Chips for cash? Where the US policy split on tech sales to China is headed
The debate reveals fundamental disagreements about how the US should balance economic interests and national security in an era of great power competition
THE ongoing debate in Congress over restricting semiconductor sales to China has reached a critical juncture, highlighting deep tensions between national security imperatives, economic interests and the practical realities of global technology competition.
At the centre of this controversy is US President Donald Trump’s August 2025 decision to allow advanced artificial intelligence (AI) chip sales to China in exchange for a 15 per cent revenue share to the US government – a move that has sparked intense bipartisan criticism and raised fundamental questions about America’s approach to technological rivalry with China.
The Trump administration’s unprecedented deal with chipmakers Nvidia and AMD represents a dramatic departure from traditional export control policies. Under this arrangement, these companies pay the US government 15 per cent of their revenue from selling AI chips such as Nvidia’s H20 and AMD’s MI308 to China.
This unusual structure, reportedly settled after Trump’s initial demand for 20 per cent was negotiated down by Nvidia chief executive officer Jensen Huang, effectively transforms what were once security-based export restrictions into a revenue-generating mechanism for the federal government.
The policy shift is particularly striking given that the administration had previously banned sales of Nvidia’s H20 chips to China in April 2025, only to reverse course months later. This flip-flop has drawn criticism from lawmakers who question whether national security is being subordinated to financial gain.
Senate Democrats have led the charge against this policy, writing to Trump to express their “serious alarm”. These critics argue that allowing advanced AI chip sales to China, regardless of the revenue-sharing arrangement, fundamentally undermines efforts to prevent China from advancing its military and surveillance capabilities. They contend that these semiconductors are crucial components in AI systems that could enhance China’s defence technologies and authoritarian control mechanisms.
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The revenue-sharing model could establish a troubling precedent where national security restrictions can be bypassed for a fee. This approach, they warn, risks transforming export controls from security tools into mere profit-sharing schemes.
Moreover, legal experts have raised concerns about whether this arrangement constitutes an unconstitutional export tax, as it levies a fee on companies for exporting their products. The Constitution vests the power to regulate international commerce and impose taxes in Congress, not the executive branch.
Controlling chip sales
On the other side, proponents of controlled chip sales argue that a complete ban would be counterproductive. The Chinese market represents billions in potential revenue for American semiconductor companies – income that helps fund research and development needed to maintain America’s technological edge.
From this perspective, total restrictions could harm US firms while pushing China to accelerate the development of domestic alternatives. Unilateral restrictions are often less effective than coordinated international efforts in controlling sensitive technology transfers.
This debate occurs against the backdrop of the Chips and Science Act, which invested billions in domestic semiconductor manufacturing to reduce dependence on foreign production and maintain American leadership in critical technologies. Reinforcing this legislative mood, the Senate proposed the Gain AI (short for Guaranteeing Access and Innovation for National Artificial Intelligence) Act earlier this month, which stipulates that AI chipmakers prioritise domestic orders for advanced processors before supplying them to foreign customers.
The revenue-sharing arrangement reflects a transactional policy view that seeks to extract economic benefit from commercial relationships, clashing with a security-focused approach that prioritises denying China sensitive technologies, regardless of economist cost. Some lawmakers worry this new policy directly undermines the strategic objectives of the Chips Act.
Looking ahead, the debate in Congress appears headed for continued partisan division. Democrats are expected to push harder for stricter controls, with some lawmakers proposing even more stringent measures, such as the Chip Security Act, which would require embedding “tracking systems” in exported chips to enable Washington to monitor their use in China.
Despite this pressure, the Trump administration would likely have enough votes to maintain its fee-based licensing approach, creating ongoing uncertainty in US-China semiconductor policy.
The outcome will shape technology relations between the two superpowers, defining the broader framework for how America manages strategic competition in this critical sector. Congressional oversight remains crucial to ensure that short-term financial gains do not compromise long-term strategic interests.
Ultimately, the debate also reflects deeper questions about how democracies can effectively compete with their rivals while maintaining their values and protecting their security in an interconnected global economy.
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