Nvidia and AMD Reach Agreement to Pay 15% of China Revenues to US Government

Nvidia and AMD have agreed to pay 15% of their respective semiconductor revenues generated in China to the US government to secure essential export licenses. This development comes amid shifting trade dynamics between the US and China, signaling a potential easing of tensions.

Chip industry leaders Nvidia and AMD have recently struck a deal that obligates them to pay the US government 15% of their revenues from semiconductor sales in China, as reported by the BBC from a source with knowledge of the negotiations. This arrangement is part of a broader understanding to ensure the companies can obtain necessary export licenses for operations in the world's second largest economy.

Nvidia articulated its stance, emphasizing adherence to US government regulations to maintain participation in global markets. Despite halting shipments of its H20 chips to China for several months, the company expressed hope that changes in export control rules would allow it to resume competition in China and beyond.

Specifically, Nvidia's agreement will see it pay 15% of its revenues from H20 chip sales to the US government. In parallel, AMD will similarly contribute this percentage from its MI308 chip revenues. Clarifications regarding this deal have not yet been provided by AMD as it has not responded to inquiries.

This agreement is particularly noteworthy given the backdrop of a previous ban on Nvidia's H20 chips sales to China, enacted due to national security concerns. Recently, however, the Biden administration announced that certain restrictions would be lifted, creating an opportunity for Nvidia to re-enter the Chinese market with its H20 chip, which was tailored for that specific region following a series of US export controls.

Moreover, Nvidia's CEO Jensen Huang has been actively advocating for the lifting of these sales restrictions, having reportedly met President Donald Trump last week to discuss the matter. This renewed access to chip sales aligns with an overall easing of trade tensions between the US and China, as Beijing has recently relaxed its export controls on rare earth materials while the US has lifted limitations on certain chip design software companies operating within China.

Earlier this year, a truce of 90 days was established between the two nations amid an ongoing tariff war. This led to productive discussions between high-level trade officials from both the US and China, although an extension of the tariffs pause remains unconfirmed as the deadline approaches on August 12.

The developments between Nvidia, AMD, and the US government not only highlight shifting trade relations but also signal the complex interplay of economic interests that could shape the future of the semiconductor industry and international trade policies.