Consequence of chip dispute with the USA? China initiates antitrust review against NVIDIA

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Amid the escalating trade disputes over chip technologies between the USA and China, Chinese competition regulators have now initiated proceedings against NVIDIA. According to reports, the American GPU specialist violated regulations imposed on the US company regarding its acquisition of Mellanox in 2020.

In 2019, NVIDIA initiated an acquisition of the Israeli network technology provider Mellanox and successfully completed it in April 2020. The GPU specialist at that time outbid Intel in a months-long bidding war and paid 6.9 billion USD for the acquisition. With the acquired technological know-how, NVIDIA aimed to optimize its offerings along the complete functional chain of a data center—consisting of processors, network, and storage—according to their announcement. After the purchase was announced in March 2019, the acquisition was successfully completed in April 2020 following a thorough examination by global market regulators.

Now, more than four years later and amid an escalating trade dispute between the USA and China over chip technologies, Chinese antitrust regulators are becoming active: China's State Administration for Market Regulation announced last Monday that it has launched an investigation against NVIDIA for violating local antitrust laws.

The Chinese antitrust regulators approved the acquisition of Mellanox in April 2020 on the condition that NVIDIA's graphics processor accelerators, Mellanox high-speed network connection devices, along with the associated software and accessories, continue to be supplied to the Chinese market based on "fair, reasonable, and non-discriminatory principles," according to the justification. The conditions set by the Chinese government for the acquisition included that Mellanox informs competitors about new products within 90 days of delivery to NVIDIA. Additionally, NVIDIA had committed to ensuring that Chinese chip manufacturers could effectively integrate their products with Mellanox's technology. With the recent tightening of export regulations by the USA, these principles apparently no longer apply.

"A calculated geopolitical maneuver"

The antitrust investigation against NVIDIA "marks the beginning of what is likely a systematic retaliation strategy against the USA [and] a harbinger of more aggressive future measures," said Nigel Green, CEO of the financial advisory firm deVere Group, in a statement to Bloomberg News. "This is not just a regulatory matter but a calculated geopolitical maneuver," he said, adding that China is sending a clear message that it will not hesitate to retaliate.

In a statement, NVIDIA declared that they are "happy to answer any questions the regulatory authorities may have about our business." The company also emphasized its commitment to "offer the best possible products in every region and to fulfill our obligations wherever we conduct business." The company's U.S.-listed shares fell by 1.8 percent in pre-market trading on Monday to $142.44 following the announcement of the investigations.

Beijing's regulatory move against NVIDIA comes just days after China's state-backed industry associations warned their members to be cautious about purchasing U.S. chips in response to Washington's latest round of restrictions. The China Semiconductor Industry Association, which includes the Beijing-based NVIDIA Technical Service, urged its members to avoid chips from U.S. suppliers, declaring them "no longer safe and no longer reliable." (sg)

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