China, the U.S. NVIDIA antitrust investigation is a smart countermeasure.

December 11, 2024 2:02 PM GMT+9

The Chinese government has found a clever way to retaliate against the USA. They have initiated an investigation into the suspicion of antitrust violations by the American semiconductor giant NVIDIA. The motive is believed to be political, especially following the strengthening of export restrictions on advanced semiconductor-related products by the USA towards China. However, it is a fact that NVIDIA dominates the semiconductor market for artificial intelligence (AI), and concerns regarding antitrust violations cannot be ignored.
The timing of the start of the investigation is not a coincidence. The Biden administration in the US announced new export restrictions related to semiconductors for China just last week. In response, China announced the prohibition of exporting important minerals such as gallium, germanium, antimony used in semiconductors, infrared technology, optical fiber, etc. to the USA.
China has previously taken countermeasures targeting American companies such as Micron Technology, a memory chip manufacturer. However, since the US initiated a high-tech war against China in 2022, NVIDIA has become the largest and most prominent target.

This is a wise choice. NVIDIA dominates the market for cutting-edge graphics processing units (GPUs) used by Microsoft and Meta Platforms to train AI models. With GPUs costing over $30,000 each and little alternative to NVIDIA's products, and with the company's gross margin exceeding 70%, regulatory authorities have been keeping a close eye on them.
The US Department of Justice is gathering information from the perspective that NVIDIA may be making it difficult for customers to switch suppliers or imposing punitive measures on customers using products other than NVIDIA's. This was reported by Bloomberg in September based on insider information.
According to another report by Bloomberg, the European Union (EU) is informally collecting information on the possibility of anti-competitive practices in the GPU market.

NVIDIA is already prohibited from selling advanced semiconductors to Chinese companies. However, major Chinese tech companies like Baidu, the parent company of TikTok (ByteDance), still use NVIDIA processors. NVIDIA's revenue from China increased by 78% in the most recent fiscal year, exceeding $10 billion.

Indeed, China accounts for less than 20% of NVIDIA's total revenue. However, the company faces a greater risk that formal investigations by the Chinese government could prompt actions from other countries.
Leading US semiconductor giant Qualcomm (QCOM.O) experienced similar events. After China imposed a $975 billion fine for antitrust violations in 2015, authorities in South Korea, the USA, and the EU followed suit. China's countermeasures against NVIDIA may have political motives but are likely to have repercussions for high-tech companies worldwide and regulatory agencies.
●Background News
*China's State Administration for Market Regulation (SAMR) announced on the 9th that they have started an investigation into NVIDIA for suspected violations of anti-monopoly laws. They pointed out the potential violation of NVIDIA's promise to obtain SAMR's approval regarding its acquisition of Israeli peer Mellanox Technologies in 2020.
*An NVIDIA spokesperson told Breakingviews that the company is striving to deliver the best products in all regions and to keep promises in all locations where it operates. They stated, 'If regulatory authorities have any questions about our business, we will be happy to answer any questions.'