China launches antitrust probe into Nvidia | USAEMALL.com

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China has launched an antitrust probe into chip giant Nvidia as competition with the US deepens over the development of cutting-edge technologies such as artificial intelligence.

Chinese state media on Monday night reported that the State Administration of Market Regulation had in recent days opened an investigation into Nvidia for suspected violations of the country’s anti-monopoly law.

The state media report said that China’s market regulator was also reviewing possible violations of commitments the US chipmaker made during its $6.9bn acquisition of Mellanox, an Israeli-American supplier of networking products. China’s market regulator conditionally approved the deal in 2020.

The transaction was the biggest-ever acquisition for the US semiconductor company and launched Nvidia deeper into the data centre and high-performance computing markets.

Over recent years, Nvidia has become a global market leader in AI chips, with its graphics processing units becoming crucial in developing leading AI models. But US export controls have forced Nvidia to sell watered-down versions of its must-have GPUs in China and given rise to a large black market of smugglers who illegally bring its more advanced processors into China.

“This probe appears to be a political action rather than a legal one,” said a Chinese antitrust expert, who asked not to be named, adding: “Never before has state media taken the lead in announcing an investigation.”

China’s investigation comes a week after Washington unveiled tougher export controls on advanced high-bandwidth memory chips and chipmaking equipment to the country, leading Beijing to respond immediately with an embargo on critical materials to the US.

The loss of the imported memory chips will be a challenge for Nvidia’s local rival Huawei, which needs HBM chips for its own AI processors.

Four Chinese government-backed industry associations, representing the bulk of the country’s semiconductor demand, last week issued co-ordinated statements urging member companies to rethink purchases of US silicon that three of them deemed as “no longer safe or reliable”.

The public directives came after Chinese officials in recent months urged local tech giants behind closed doors to buy more of Huawei’s AI processors and fewer of Nvidia’s, according to two people familiar with the matter.

Chinese customers still bought $5.4bn of Nvidia’s chips in its most recent quarter, contributing 15 per cent of sales. Analysts say the weakened Nvidia H20 chips available to China are still powerful AI accelerators for groups such as ByteDance, Alibaba and Tencent when compared with other available options.

Analysts earlier this year estimated that Nvidia would sell 1mn of its H20 chips, about double Huawei’s expected AI sales.  

Washington’s sanctions have made it more difficult for Chinese AI companies to build huge computing clusters like their US rivals, which are thought to be critical to advancing AI development.

Shares in the US group traded down 2 per cent in pre-market trading.

Nvidia did not immediately respond to a request for comment.