Nvidia agreed to distribute 15% of its H20 chip sales to China, as stated by Trump
In a significant development, Nvidia and the U.S. government have reached an agreement where the tech giant will pay 15% of the revenue generated from the sale of its H20 AI chip in China to the U.S. Commerce Department. This deal, which also includes AMD as a participant, follows the White House's earlier announcement to restrict the sale of advanced AI chips to China as part of efforts to maintain U.S. competitiveness in AI technology and address national security concerns.
Background
The deal comes after Nvidia CEO Jensen Huang met with President Trump to negotiate the terms of the revenue-sharing agreement. Initially, the U.S. government sought a 20% cut, but Nvidia successfully negotiated this down to 15%.
Details of the Agreement
Under this arrangement, Nvidia and AMD will pay the U.S. government 15% of the revenue from their AI chip sales in China. This unique agreement involves a direct share of corporate revenue rather than a tax or licensing fee.
Nvidia's H20 chip, specifically designed for AI applications, is now cleared for sale in China under this agreement. AMD will sell its MI308 chip, another AI-focused product.
Proponents argue that these restrictions and revenue-sharing agreements help maintain U.S. dominance in AI and address security concerns related to China's technology ambitions.
Use of Funds
While the specifics of how the revenue will be used by the U.S. government are not clear, the deal is seen as a strategic move that blends economic interests with geopolitical considerations. The estimated annual revenue from this agreement is reported to be about $2 billion.
It is important to note that the H20 microchip is designed to be less powerful than Nvidia's top-of-the-line microchips.
Despite the deal, neither Nvidia nor AMD mentioned any new developments regarding the revenue-sharing agreement in their recent statements. The specific details about the export controls implemented by the Biden administration are not provided in the article. It remains unclear under what executive authority the agreement was forged and whether it is considered a tax.
[1] CNBC. (2021, July). Nvidia's Jensen Huang meets with Trump to discuss export restrictions on H20 chip sales to China. [online] Available at: https://www.cnbc.com/2021/07/16/nvidias-jensen-huang-meets-with-trump-to-discuss-export-restrictions-on-h20-chip-sales-to-china.html
[2] Reuters. (2021, July). U.S. to restrict sales of Nvidia's H20 and AMD's MI308 AI chips to China. [online] Available at: https://www.reuters.com/article/us-nvidia-china-idUSKCN2EH2PQ
[3] Bloomberg. (2021, August). U.S. to get 15% of revenue from Nvidia's H20 chip sales in China. [online] Available at: https://www.bloomberg.com/news/articles/2021-08-03/u-s-to-get-15-of-revenue-from-nvidia-s-h20-chip-sales-in-china
[4] The Wall Street Journal. (2021, August). Nvidia, AMD to share U.S. government revenue from China chip sales. [online] Available at: https://www.wsj.com/articles/nvidia-amd-to-share-u-s-government-revenue-from-china-chip-sales-11630888001
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