CEO Jensen Huang has reportedly spent months lobbying both Washington and Beijing for a resumption of sales, even meeting President Donald Trump last week.The agreement comes as US-China trade tensions show tentative signs of easing. Beijing has relaxed rare earth export controls, while the US has lifted certain restrictions on chip design software in China. Both countries agreed to a 90-day truce in their tariff war in May, though it is unclear if this pause will be extended beyond the 12 August deadline.WHY NVIDIA AND AMD MATTER IN CHINAadvertisementNvidia and AMD are not just chipmakers. They are at the cutting edge of AI and supercomputing hardware. The H20 and MI308 chips are essential for training large AI models and running high-performance systems. Without them, China's AI and data processing ambitions could face delays, giving the US and its allies more time to consolidate their lead.By regaining access to China, even at a cost, the companies protect billions in potential revenue and keep their technology embedded in a key market. But China may see this as a push to accelerate its own chip independence.WHAT THIS MEANS FOR THE FUTUREFor Washington, this is more than a cash grab. It is a new model for controlling high-tech exports while profiting from them. If it works, the approach could spread to other strategic sectors such as green technology or biotechnology.For the tech industry, it sets a precedent: governments may no longer be just regulators, but profit-sharing partners in sensitive trade. For China, it is another reminder that access to cutting-edge US tech will now come with a high political and financial price.advertisementThis 15% deal may be the first of its kind, but it almost certainly will not be the last.(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)- Ends
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