China Investigates Nvidia for Antitrust Violations Amid US-China Tech Wars

Nvidia’s investigation comes after the US implemented its third enforcement action against the Chinese semiconductor industry in three years.

China announced on Monday that it has launched an investigation into Nvidia over potential violations of the country’s anti-monopoly regulations, a move widely seen as retaliation against Washinton’s latest restriction on the Chinese semiconductor industry.

The statement regarding the investigation from the State Administration for Market Regulation did not specify how the US company, which is known for its artificial intelligence and gaming chips, has breached China’s anti-monopoly laws.

It also added that the US chip manufacturer was accused of violating the commitments it made during its acquisition of Israel chip company Mellanox Technologies, under terms it specified in the regulator’s 2020 conditional approval of that transaction.

This announcement is the latest in the ongoing tech wars between China and the United States as both countries compete to see which technology is superior.

Last week, four significant industry associations in China issued a rare and coordinated statement saying that Chinese companies should be careful while buying US chips as they claim to be no longer safe and should instead opt for local alternatives.

Nvidia shares dropped by 2.5% on Monday. A spokesperson for Nvidia stated that the company tries its best to deliver the best products in every market, fulfill its commitments whenever it operates, and is willing to respond to any questions asked by the investigators regarding their business operations.

According to Bob O’Donnell, chief analyst at TECHnalysis Research, the investigation does not significantly impact the company, especially in the short run, as most of Nividia’s advanced chips are banned from sale in China.

The investigation comes after the US implemented its third enforcement action against the Chinese semiconductor industry in three years, restricting exports to 140 companies, including chip equipment manufacturers.

After Washington’s announcement, Beijing banned exports of rare earth minerals like gallium, germanium, and antimony to the US.

Nvidia is one of the many companies affected by the conflict between the US and China. In 2022, US sanctions were imposed that banned the shipment of A100 and H100 AI chips to China, which led to Nvidia developing modified versions.

In October 2023, the variants specific to the Chinese market were later restricted due to more strict US regulations, so Nvidia had to create another set of modified chips for China.

O’Donnell remarked that it was clear that the Chinese government is trying to retaliate against the latest US regulations, but their capability to influence the US semiconductor industry is declining over time.

Before these restrictions, Nvidia was dominant in China’s AI chip market, with a 90% share. Now, it is under increasing competition from local competitors, especially Huawei. China accounted for 17% of Nvidia’s revenue for the year ending January, which decreased from 26% two years before.

However, in 2020, the company received approval from China to acquire Mellanox Technologies, which relieved investors concerned that US-China trade wars would complicate the deal.

Nvidia and the merged company were under many conditions that required them to supply GPU accelerators to the Chinese markets at a fair and reasonable price.

Under these terms, the companies must also provide customers and distributors the opportunity to buy up to one year’s worth of Nvidia GPU accelerators and Mellanox networking products.

These conditions also ban forced product bundling, unreasonable trading conditions, purchase limitations, and discriminatory treatment of customers buying products individually.  

The last time China launched an anti-monopoly investigation into a significant international tech company was in 2013 when it investigated Qualcomm’s local subsidiary for overcharging and abusing its market position in wireless communication standards.

Qualcomm later agreed to pay a $975 million fine, the largest penalty China had ever imposed on a company during that time.