In a significant development for global tech trade, Advanced Micro Devices (AMD) is prepared to pay a substantial fee to the United States government to continue its artificial intelligence chip business in China. The company's Chief Executive Officer, Lisa Su, has publicly reiterated this stance, confirming a key financial arrangement amidst ongoing trade tensions.
The 15% Tax Deal: A Path to Resume Exports
Speaking at an event organised by Wired magazine in San Francisco, Lisa Su addressed the future of AMD's chip sales to the Chinese market. She confirmed that AMD will pay a 15 percent tax on its MI308 AI chips to resume shipping them to China. This fee was instituted during the Trump administration.
This move follows a similar agreement reached between the US government and its rival, Nvidia. In August this year, the Trump administration announced a deal allowing both chipmakers to resume shipping certain advanced chips to China. The condition was a direct payment of 15% of the revenue generated from these sales back to the US Treasury. For Nvidia, this applies to its H20 chip sales in China.
Background: Bans, Lobbying, and Financial Impact
The context for this unusual tax arrangement stems from strict US export controls, typically justified on national security grounds. The US had previously banned the sale of powerful AI chips to China. Consequently, exports of both Nvidia's H20 and AMD's MI308 chips were halted in April as trade frictions between the two economic giants simmered.
The financial stakes are enormous. China represents a critical market for leading AI chip developers. AMD itself estimated that the US export restrictions on its MI308 chips would cost the company roughly $800 million. In an April filing with the US Securities and Exchange Commission (SEC), AMD expressed uncertainty, stating, "The Company expects to apply for licenses but there is no assurance that licenses will be granted." The filing also warned that the new license requirements would impact inventory and purchase commitments.
Nvidia's CEO, Jensen Huang, has been actively lobbying for months to restart sales, reportedly meeting with President Donald Trump recently. Huang has frequently warned that losing the China market would be a "tremendous loss" for his company.
Reactions and Legal Scrutiny
The deal has not been without controversy. Some legal experts in the US have argued that taxing exports in this manner could potentially violate the US Constitution, which explicitly bans taxes on exports. Meanwhile, China has reacted with its own measures. Reports indicate that Chinese authorities, unhappy with the US restrictions, have advised domestic companies to refrain from using Nvidia's H20 chips for government and national security applications. This guidance is believed to extend to AMD's chips as well, despite the resumption of sales.
The situation highlights the complex interplay between national security, economic interests, and global technology supply chains. While the 15% tax provides a temporary conduit for commerce, it introduces new costs and uncertainties for American chip giants operating in one of the world's largest tech markets.
