US artificial intelligence (AI) chip giant Nvidia could face a fine of up to US$1 billion under Beijing’s antitrust probe, which was widely seen as a retaliatory move against Washington’s escalated chip restrictions, according to experts.
The investigation will apply the country’s antimonopoly law to Nvidia’s 2019 acquisition of Israeli interconnect products and solutions provider Mellanox Technologies, according to a statement from China’s State Administration for Market Regulation on Monday.
China granted “conditional” approval for the deal in April 2020, noting that Nvidia agreed to supply its graphic processing unit (GPU) and connection products to the Chinese market based on “fair, reasonable, and non-discriminatory principles”, and that it would ensure their compatibility with other companies’ hardware.
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However, Nvidia has restricted exports of its advanced GPUs to China to comply with US regulations, an act that displeased Beijing. The investigation into a previously-approved transaction marks the first time that China’s market regulator has opened the books on a closed deal.
Jensen Huang, CEO and founder of Nvidia, takes part in a press conference in Hanoi, Vietnam, December 5, 2024. Photo: AFP alt=Jensen Huang, CEO and founder of Nvidia, takes part in a press conference in Hanoi, Vietnam, December 5, 2024. Photo: AFP>
Chinese media on Monday reported that Nvidia could face fines of up to US$1.03 billion, equal to 10 per cent of its China sales in financial year 2024, under the country’s antitrust law. The law stipulates that companies violating antitrust regulations can face fines ranging from 1 to 10 per cent of their annual sales from the previous year, although it does not specify whether this applies to global or China sales.
China, including Hong Kong, represents Nvidia’s third-largest market by revenue, with sales reaching US$10.3 billion for the financial year ended January 24, or nearly 17 per cent of its total revenue.
It is too early to determine the exact amount of the fine, according to Liu Xu, a research fellow at the National Strategy Institute of Tsinghua University. Liu said that penalties could range from 1 per cent to 10 per cent of the previous year’s sales if regulators find evidence of abusive market dominance through practices such as tied selling, where customers are forced to purchase one product to get access to another.
