Latest news with #ExportClause
Kuwait Times
5 days ago
- Business
- Kuwait Times
Nvidia, AMD to pay 15% of China chip sale revenue to US
BEIJING/WASHINGTON: Nvidia and Advanced Micro Devices have agreed to give the US government 15 percent of revenue from sales to China of certain advanced computer chips, a US official said on Sunday, in an unusual move likely to faze American companies. The deal is extremely rare for the US and marks President Donald Trump's latest intervention in corporate decision-making, after pressuring executives to invest in American manufacturing and demanding new Intel CEO Lip-Bu Tan resign over ties to Chinese companies. Analysts said the levy may hit margins at the chipmakers and set a precedent for Washington to tax critical US exports, potentially extending beyond semiconductors. Trump's administration halted sales of Nvidia's H20 chips to China in April, but the company said last month it had won clearance to resume shipments and hoped to start deliveries soon. The Commerce Department has started issuing licenses for the sale of H20 chips to China, another US official said on Friday. Both the US officials declined to named because details have not been made public. The China curbs are expected to cost Nvidia and AMD billions of dollars in revenue, and successive US administrations have sought in recent years to limit Beijing's access to cutting-edge chips that could bolster China's military. Washington does not feel the sale of H20 and equivalent chips compromises national security, said the first US official. The official did not know when or how the agreement with the chip companies would be implemented, but said the administration would be in compliance with the law. The US Constitution prohibits Congress from laying taxes and duties on articles exported from any state. The Export Clause applies to taxes and duties, not user fees. When asked if Nvidia had agreed to pay 15 percent of revenues to the US, a company spokesperson said: 'We follow rules the US government sets for our participation in worldwide markets.' 'While we haven't shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide,' the spokesperson added. A spokesperson for AMD said the US approved its applications to export some AI processors to China, but did not directly address the revenue-sharing agreement and said the company's business adheres to all US export controls. The US Commerce Department did not immediately comment. China's foreign ministry said the country has repeatedly stated its position on US chip exports. The ministry has previously accused Washington of using technology and trade measures to 'maliciously contain and suppress China.' The Financial Times, which first reported the development, said the chip firms agreed to the arrangement as a condition for obtaining the export licenses for their semiconductors, including AMD's chips. It added that the Trump administration had yet to determine how to use the money. 'The Chinese market is significant for both these companies so even if they have to give up a bit of the money, they would otherwise make it looks like a logical move on paper,' AJ Bell investment director Russ Mould said. Still, analysts and experts questioned the logic of resuming sales if the chips could pose a national security risk. 'Decisions on export licenses should be determined by national security considerations and the tradeoffs of US policy goals, not a revenue-creating possibility,' said Martin Chorzempa, senior fellow at the Peterson Institute for International Economics, an independent research institution. 'What it ends up creating is an incentive to control things, to then extract a payment, rather than controlling things because we're actually concerned about the risk to national security.' US Commerce Secretary Howard Lutnick said last month the planned resumption of sales of the AI chips was part of US negotiations with China to get rare earths and described the H20 as Nvidia's 'fourth-best chip' in an interview with CNBC. He said it was in US interests for Chinese firms to use American technology, even if the most advanced chips remained barred, to keep them on a US 'tech stack'. Some elements of Trump's trade policy are already facing legal scrutiny, with a federal appeals panel skeptical of his claim that a 1977 law, traditionally used to sanction enemies or freeze assets, also empowered him to impose tariffs. 'We aren't sure we like the precedent this sets,' Bernstein analysts said of the revenue-share deal. 'Will it stop with Chinese AI? Will it stop with controlled products? Will other companies be required to pay to sell into the region?' 'It feels like a slippery slope to us.' The analysts estimated the deal would cut gross margins on the China-bound processors by 5 to 15 percentage points, shaving about a point from Nvidia and AMD's overall margins. Nvidia generated $17 billion in revenue from China in the fiscal year ending January 26, representing 13 percent of total sales. — Reuters
New Straits Times
5 days ago
- Business
- New Straits Times
Nvidia, AMD to pay 15pct of China chip sale revenue to US, official says
