US Government and Chipmakers Agree to Revenue-Sharing Deal on Advanced Chip Sales to China

Strategic Insights -

The US government has reportedly agreed to a deal with chipmakers Nvidia and AMD to allow the sale of advanced chips to China in return for 15% of their revenue from these sales. This unprecedented arrangement, first reported by the Financial Times, marks a significant easing of the US-China trade war. The deal, which could be potentially unconstitutional, will see Nvidia give 15% of its revenue from Chinese sales of its H20 chips and AMD give 15% of revenue from Chinese sales of its MI308 chips. The US government has sought to limit technology supplies to China that could threaten national security, particularly chips that can power artificial intelligence development and weapons.

Key Takeaways:

  • The US government will receive 15% of revenue from Nvidia's H20 chip sales and AMD's MI308 chip sales to China.
  • The deal is a significant easing of the US-China trade war, with Nvidia's chips being a major driver of the AI boom.
  • The US government has sought to limit technology supplies to China that could threaten national security, particularly chips that can power artificial intelligence development and weapons.
  • Nvidia's CEO, Jensen Huang, had made visits to Trump and officials in Beijing in recent months, meeting the US president as recently as Wednesday.
  • Trump has praised Nvidia, which became the first company to have its market value pass $4tn (£2.97tn) in July.
  • The deal has alarmed analysts, with concerns about its constitutionality and the credibility of US export controls.

Statistics:

  • Nvidia's market value has passed $4tn (£2.97tn) in July (Source: Financial Times).
  • In June, US businesses took on about 64% of the costs of tariffs imposed by Trump, while consumers took on 22% (Source: Goldman Sachs).
  • The share of costs borne by consumers in June is expected to flip, with consumers' share increasing to 67% (Source: Goldman Sachs).
  • The US-China tariff-war truce is due to end on Tuesday, with no extension yet announced (Source: Reuters).

Sources:

  • Financial Times (revenue-sharing deal first reported)
  • Reuters (US-China tariff-war truce due to end)
  • Goldman Sachs (note on tariff costs borne by US businesses and consumers)
  • The Guardian (statements from analysts on export controls and credibility)
  • Nvidia (statement on export control rules)
  • White House (statement from Peter Harrell on export taxes)