China Launches Antitrust Probe into US Semiconductor Giant in Sign of Escalation
China's antitrust regulator launched an investigation into American semiconductor giant Nvidia in an apparent move to hit back at the US government's escalated chip restrictions.
Nvidia, which has complied with US regulations in restricting exports of advanced chips to China, is suspected of violating China's antimonopoly law in its US$6.9 billion acquisition of Israeli interconnect products and solutions provider Mellanox Technologies, the State Administration for Market Regulation said in a notice on Monday, South China Morning Post reported.The Nvidia-Mellanox deal was announced in 2019. China's market regulator approved the deal in April 2020 on the condition that Nvidia's graphics processing unit (GPU) accelerators, Mellanox high-speed network interconnect equipment, and related software and accessories continue to be supplied to the Chinese market based on "fair, reasonable, and non-discriminatory principles".The Nvidia antitrust probe "marks the start of what is likely to be a systematic strategy to retaliate against the US [and] a harbinger of more aggressive measures to come", said Nigel Green, CEO of deVere Group, a financial advisory firm. "This isn't just a regulatory issue; it's a calculated geopolitical manoeuvre," he said, adding that China was sending a strong message that it won't hesitate to push back.Nvidia did not immediately respond to a request for comment on Monday. Its US-listed shares fell 1.8 percent to US$142.44 in pre-market trading on Monday.
Beijing's regulatory move against Nvidia comes just days after China's state-backed industry associations urged their members to be cautious about purchasing US chips, a response to Washington's latest round of restrictions. The China Semiconductor Industry Association, which includes Nvidia Technical Service (Beijing) as a member, for instance, called on its members to shun chips from US suppliers, saying they are "no longer safe, no longer reliable".It remains unknown how the antitrust probe will affect Nvidia's sales and business ties in China. Beijing could levy a fine on the company, or force it to undo the acquisition under Chinese laws and regulations, once the probe is completed. The chipmaker's revenue in China (including Hong Kong) for the three months ended October 29 reached US$5.41 billion, accounting for about 17.9 percent of the global total, making China its third biggest market by revenue after the US and Singapore.Company founder Jensen Huang visited Hong Kong last month and pledged to maintain Nvidia's presence in mainland China despite rising geopolitical tensions. Huang also spoke highly of China's unique strengths in capitalising on artificial intelligence (AI) as he received honorary doctorates from the Hong Kong University of Science and Technology.
Nvidia's advanced chips are the most sought-after in the AI era, but the company was barred from selling its A100 and H100 GPUs - two of the most in-demand chips for training and running AI models - to customers in China in August 2022. It later modified those chips to create the A800 and H800 to get around those restrictions.At the same time, Chinese tech giant Huawei Technologies has been catching up in offering alternatives. Earlier this year, it started offering samples of its Ascend 910C processor to large Chinese server companies for hardware testing and configuration, edging closer to the commercial roll-out of its upgraded version of the 910B, which it claims is on a par with Nvidia's popular A100.It is not the first time Beijing has targeted a US chip company.China's Cyber Security Review Office under the Cyberspace Administration of China (CAC), the country's internet watchdog, last year launched an investigation into US memory chipmaker Micron Technology. It was the first time the Chinese government targeted a US semiconductor company since the tech war began.Two months later, regulators banned the sale of Micron's products to China's so-called critical information infrastructure operators, claiming that the company posed a "national security risk".
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