Donald Trump’s decision to let Nvidia and AMD export AI processors to China in exchange for a cut of their sales will have repercussions far beyond the U.S.
The semiconductor supply chain is global, involving a wide array of non-U.S. Companies, often based in countries that are U.S. Allies. Nvidia’s chips may be designed and sold by a U.S. Company, but they’re manufactured by Taiwan’s TSMC, using chipmaking tools from companies like ASML, which is based in the Netherlands, and Japan’s Tokyo Election, and using components from suppliers like South Korea’s SK Hynix.
The U.S. Leaned on these global companies for years to try to limit their engagement with China; these efforts picked up after the passage of the CHIPS Act and the expansion of U.S. Chip-export controls in 2022. Washington has also pressured major transshipment hubs, like Singapore and the United Arab Emirates, to more closely monitor chip shipments to ensure that controlled chips don’t make their way to China in violation of U.S. Law.
Within the U.S., discussion of Trump’s Nvidia deal has focused on what it means for China’s government’s and Chinese companies’ ability to get their hands on cutting-edge U.S. Technology. But several other countries and companies are likely studying the deal closely to see if they might get an opening to sell to China as well.
Trump’s Nvidia deal “tells you that [U.S.] National security is not really the issue, or has never been the issue” with export controls, says Mario Morales, who leads market research firm IDC’s work on semiconductors. Companies and countries will “probably have to revisit what their strategy has been, and in some cases, they’re going to break away from the U.S. Administration’s policies.”
“If Nvidia and AMD are given special treatment because they’ve ‘paid to play’, why shouldn’t other companies be doing the same?” He adds.
Getting allies on their side
The Biden administration spent a lot of diplomatic energy to get its allies to agree to limit their semiconductor exports to China. First, Washington said that manufacturers like TSMC and Intel that wanted to tap billions in subsidies could not expand advanced chip production in China. Then, the U.S. Pushed for its allies to impose their own sanctions on exports to China.
“Export controls and other sanctions efforts are necessarily multilateral, yet are fraught with collective action problems,” says Jennifer Lind, an associate professor at Dartmouth College and international relations expert. “Other countries are often deeply unenthusiastic about telling their firms—which are positioned to bring in a lot of revenue, which they use for future innovation—that they cannot export to Country X or Country Y.”
This translates to “refusing to participate in export controls or to devoting little or no effort to ensuring that their firms are adhering to the controls,” she says.
Paul Triolo, a partner at the DGA-Albright Stonebridge Group, points out that “Japanese and Dutch officials during the Biden administration resisted any serious alignment with U.S. Controls,” and suggests that U.S allies “will be glad to see a major stepping back from controls.”
Ongoing trade negotiations between the U.S. And its trading partners could weaken export controls further.
Chinese officials may demand a rollback of chip sanctions as part of a grand bargain between Washington and Beijing, similar to how the U.S. Agreed to grant export licenses to Nvidia and AMD in exchange for China loosening its controls on rare earth magnets.
Japan and South Korea may also bring up the chip controls as part of their own trade negotiations with Trump.
‘Expect continuing diversions’
A separate issue are controls over the transfer of Nvidia GPUs. The U.S. Has leaned on governments like Singapore, Malaysia and the United Arab Emirates to prevent advanced Nvidia processors from making their way to China.
Scrutiny picked up in the wake of DeepSeek’s surprise AI release earlier this year, amid allegations that the Hangzhou-based startup had trained its powerful models on Nvidia processors that were subject to export controls. (The startup claims that it acquired its processors before export controls came into effect).
As of now, the two chips allowed to be sold in China–Nvidia’s H20 and AMD’s MI308–are not the most powerful AI chips on the market. The leading-edge processors, like Nvidia’s Blackwell chip, cannot be sold to China.
That means chip smuggling will continue to be a concern for the U.S. Government. Yet “enforcement will be spotty,” Triolo says. “The Commerce Department lacks resources to track GPUs globally, hence expect continuing diversions of limited amounts of GPUs to China via Thailand, Malaysia, and other jurisdictions.”
Triolo is, instead, focused on another loophole in the export control regime: Chinese firms accessing AI chips based in overseas data centers. “There is no sign that the Trump Commerce Department is gearing up to try and close this gaping loophole in U.S. Efforts to limit Chinese access to advanced compute,” he says.
How much will the global supply chain change?
Not all analysts think we’ll see a complete unraveling of the export control regime.
“The controls involve a complex multinational coalition that all parties will be hesitant to disrupt, given how uncertain the results will be,” says Chris Miller, author of Chip War: The Fight for the World’s Most Critical Technology. He adds that many of these chipmakers and suppliers don’t have the same political heft as Nvidia, the world’s most valuable company.
Yet while these companies may not be as politically savvy as Nvidia, they’re just as important. TSMC, for example, is the only company that can manufacture the newest generation of advanced chips; ASML is the only supplier of the extreme ultraviolet lithography machines used to make the smallest semiconductors.
“I don’t believe it’s leverage that the Trump administration will easily give away,” says Ray Wang, a semiconductor researcher at the Futurum Group.
