Janice R. Andrews
China’s State Administration for Market Regulation (SAMR) announced on Monday the launch of an anti-monopoly investigation into U.S. chipmaker Nvidia. The move is widely viewed as a countermeasure to the latest restrictions imposed by Washington on China’s semiconductor industry, further escalating tensions between the two global superpowers.
Investigation Highlights
SAMR’s statement did not detail the specific ways Nvidia, known for its gaming and artificial intelligence (AI) chips, might have violated China’s anti-monopoly regulations. However, it highlighted potential breaches of commitments Nvidia made during its 2020 acquisition of Israeli chip designer Mellanox Technologies. The deal had been conditionally approved by Chinese regulators, with operational requirements imposed on the merged entity.
Nvidia responded to the probe by reaffirming its compliance efforts. A company spokesperson said, “We strive to provide the best products in all regions while honoring our commitments. We welcome any questions regulators may have about our business operations.”
Following the announcement, Nvidia’s shares fell 2.5%, reflecting investor concerns over the investigation.
U.S.-China Chip War Intensifies
This probe comes in the wake of Washington’s latest crackdown on China’s semiconductor sector. Last week, the U.S. expanded export restrictions, targeting 140 Chinese companies, including manufacturers of chipmaking equipment. These measures aim to curb China’s access to advanced chip technologies critical to AI and defense applications.
In response, Beijing has taken steps to retaliate. It recently banned exports of key minerals, including gallium, germanium, and antimony, to the U.S.—materials essential for high-tech manufacturing. Simultaneously, four prominent Chinese industry associations urged domestic companies to reduce reliance on U.S. chips, citing security risks, and to prioritize purchasing from local suppliers.
Impact on Nvidia
Nvidia, a central player in the U.S.-China tech tensions, has been navigating these challenges for some time. Due to U.S. export restrictions, its most advanced AI chips are already barred from sale in China. To adapt, Nvidia developed China-specific versions of its products that comply with the imposed restrictions.
Before these restrictions, Nvidia commanded over 90% of China’s AI chip market. However, competition from domestic players, particularly Huawei, has been growing. In the fiscal year ending January 2024, China accounted for 17% of Nvidia’s revenue, a drop from 26% two years earlier.
According to Bob O’Donnell, chief analyst at TECHnalysis Research, the investigation is unlikely to affect Nvidia significantly in the short term. “Nvidia’s most advanced chips are already restricted from sale in China. The Chinese government’s ability to impact the U.S. semiconductor industry has diminished over time,” O’Donnell said.
Previous Anti-Monopoly Cases
This is not the first time China has launched a high-profile anti-monopoly investigation against a foreign tech firm. In 2013, Qualcomm faced a similar probe and was fined $975 million for overpricing and abusing its market dominance. The Nvidia investigation may follow a similar trajectory, potentially leading to fines or operational constraints.
Broader Implications
The investigation highlights China’s intent to push back against U.S. restrictions while signaling its determination to safeguard its domestic tech industry. For foreign companies like Nvidia, the probe serves as both a cautionary tale and a reminder of the complex geopolitical risks associated with operating in China.
As the tech rivalry between the U.S. and China deepens, Nvidia and other global firms remain caught in the middle, forced to navigate an increasingly volatile business environment. The outcome of this probe will determine whether it results in material penalties or primarily serves as a symbolic warning.
