Nvidia, AMD to pay 15% of China chip sale revenue to US

According to the Financial Times, the U.S. government has reached a special arrangement with Nvidia, AMD, and others, requiring them to pay 15% of their chip sales revenue in China to the U.S. government. Under this condition, they can obtain export licenses for chips like the H20. This has sparked significant controversy in the United States.

The uniqueness of this agreement lies in exchanging revenue sharing for technology export licenses, a form of "equivalent exchange" or transaction. Such an arrangement is unprecedented in the U.S. but aligns with the Trump administration's consistent pattern of "conditions for exemptions." For instance, regarding import tariffs, the Trump administration demanded increased investment in the U.S. from companies or countries in exchange for tariff reductions or exemptions.

Analysts estimate that based on pre-regulation forecasts, Nvidia's H20 sales in China could reach 1.5 million units in 2025, with revenue of about $23 billion. A 15% sales share would correspond to approximately $3.5 billion.

However, the H20 itself is already a downgraded AI chip customized for China after former President Biden's export controls. The Trump administration announced a ban on its sale in April this year, but reversed the decision after Jensen Huang met with Trump at the White House in June. The Bureau of Industry and Security (BIS) of the Commerce Department delayed issuing the license, leading Huang to negotiate again on August 6, finally obtaining the license on August 8.

The Trump administration's approach essentially turns export licensing into a revenue-generating tool, which makes them extremely uncomfortable as it appears that private companies are using money to open a "back door." This is highly damaging to the capitalist free market and amounts to blatant "bribery."

We will continue to monitor how this will affect the market in the future.