‘This chip is obsolete; outdated technology that China has already had. ” That was Donald Trump’s answer when this week he was asked why he gave chip maker Nvidia permission to deliver AI chips to China.
But the processor – model name H20 – is certainly not an old stuff. Four months ago, the US still put this chip on the forbidden list. The reasoning at the time: it is dangerous for the US if China can have more computing power and can produce better (cyber) weapons and drones with artificial intelligence.
A lot can change in four months of Trump. This week, the American president, not without pride, confirmed that he had concluded a deal with Nvidia CEO Jensen Huang. In exchange for signed export permits for the H20, Nvidia shares 15 percent of sales with the US government. Based on Nvidia’s expected sales from China, it is probably an amount of 2.5 to 3 billion dollars.
Trump first asked 20 percent, he told journalists, but accepted Huangs fast counter offer of 15 percent. Competitor AMD, which also makes AI chips, agreed to the same conditions, so as not to be even more backlog on market leader Nvidia.
This hand clap between President and the NVIDIA CEO undermines the complex system of export rules that America imposes its own chip industry and the rest of the world. China does not get fast chips from the US and cannot buy the most advanced chip machines, such as the crucial lithography systems from ASML. For example, the West holds its technological lead compared to China for longer, the idea is. In recent years, America, with the Netherlands in the Kielzog, has always imposed stricter limitations on, but Trump is now breaking that pattern.
It is a strategic blunder to allow the export of the H20 processor to China, twenty experts wrote an open letter
Strategic blunder
The ‘committee’ that Nvidia has to pay for access to the Chinese market is, to say the least, unconventional – the construction shows traits of protection money. Taxes and rates are a matter for the congressthe American law prohibit Export taxes. Where the money would end up and how it can be collected is also unclear.
In any case, it is a strategic blunder to export this chip to China, twenty experts wrote in one open letter Among other things, was signed by two former safety advisers of Trump.
Although the H20 is not a runner when it comes to training AI models, it is a chip that has a quick computer memory, indispensable for processing AI assignments.
Democrat Raja Krishnamoorthi of the China Commission of the American House of Representatives responded Indignant on the Nvidia deal. “The government cannot indicate the export of semiconductors as a threat to national security and at the same time use as a source of income. We give China and our allies the signal that we can negotiate about our principles.”
According to John Moolenaar, the Republican chairman of the China committee, the White House makes a mistake by claiming that the H20 chips do not come close to what the fastest American AI chips can do. In any case, the processor performs “substantially better” than what Chinese manufacturers such as Huawei can produce, Moolenaar wrote in a letter To Howard Lutnick, the American Trade Minister.
Howard Lutnick, however, is not in control – he succeeds Trump’s instructions. The US President dismisses worries about national security if he suits it better and that is a change of course compared to the Bides government.
It is better to think a little longer than what is happening now: make good luck, already improvising, making a policy
Painfully slow
President Joe Biden tried to separate national security and economic motives, in order to convince allies of supporting the American export policy against China. That was a slow and difficult process, says Thea Kendler, expert in export regulation. She was a sub -minister at the Bureau For Industry and Security, the body that performs the export rules. Kendler negotiated with American chip companies and those in the Netherlands and Japan. She now works at Ekingump law firm. “The Biden government took centuries to make decisions, because for a long time all the ideas were chewed and the White House has been over-analyzed. But it is better to think a little longer than what happens now: on good happiness, already improvising, making a policy.”
Trump uses export restrictions as a trump card in the trade war with China. In June, for example, the US put the export of design software for chips to China on tires. A month later, after the trade discussions with China in London, that restriction was withdrawn.
Kendler: “I don’t think everything was immediately on the table. But as soon as you make it clear that you can negotiate at all about export restrictions, the reaction is: okay, apparently you can talk about everything.”
China, which holds the US in its grip with restrictions on rare metals and magnets, wants Washington to scrap the export restrictions on special computer memory for AI chips (High Bandwidth Memory). That way, Chinese companies could make faster AI chips themselves. “That would be so … short -sighted,” says Kendler – she pauses to find a suitable formulation.
But businessman Trump does not always give national security the highest priority. That was already apparent during his previous reign. In 2020, Trump surprised friend and foe by suggesting that the US could get the Chinese tech company Huawei – state enemy number one according to many American politicians – from the blacklist if he yielded a better deal with China. The wallet wins more often from the principles.
The next deal
“The big question is: the Trump government is still behind the general export policy or is everything negotiable? Because that would have major consequences for our national security,” says Ted Dean. He was an adviser to the former Handelsminister Gina Raimundo and nowadays works at American think tank DGA/Albright Stonebridge Group.
Trump has already set the door for the next deal: the president hinted That he also wants NVIDIA to have a squeezed version of the next generation AI chips sold to China, but then against a committee of 30 to 50 percent.
That smells of extortion: for Nvidia the enormous Chinese AI market is too important to go wrong. NVIDIA CEO Jensen Huang has convinced the president that it is better to keep China ‘addicted’ to NVIDIA chips and the accompanying software. Otherwise, Chinese companies would switch to the national alternatives, such as the AI chips from Huawei. Then Nvidia could ultimately be losing out, just as Huawei once brought the market share of Nokia and Ericsson.
For the time being, Nvidia is the standard for almost all AI development, also in China. Deepseek, the Chinese AI company that came up with a surprisingly good AI model at the beginning of this year, is struggling according to the Financial Times With lack of computing power: there are too few American chips available to train the next version of the Deepseek model. The Chinese alternatives of Huawei fall short, according to Deepseek. That is a sign that the export restrictions that the US and his allies impose still have a delaying effect.
As soon as it became known that the NVIDIA was allowed to export the H20 chip, Beijing Fijntjes announced that Chinese companies could better use their own soil chips for ‘sensitive’ government projects.
A deal for ASML?
“We seem to be distance from cooperation with our allies – while that is the best way to guarantee national security,” says Thea Kendler.
The Netherlands itself imposes export restrictions on chip machine makers ASML and ASM International because the point of view of the (outgoing) cabinet is that China is not allowed to have the very latest chip technology from the point of view of national security.
The United States did forced stricter measures for ASML to take The Hague itself. Trumps change in the direction of Nvidia makes it more difficult to deal with similar agreements in the future, Ted Dean explains: “Now that the Trump government says that the US is selling some advanced chips to China and the government even earns money with it, it becomes more difficult to enforce that a Dutch company should not make the same kind of sales.”
It is unlikely that ASML itself reports to the White House to close a deal for milder export rules: the risk of drainage is greater than the possible profit. China could throw a ball over ASML in the negotiations with the US, but the chance is small that Washington has the reins celebrated: the chip machines are too important for that.
Trumps brand new AI Action Planpublished in July, export policy regards as an indispensable element to guarantee America a technological lead over China. And the same AI Action Plan wants to force allies to take stricter export measures. If necessary with the Foreign Direct Product Rulean Export Act with which the US also determines the policy outside its own national borders.
No matter how fickle, the will of Washington is still law.