Giant manufacturers of microchips fork over billions to restore sales within China following a tariff agreement
The US government has approved applications from Nvidia and AMD to sell certain AI processors to China, marking a significant shift in US-China technology relations. However, the revenue-sharing arrangement remains a topic of discussion [2][3].
In this deal, Nvidia and AMD will pay 15% of their revenue from specific AI chip sales, such as the Nvidia H20 and AMD MI308, in China to the US government in exchange for export licenses [2][3]. This arrangement, while allowing these companies to access the lucrative Chinese market, raises constitutional questions in the US.
The deal can be seen as an export tax, which is generally prohibited under the US Constitution. The chips are primarily designed in the US but are primarily manufactured abroad, mainly by Taiwan Semiconductor Manufacturing Company (TSMC) in Taiwan. If production moves to TSMC's new Arizona plant, the companies might challenge the tax as unconstitutional [1][4].
Economically, the tax reduces the profitability of selling advanced AI chips in China but could potentially increase the overall market share and revenues for Nvidia and AMD due to access to the large Chinese market [2][3].
Politically and strategically, the deal reflects US efforts to leverage semiconductor technology exports for national security and economic influence. It also highlights ongoing tensions between innovation leadership, export controls, and international trade policy under the Trump administration [3][4].
There is potential for legal pushback by Nvidia and AMD, particularly if they shift manufacturing to US soil to avoid this tax, which could lead to litigation over the constitutionality of taxing exports from US production versus foreign production [1].
This deal, with its far-reaching implications, spans legal challenges due to constitutional concerns, economic trade-offs for chipmakers, and broader US-China technology and trade relations shaped by government intervention in semiconductor exports.
[1] Constitutional Questions Arise with US Export Tax on Advanced Chips [2] Nvidia and AMD to Pay US Government 15% of Revenue from AI Chip Sales in China [3] US-China Technology Tensions Escalate with Revenue-Sharing Deal [4] TSMC's New Arizona Plant and the Implications for US-China Trade Relations
Investing in the Chinese market may be more profitable for Nvidia and AMD due to the access they gain to this large market, but the 15% revenue-sharing arrangement with the US government for specific AI chip sales could impact their overall finances. The potential legal challenge arising from this tax, particularly if production is shifted to US soil, highlights the complex intersection of business, technology, finance, and constitutional law in this deal.
