China has accused Nvidia of violating the country’s anti-mass laws, the latest escalation in the trade war with the US, claiming US-based chipmakers as collateral damage.
The allegations made by China’s market regulators on Monday came after he said it was a preliminary investigation into Nvidia’s business practices, with two countries holding trade talks in Madrid, Spain, and tipping was expected to be on the agenda.
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U.S. Treasury Secretary Scott Bescent has called for an announcement from the “poor timing” of China’s Market Regulation (SAMR), analysts said China has given leverage in trade talks.
Both countries have threatened to trade barbs and shut down the popular social media app Tiktok for the past six months after US President Donald Trump dropped to 30% after he hit China with massive tariffs.
China is responding to things like Alphabet’s Google with 10% tariffs and antitrust probes, further showing scrutiny of US companies’ regulations.
“This is a warning that if the US export control paradigm works the same way as it has last few years, there will be consequences and China wants to do damage to US companies,” said Zhengyuan Bo, a partner at research firm Plenum.
He added that the SAMR preliminary ruling is likely to violate the Trump administration’s decision on Friday to place 23 Chinese companies on the US trade blacklist.
China’s announcement concerns more uncertainty for Nvidia’s business in China, which accounted for 13% of total sales last year.
This shows that CEO Jensen Fan in China is not attractive enough. Huang visited the country three times this year to demonstrate his commitment to the Chinese market, saying that selling AI technology to China is the key to his ambition to become a business leader.
Despite the huge demand from Chinese tech companies, including Tencent and Tiktok Parentedance for Nvidia’s chips, Reuters, what is needed to build infrastructure to spike AI workloads, reports that China has discouraged businesses from such purchases when it attempts to steal US technology.
Last month, Beijing asked Nvidia to explain whether the H20 chip, specially made for the Chinese market, poses a backdoor security risk that could affect China’s user data and privacy.
Even after the US approved export licenses that allow the US to sell H20 chips in exchange for 15% of domestic sales, chipmakers have not yet come up with rules on how to obtain payments, as the US has not yet come up with rules for how to obtain payments.
In a statement, Nvidia said it is complying with the law and will “continue to work with all relevant government agencies in assessing the impact of export controls on competition in the commercial market.”
The company declined to further comment on where the US government stands by paying 15% of China’s revenue. The US Department of Commerce and the White House did not immediately respond to requests for comment.
Separately, Bescent said Monday that both countries have reached a framework for switching Tiktok to US-controlled ownership.
Nvidia’s competitiveness
A brief statement by China’s SAMR on Monday did not elaborate on how Nvidia violated China’s anti-monopoly law. Under these rules, businesses can face a fine of 1% to 10% of annual sales from the previous year.
In 2020, China approved Nvidia’s deal to purchase Israeli Melanox technology, provided that Nvidia continues to supply high-tech GPU chips to the Chinese market. However, the company was forced to end its most sophisticated chip sales due to export controls implemented by former US President Joe Biden.
Regulators said in December it was investigating the company into alleged violations resulting from Mellanox’s $6.9 billion acquisition.
SAMR on Monday added that it would continue its investigation.
Mellanox manufactures high-speed networking equipment for data centers, and Nvidia bundles chips that offer advanced cloud computing products.
“The real concern is the possibility that China may impose new measures that limit Nvidia’s ability to sell networking solutions to Chinese customers,” said Ray Wang, lead Semiconductor analyst at Futurum Group. “The business is worth billions of dollars a year and continues to grow with growing demand for networking in data centers.”
Wang added that Mellanox Gear has played “a very important role, second to Cuda,” Nvidia’s computing platform, allowing it to deliver the best networking technology in the world.
Lian Jye Su, chief analyst at Consultancy Omdia, said Nvidia would need to sell chips in China due to Mellanox’s technology.
Still, Nvidia’s unfavourable ruling on antitrust probes is unlikely to affect Nvidia’s revenues as much as China’s efforts to nurture domestic alternatives to the most powerful AI chips of US chip makers, Plenum’s Bo said.
“This should not be seen as an indication that China is trying to drive Nvidia out of the country,” he pointed out.
Nvidia’s shares closed near the market on the news, down 0.3% that day.
