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American technology giants NVIDIA and AMD have agreed to give the Donald Trump-led US administration 15 per cent of revenue generated from semiconductor sales proceeds in China, foreign media reported, citing sources. The pact, in line with rules laid down by the US government, is part of a deal to secure licenses to export into the world's second largest economy, according to the reports.
The development impacts revenue generated from NVIDIA's H20 and AMD's MI308 chips in the Asian country, according to the reports.
These chips are used in AI-powered applications.
Meanwhile, Washington recently lifted restrictions on the sale of the NVIDIA H20 chips to China, citing security concerns.
Here are 10 things to know about this news:
- Many analysts call this arrangement the first of its kind, underscoring the high cost of market access amid escalating tech trade tensions.
- NVIDIA particularly designed the H20 chip for the Chinese market after the then Joe Biden administration imposed US export restrictions in 2023. The chip's sale in China was banned by the Trump administration in April.
US tech giants rely heavily on China sales
- Currently, US semiconductor makers earn a significant portion of their revenue from sales in China. Some industry reports suggest that US chip makers rely on the Chinese market for approximately one-third of their global sales.
- In the last fiscal year, NVIDIA generated $17 billion in revenue from China, representing 13 per cent of its total sales. In 2024, AMD reported $6.2 billion revenue from China revenue, translating to 24 per cent of its total sales that year.
- American chip makers' sales to China have resumed amid easing trade tensions between Beijing and Washington. While Beijing has eased curbs on rare earth exports, the US has removed restrictions on chip design software firms operating in China.
Latest in Tariff War | Easing US-China trade tensions
- In May, Beijing and Washington agreed to a 90-day truce in their trade tariff war.
- Since then, trade officials from both sides have met several times, though there is no agreement yet to extend the tariff pause beyond a 12 August deadline.
- Meanwhile, the Trump 2.0 administration has forced major companies to make more investments in the US.
- This month, Apple committed to investing another $100 billion in the world's largest economy, taking its total pledge to spend $500 billion over a period of four years. In June, Micron Technology announced plans to take its US investments to $200 billion.
- Even Nvidia has announced plans to build AI servers worth up to $500 billion in the US. The tech giant has also vowed to build the first American-made AI supercomputers.
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