[News] China Launches Antitrust Probe into NVIDIA over Mellanox Deal, Heightening U.S. Chip Tensions

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Shortly after U.S.’s latest semiconductor crackdown on China, which restricted exports to 140 entities, the country has found a way to fight back – by targeting NVIDIA. According to reports from Reuters and Bloomberg, China announced on Monday that it has initiated an antitrust investigation into the U.S. AI chip giant for alleged violations of the country’s anti-monopoly regulations.

According to Bloomberg, the State Administration for Market Regulation stated that it has launched an investigation into NVIDIA’s recent conduct and the terms of its acquisition of Mellanox Technologies approved by Beijing four years ago, noting that the deal required NVIDIA to ensure non-discriminatory treatment of Chinese companies.

In April, 2020, NVIDIA announced the completion of its acquisition of Israeli computer networking equipment maker Mellanox Technologies, for a transaction value of USD 7 billion. China approved the deal with the condition that Mellanox share details about new products with competitors within 90 days of releasing them to NVIDIA, as per Bloomberg.

In response, an NVIDIA spokesperson emphasized the company’s dedication to delivering top-tier products globally and adhering to its obligations in all regions where it operates. “We are happy to address any questions regulators may have about our business,” the spokesperson added.

Short-term Impact May Be Limited

In terms of the impact of China’s probe, the Reuters report, citing remarks from an analyst, indicates that the investigation is unlikely to significantly affect NVIDIA, particularly in the short term, as the company’s most advanced chips are already prohibited from being sold in China.

Since 2022, the U.S. has prohibited NVIDIA from exporting some of its most advanced AI chips to China, prompting the company to develop custom chips tailored for the market. One of the latest examples would be H20, built on the Hopper architecture but less powerful than NVIDIA’s H100.

Though NVIDIA’s chips have been playing a critical role for Chinese companies, like ByteDance, to train their AI models, it now faces growing competition from domestic players, particularly Huawei, according to Reuters. The report further notes that NVIDIA once held over 90% of China’s AI chip market. However, China contributed about 17% of NVIDIA’s revenue in the fiscal year ending January, a drop from 26% two years earlier.

Another High-profile Anti-monopoly Probe by China after Qualcomm

Notably, according to Bloomberg, France also launched an investigation into NVIDIA last year, focusing on its AI chip business. Benoit Coeure, head of France’s antitrust agency, hinted during a July press conference that the company could face antitrust charges “at some point,” the report adds.

It is also worth noting that the most recent high-profile anti-monopoly investigation into a foreign tech company by China occurred in 2013, targeting Qualcomm’s local subsidiary for alleged overpricing and abuse of its dominant position in wireless communication standards, as per Reuters.

Qualcomm ultimately agreed to pay a USD 975 million fine, the largest penalty ever imposed on a company in China at that time, the Reuters report notes.

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(Photo credit: NVIDIA)