NEW YORK: Nvidia and Advanced Micro Devices have agreed to give the US government 15 per cent of revenue from sales to China of certain advanced computer chips, a US official said on Sunday, in an unusual move likely to faze American companies. The deal is extremely rare for the US and marks President Donald Trump's latest intervention in corporate decision-making, after pressuring executives to invest in American manufacturing and demanding new Intel CEO Lip-Bu Tan resign over ties to Chinese companies. Analysts said the levy may hit margins at the chipmakers and set a precedent for Washington to tax critical US exports, potentially extending beyond semiconductors. Trump's administration halted sales of Nvidia's H20 chips to China in April, but the company said last month it had won clearance to resume shipments and hoped to start deliveries soon. The Commerce Department has started issuing licenses for the sale of H20 chips to China, another US official said on Friday. Both the US officials declined to named because details have not been made public. The China curbs are expected to cost Nvidia and AMD billions of dollars in revenue, and successive US administrations have sought in recent years to limit Beijing's access to cutting-edge chips that could bolster China's military. Washington does not feel the sale of H20 and equivalent chips compromises national security, said the first US official. The official did not know when or how the agreement with the chip companies would be implemented, but said the administration would be in compliance with the law. The US Constitution prohibits Congress from laying taxes and duties on articles exported from any state. The Export Clause applies to taxes and duties, not user fees. When asked if Nvidia had agreed to pay 15 per cent of revenues to the US, a company spokesperson said: "We follow rules the US government sets for our participation in worldwide markets." "While we haven't shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide," the spokesperson added. A spokesperson for AMD said the US approved its applications to export some AI processors to China, but did not directly address the revenue-sharing agreement and said the company's business adheres to all US export controls. The US Commerce Department did not immediately comment. China's foreign ministry said the country has repeatedly stated its position on US chip exports. The ministry has previously accused Washington of using technology and trade measures to "maliciously contain and suppress China." The Financial Times, which first reported the development, said the chip firms agreed to the arrangement as a condition for obtaining the export licenses for their semiconductors, including AMD's MI308 chips. It added that the Trump administration had yet to determine how to use the money. "The Chinese market is significant for both these companies so even if they have to give up a bit of the money, they would otherwise make it looks like a logical move on paper," AJ Bell investment director Russ Mould said. 'SLIPPERY SLOPE' Still, analysts and experts questioned the logic of resuming sales if the chips could pose a national security risk. "Decisions on export licenses should be determined by national security considerations and the tradeoffs of US policy goals, not a revenue-creating possibility," said Martin Chorzempa, senior fellow at the Peterson Institute for International Economics, an independent research institution. "What it ends up creating is an incentive to control things, to then extract a payment, rather than controlling things because we're actually concerned about the risk to national security." US Commerce Secretary Howard Lutnick said last month the planned resumption of sales of the AI chips was part of US negotiations with China to get rare earths and described the H20 as Nvidia's "fourth-best chip" in an interview with CNBC. He said it was in US interests for Chinese firms to use American technology, even if the most advanced chips remained barred, to keep them on a US "tech stack". Some elements of Trump's trade policy are already facing legal scrutiny, with a federal appeals panel skeptical of his claim that a 1977 law, traditionally used to sanction enemies or freeze assets, also empowered him to impose tariffs. "We aren't sure we like the precedent this sets," Bernstein analysts said of the revenue-share deal. "Will it stop with Chinese AI? Will it stop with controlled products? Will other companies be required to pay to sell into the region?" "It feels like a slippery slope to us." The analysts estimated the deal would cut gross margins on the China-bound processors by 5 to 15 percentage points, shaving about a point from Nvidia and AMD's overall margins. Nvidia generated US$17 billion in revenue from China in the fiscal year ending January 26, representing 13 per cent of total sales. AMD reported US$6.2 billion in China revenue for 2024, accounting for 24 per cent of total revenue. Nvidia has warned a China sales halt for H20 chips could cut US$8 billion from July-quarter revenue, while AMD has projected a US$1.5 billion annual hit from the curbs.
Yahoo
6 days ago
- Business
- Yahoo
Trump's Chip Sales Payoff Deal Sure Looks Illegal
Disregarding the Constitution's Export Clause, the Trump administration has struck an unprecedented arrangement to take a 15 percent cut of Nvidia and Advanced Micro Devices' chip sales to China. Under the deal, first reported on Sunday, the companies will pay the U.S. government for sales of chips used for artificial intelligence—Nvidia's H20 and AMD's MI308 chips—in China in order to obtain export licenses to the country, despite national security restrictions. According to the Financial Times, the arrangement is unprecedented, as 'no US company has ever agreed to pay a portion of their revenues to obtain export licences.' Several media reports have called it 'unusual.' 'Unconstitutional' would evidently work just as well. As Peter Harrell, a former Biden administration official and current fellow at the Carnegie Endowment for International Peace, as well as many other observers, noted, the move disregards the U.S. Constitution's prohibition on export taxes. The Export Clause states: 'No Tax or Duty shall be laid on Articles exported from any State.' The administration can be expected to characterize the arrangement as something other than a tax. It may ultimately be up to the courts, if the move faces legal challenges, to tell this like it is. Constitutional concerns aside, this development represents the latest in an ongoing saga of Trump flip-flopping on chips, as the administration previously reportedly planned to ban the export of Nvidia's H20 chips to China, before having a change of heart in April after the company's CEO paid $1 million to dine with the president at Mar-a-Lago.
