It may be that Nvidia and AMD have made the largest, most lucrative deal in history with the US government. In exchange for receiving export licenses, they will pay 15% of their semiconductor sales revenue generated in China. This new arrangement centers on Nvidia’s H20 chips and AMD’s MI308 chips. Though not the flashiest technology out there, both are key to ensuring a multitude of applications, from the most basic to the most cutting edge.
The broader move is a response to increased scrutiny over the national security issues posed by these chips. Nvidia’s H20, which was called an “old chip” by former President Donald Trump, does not have the sophisticated capabilities of Nvidia’s Blackwell chip. In the same vein, the Blackwell chip is still banned from export to China. This unfortunate scenario is reflective of the broader thicket of challenges and opportunities accompanying intercultural trade and technology exchanges in our deeply polarized global political environment.
Agreement Details and Financial Implications
Under the revised deal, Nvidia will remit 15% of its sales from semiconductors exported to China to the US government. This figure was negotiated down from an original proposal of 20%. Trump expressed his rationale behind the agreement, stating:
“I said, if I’m going to do that, I want you to pay us, as a country, something, because I’m giving you a release.”
Just before this visit, Nvidia’s CEO Jensen Huang had similarly been calling on Trump to allow him to sell his company’s newly-developed H20 AI chip to China. The ongoing negotiations highlight the unusual tug-of-war between business interests and national security issues.
Even with these relatively tight licenses won, the bigger picture of US export controls muddy the waters. In recent months, the US government has augmented existing restrictions on transfers of high-bandwidth memory (HBM) chips, severely contracting pathways for transferring technology to China. At the same time, China has been advocating for a rollback of trade restrictions. In fact, they view this step as a critical component of any future trade talks.
Security Concerns from China
Even China’s cyberspace regulator has summoned Nvidia to explain the growing security concerns associated with its chips. One of the biggest fears is that these chips could have “backdoors” that leave them vulnerable to malicious attacks. Chinese state media has issued warnings, stating:
“When a type of chip is neither environmentally friendly, nor advanced, nor safe, as consumers, we certainly have the option not to buy it.”
As an answer to such allegations, in a rebuttal to Huang’s September 28 allegations, Nvidia has staunchly denied the assertion of security vulnerabilities in any of their products. The company emphasized that embedding backdoors and kill switches into chips would be detrimental, noting:
“embedding backdoors and kill switches into chips would be a gift to hackers and hostile actors.”
This ongoing tit-for-tat reflects the deep-seated mistrust between the two countries, especially regarding technology transfer and cybersecurity issues.
The Competitive Landscape
Nvidia’s H20 chip is currently being debated. Perhaps most crucially, it’s necessary to realize that it in no way reflects the cutting edge of AI technology. Even Trump himself has noted that Nvidia’s Blackwell chip is like 10 generations ahead of the H20 chip. He remarked:
“The Blackwell is superduper advanced. I wouldn’t make a deal with that, although it’s possible.”
Trump said he was willing to allow other terms to be negotiated. He repeated emphatically that he would not ease export controls on high-bandwidth memory (HBM) chips in any trade agreement with China. He stated:
“I’d make a deal – a somewhat enhanced in a negative way. Blackwell, in other words, take 30% to 50% off of it, but that’s the latest and the greatest in the world. Nobody has it. They won’t have it for five years.”
Tensions are boiling over between the United States and China with respect to technology exports. Amid all of this, Nvidia still has an incredibly challenging road ahead. The company has consistently recast its focus as one of willing adherence to US government directives, all while aiming for a foot in the door of lucrative international markets.
