China targets Nvidia with antitrust probe, escalates US chip tensions

By Liam Mo and Brenda Goh

BEIJING (Reuters) -China stated on Monday it has launched an investigation into Nvidia Corp (NASDAQ:NVDA) over suspected violations of the nation’s anti-monopoly legislation, in a transfer broadly seen as a retaliatory shot towards Washington’s newest curbs on the Chinese language chip sector.

The assertion from the State Administration for Market Regulation (SAMR) asserting the probe didn’t elaborate on how the U.S. firm, recognized for its synthetic intelligence (AI) and gaming chips, may need violated China’s anti-monopoly legal guidelines.

It stated the U.S. chipmaker is, as well as, suspected of violating commitments it made throughout its acquisition of Israeli chip designer Mellanox (NASDAQ:MLNX) Applied sciences beneath phrases outlined within the regulator’s 2020 conditional approval of that deal.

Nvidia didn’t instantly reply to a request for remark. The corporate’s shares fell 2%.

The investigation comes after the U.S. final week launched its third crackdown in three years on China’s semiconductor business, which noticed Washington curb exports to 140 corporations, together with chip tools makers.

“It is (the probe) unlikely to have a lot of an impression on the corporate, significantly within the close to time period, as a result of most of Nvidia’s most superior chips are already restricted from being offered into China,” stated Bob O’Donnell, chief analyst at TECHnalysis Analysis.

In an indication that China intends to struggle again strongly towards the most recent transfer, shortly after Washington’s announcement Beijing banned exports to the USA of the essential minerals gallium, germanium and antimony.

On the identical day, 4 of the nation’s prime business associations issued a uncommon and coordinated response saying that Chinese language corporations needs to be cautious of shopping for U.S. chips as they have been “not protected” and purchase regionally as a substitute.

Nvidia has been one of many many corporations caught up within the U.S.-China frictions. An earlier spherical of export curbs by the U.S. stopped Nvidia from promoting its most superior AI chips to China, prompting it to give you new China-specific variations that have been compliant with U.S. export controls.

“It is clear that the Chinese language authorities is making an attempt to react towards current restrictions from the U.S., however their means to impression the U.S. semiconductor business continues to lower over time,” O’Donnell stated.

Nvidia dominated China’s AI chip market with a greater than 90% share earlier than these curbs. Nevertheless, it presently faces growing competitors from home rivals, chief amongst them being Huawei. China accounted for round 17% of Nvidia’s income within the 12 months to the tip of January, sliding from 26% two years earlier.

In 2020, the corporate received a key approval from China for its acquisition of Mellanox Applied sciences, regardless of issues that Beijing might block the deal resulting from U.S.-China commerce frictions.

Beijing’s approval set a number of circumstances for Nvidia and the merged entity’s China operations, together with prohibitions on pressured product bundling, unreasonable buying and selling phrases, buy restrictions and discriminatory therapy of shoppers who purchase merchandise individually.

The final time China launched an anti-monopoly probe right into a high-profile overseas expertise agency was in 2013 when it investigated Qualcomm (NASDAQ:QCOM)’s native subsidiary for overcharging and abusing its market place in wi-fi communication requirements.

Qualcomm later agreed to pay a high quality of $975 million, which on the time was the biggest China had ever handed out to an organization.