This piece reflects the author’s own opinions, which may not align with those of The Component Club. We share it to spark informed debate and welcome alternative perspectives from our readers.
The US Takes a Cut on China Chip Sales, A New Precedent in Tech Trade
In an arrangement that industry veterans are calling “unprecedented,” the United States government will now receive 15% of revenue from certain advanced chip sales to China. The agreement, involving Nvidia and AMD, follows a reversal of previous bans and marks a sharp turn in US technology trade policy.
Under the Biden administration, exports of top-tier AI chips to China were banned over national security concerns, so Nvidia and AMD responded by producing less powerful, China-specific variants, including the Nvidia’s H20 and AMD’s MI308.
However, under President Trump, even these moderated products were blocked, but that changed in July, when the ban was lifted after lobbying from Nvidia CEO Jensen Huang. Shortly thereafter, the 15% revenue cut was announced, effectively placing the US government in direct financial partnership with sales it previously prohibited.
Proof of A Money Grab
I have always said that the original ban on chip sales to China was a mistake, not because I believe that China has a right to these devices, but because I knew exactly what it would lead to. The act of making China desperate has seen China expand its own semiconductor industry, develop its own devices, and push open-source technologies such as RISC-V.
Of course the ban did hold China back a few years, but it didn’t take them long to create their own infrastructure and supply chain. In fact, it has done so well in its independence that when Western devices are available, there is a growing trend in Chinese engineers just refusing these devices in favor of home grown versions that they can depend on in supply and support.
Despite that, I understand the logical reasoning behind the original ban; to protect national interests and prevent China from gaining an upper hand in the AI race. Selling high-end chips to a nation that actively tried to undermine your own through industrial espionage, violation of IP, and even outright counterattacks is just an odd thing to do.
When Donald Trump imposed stricter bans on China and its access to Western devices and services, it only hardened the idea that the West doesn’t want to support nations that actively undermine it. These stricter bans were done in the name of national interest, and the logical reasoning was there.
But when the news broke that the US will be taking a portion of sales for exports on high-end chips going to China, it instantly became clear that the Trump administration does not perceive any national security risk over high-end chips. Instead, it has used the guise of national security to force companies into paying a secondary tax if they want to deal with nations considered unfriendly to the US. If an administration was genuinely concerned with the risk associated with a sale, they would either outright ban it or coat it in bureaucracy to make sure that whatever was sold doesn’t end up in the wrong hands.
So what does this move really signal? Well, in my opinion, what it shows is one of a few things.
Option 1 – The US Government Is Desperate
If you believe that the administration truly believes in the national security issues surrounding semiconductors, then this mafia like behavior points towards sheer desperation to raise funds. This theory is further backed when considering the numerous tariffs that have been introduced, with the idea of protecting US businesses.
The US dollar is declining in power, interest rates remain high, and the spending power of the average citizen is declining, which makes it harder for the government to raise taxes. Combined with a growing deficit and national debt, economic growth must continue to outpace the growing interest on the debt otherwise a US government default would be imminent.
Since those chip companies are desperate to sell their devices abroad, and there are already national interest controls in place, it is an easy target for the US government to raise funds.
Option 2 – The US Government Is Greedy
If the administration believes that semiconductor exports do not pose a threat national security, then this decision is nothing more than a money grab. Considering that US businesses could make massive profits from selling devices to China, this would help grow the US economy, allow these businesses to grow, and from there, increase employment opportunities.
Of course, a business that grows doesn’t always pay proportionally more in tax (depending on investments, losses, expenses etc.), and it is tax that the government gets funding. So if you allow chip sales with no restrictions, yes, the government will get a small piece of the action through corporation tax, but it will likely be a small amount.
Instead, if the government just steps in and takes a direct portion of all sales, then it stands to make substantial amounts of money, and this is before other taxes are applied. In the case with NVIDIA and AMD, a billion in sales would result in the US government raking in $150 million, and while this may be a drop in the bucket of the national debt, it is certainly no small change.
Where would this money go?
Now, where this money goes is anyone's guess. If national security was a genuine concern, then this money could (and should) go straight into cyber-defence, research, and other military technologies that would help to further protect the nation.
But knowing how governments work, it will more than likely just end up distributed among the inefficient departments that lie deep in the US government. Millions will continue to be wasted on projects that never take off, critical infrastructure will only be talked about but never actually built or repaired, and deep social-economic issues that face the US will likely be overlooked in favor of some lobbying group looking to undermine the rights of citizens.
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