Nvidia and AMD to Hand Over 15% of China Chip Sales Revenue to US Government

Introduction

In a surprising move that could reshape the global semiconductor industry, the U.S. government is reportedly requiring Nvidia and AMD to hand over 15% of their chip sales revenue from China as part of new trade restrictions. This unprecedented policy aims to curb China’s access to advanced AI and computing technologies while compensating the U.S. for potential revenue losses due to export controls.

This development marks a significant escalation in the ongoing U.S.-China tech war, with major implications for chipmakers, global supply chains, and AI development.

Why Is the U.S. Imposing This Fee?

The U.S. has been tightening restrictions on advanced semiconductor exports to China, fearing that cutting-edge AI chips could enhance China’s military and surveillance capabilities. Previous measures included:

• Export bans on high-performance GPUs like Nvidia’s A100 and H100.
• Licensing requirements for selling certain chips to Chinese firms.
• Blacklisting key Chinese tech companies (e.g., Huawei, SMIC).

However, these restrictions have hurt U.S. chipmakers’ revenues, as China accounts for a significant portion of their sales. To offset these losses, the Biden administration is now demanding 15% of Nvidia and AMD’s China-based earnings as a form of compensation.

How Will This Impact Nvidia and AMD?

Both companies generate billions from the Chinese market:

• Nvidia derived ~20% of its revenue from China in 2023.
• AMD also relies on China for a substantial share of its data center and gaming GPU sales.

A 15% revenue forfeiture could:
✅ Reduce profitability in one of their largest markets.
✅ Force price hikes on remaining approved chips sold in China.
✅ Accelerate China’s push for self-sufficiency in semiconductors (e.g., Huawei’s Ascend AI chips).

China’s Response: More Sanctions and Domestic Chip Development

China has already retaliated with:

• Export controls on gallium and germanium (key chipmaking materials).
• Restrictions on rare earth metals used in U.S. tech manufacturing.
• Increased funding for domestic chip firms like SMIC and Huawei.

If Nvidia and AMD pass the 15% fee to Chinese buyers, companies like Alibaba, Tencent, and Baidu may shift to homegrown alternatives, further weakening U.S. dominance in AI hardware.

Global Semiconductor Industry at a Crossroads

This move could lead to:
🔹 More decoupling between U.S. and Chinese tech ecosystems.
🔹 Higher costs for AI development worldwide.
🔹 Increased investment in alternative supply chains (e.g., India, Vietnam).

Conclusion: A Risky Gamble for the U.S.

While the U.S. aims to limit China’s AI advancements, forcing Nvidia and AMD to surrender 15% of China revenue may backfire by:

• Accelerating China’s chip independence.
• Reducing U.S. firms’ competitiveness.
• Escalating trade tensions further.