Nvidia, AMD to Pay 15% of China Chip Sale Revenue to the US: Understanding the New Policy

Introduction

In a major development affecting the global semiconductor industry, Nvidia and AMD—two leading chipmakers—have been reported to pay 15% of their revenue from chip sales in China to the United States government. This directive comes amid increasing geopolitical tensions and efforts by the US to regulate technology exports and protect its strategic interests.

History and Background

The semiconductor sector has long been at the heart of technological and economic competition between the US and China. Over the last decade, China has aggressively pursued self-reliance in chip manufacturing, while the US has imposed export controls to limit access to advanced technologies. Nvidia and AMD, known for their high-performance graphics and AI chips, are key players impacted by these policies.

Reason Behind the 15% Revenue Payment Demand

The demand for Nvidia and AMD to pay 15% of their China-generated chip sales to the US can be understood as part of broader trade and technology control measures. This move is designed to:

• Limit China’s access to advanced semiconductor technologies.

• Protect US technological leadership and intellectual property rights.

• Generate revenue from companies profiting heavily in Chinese markets under US jurisdiction.

• Exert economic pressure amid ongoing trade tensions.

Purpose and Significance

• Strategic Control: Semiconductors are critical to national security and economic competitiveness. Controlling their flow helps the US maintain leverage.

• Economic Benefit: The revenue share acts as a form of tax or royalty on foreign sales benefiting the US economy.

• Influence Global Supply Chains: By regulating major chipmakers, the US influences how and where chips are sold or manufactured.

Advantages

• Helps fund US technological and defense initiatives.

• Encourages companies to reconsider over-dependence on the Chinese market.

• Acts as a deterrent for technology transfer that could compromise US interests.

Disadvantages

• Could escalate trade tensions between the US and China.

• Might increase chip prices for Chinese consumers and industries.

• Potential backlash affecting the global semiconductor supply chain.

• Risks pushing China to accelerate self-reliance, reducing market share for US companies.

Conclusion

The directive for Nvidia and AMD to pay 15% of their China chip sales revenue to the US reflects the complex interplay of technology, economics, and geopolitics in today’s global landscape. While it aims to protect US interests and assert control, the policy carries risks of escalating tensions and disrupting supply chains. The coming months will be crucial in observing how companies, governments, and markets adapt to this new reality.