China Launches Anti-Monopoly Probe into Nvidia
In a significant move, China announced on December 9 that it has initiated an investigation into Nvidia Corp for potential breaches of the country’s anti-monopoly law. This development is likely perceived as a counter action to the recent restrictions imposed by Washington on chip exports to China.
The State Administration for Market Regulation indicated that the US chipmaker is under scrutiny for allegedly violating commitments it made during its acquisition of Mellanox Technologies Ltd. This follows conditions outlined in the regulator’s conditional approval of the deal back in 2020.
While the specifics of how Nvidia might have breached China’s anti-monopoly laws were not disclosed, the regulatory body’s announcement has sparked notable market reactions. Nvidia’s shares experienced a 2.2 percent dip in premarket trading following the news from the Chinese authorities.
This investigation emerges on the heels of the United States’ latest clampdown on China’s semiconductor sector. The US recently imposed export restrictions on 140 companies within the chip industry, a continuation of its three-year strategy to limit China’s access to advanced semiconductor technology.
Nvidia has historically thrived on high demand from the Chinese market. However, this demand has been adversely affected over the past year due to US initiatives aimed at preventing China from acquiring cutting-edge chips. Prior to these restrictions, Nvidia held a dominant position in China’s AI chip market, boasting a market share exceeding 90 percent. In recent times, however, domestic competitors such as Huawei have intensified the competition Nvidia faces.
The US firm’s 2019 bid of $6.9 billion to acquire Israeli chip designer Mellanox Technologies raised concerns that China might obstruct the agreement due to ongoing trade tensions between the US and China. Nevertheless, Beijing granted approval for the acquisition in 2020, albeit with several conditions applicable to Nvidia and its operations in China. These conditions included prohibitions on practices such as forced product bundling, imposition of unreasonable trading terms, restrictions on purchases, and any form of discriminatory treatment towards customers opting to purchase products separately.
This latest probe into Nvidia underscores the delicate balancing act that international companies must perform in navigating the regulatory landscapes of major markets like China and the United States. As tensions persist, businesses are finding themselves increasingly caught between the conflicting policies of these global powers.
The outcome of this investigation could have significant implications for Nvidia’s operations in China, as well as for its strategic direction in adapting to a rapidly shifting geopolitical environment. The tech industry will be watching closely as both China and the US continue to wield regulatory oversight to advance their respective interests in the global semiconductor market.
