China Launches Antitrust Investigation into Nvidia, Heightening US Chip Tensions – One America News Network
December 9, 2024 – 7:46 AM PST
BEIJING (Reuters) – On Monday, China announced the initiation of an investigation into Nvidia Corp (NVDA.O) over potential breaches of the country’s anti-monopoly regulations. This action is largely interpreted as a retaliatory measure following recent restrictions from Washington on the Chinese chip industry.
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The State Administration for Market Regulation (SAMR), which released the statement regarding the investigation, did not specify the nature of the alleged anti-monopoly violations involving the U.S. company, recognized for its artificial intelligence (AI) and gaming chips.
Additionally, it is claimed that the U.S. chipmaker may have breached agreements made during its purchase of Israeli chip designer Mellanox Technologies, as per the conditions laid out in the regulator’s 2020 approval of that acquisition.
Nvidia has not yet responded to a request for comment, and following the announcement from the Chinese regulator, the company’s stocks dropped by 2.2% in pre-market trading in New York.
This investigation follows the recent move by the U.S., which last week commenced its third offensive within three years against China’s semiconductor sector, imposing restrictions on exports to 140 companies, including those involved in chip equipment manufacturing.
In a clear indication of China’s intent to retaliate, shortly after the U.S. announcement, Beijing prohibited the export of essential minerals such as gallium, germanium, and antimony to the United States.
On the same day, four leading industry associations in China issued a rare coordinated message advising domestic companies to exercise caution when purchasing U.S. chips, stating they were “no longer safe” and recommending local alternatives instead.
Nvidia has faced challenges amid the ongoing U.S.-China tensions. Previous export restrictions prevented Nvidia from supplying its cutting-edge AI chips to China, which compelled the company to develop new versions tailored specifically for the Chinese market that comply with U.S. export regulations.
Before these restrictions, Nvidia held a dominant position in China’s AI chip market with over 90% market share. However, it is now encountering growing competition from local companies, notably Huawei. China represented approximately 17% of Nvidia’s revenue for the fiscal year ending January, down from 26% two years prior.
In 2020, Nvidia secured crucial permission from China to acquire Mellanox Technologies, overcoming fears that the deal might be obstructed due to escalating U.S.-China trade conflicts.
China’s approval imposed several conditions on Nvidia and its newly merged operations in the country, which included bans on forced product bundling, unreasonable trading practices, restrictions on purchases, and biased treatment towards customers purchasing products separately.
The last instance of China embarking on an anti-monopoly investigation against a prominent foreign technology firm was in 2013 when it scrutinized Qualcomm’s (QCOM.O) local unit for overcharging and misusing its market dominance in wireless communication standards.
Qualcomm subsequently consented to pay a $975 million fine, which at that time constituted the largest penalty ever imposed by China on a company.
Reporting by Liam Mo, Yukun Zhang and Ryan Woo; editing by Jason Neely, Louise Heavens and Susan Fenton
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