China’s anti-trust regulator has launched an investigation into American semiconductor company Nvidia in an apparent move to hit back at the U.S. government’s chip export restrictions. Nvidia, which has complied with U.S. regulations in restricting exports of advanced chips to China, is suspected of violating China’s anti-monopoly law in its USD6.9 billion acquisition of Israeli interconnect products and solutions provider Mellanox Technologies, the State Administration for Market Regulation (SAMR) said in a notice. 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 anti-trust probe “marks the start of what is likely to be a systematic strategy to retaliate against the U.S. 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 maneuver,” he said, adding that China was sending a strong message that it won’t hesitate to push back. Nvidia could face a fine of up to USD1.03 billion, equal to 10% of its China sales in financial year 2024. The investigation into a previously-approved transaction marks the first time that China’s market regulator has opened the books on a closed deal.
The regulatory move against Nvidia comes just days after China’s state-backed industry associations urged their members to be cautious about purchasing U.S. chips, a response to Washington’s latest round of restrictions. The China Semiconductor Industry Association (CSIA), which includes Nvidia Technical Service (Beijing) as a member, for instance, called on its members to shun chips from U.S. suppliers, saying they are “no longer safe, no longer reliable”, the South China Morning Post reports.
The China Daily adds that although the specifics of the earlier investigation remain undisclosed, Deng Feng, Professor of Law from Peking University in Beijing, said that Nvidia has repeatedly stopped supplying several GPU products to China amid U.S. semiconductor export controls, which violated its commitments to the SAMR and has infringed upon the legitimate rights and interests of Chinese companies. Nvidia is required to refrain from engaging in practices such as tying sales or discriminating against customers when selling related products to the Chinese market. The company was also asked to ensure product interoperability and continued supply of Nvidia GPU accelerators, Mellanox high-speed networking equipment and related software and accessories to the Chinese market. “The so-called export control is not a justified reason for Nvidia to breach its commitments or fail to fulfill its legal obligations,” Professor Deng said.
