【By Observer Net, Xiong Chaoran】On December 9 last year, Chinese regulatory authorities initiated an investigation against NVIDIA for suspected violations of the Anti-Monopoly Law. Nearly a year later, on September 15, Chinese regulators again issued a statement saying that NVIDIA violated the Anti-Monopoly Law and decided to conduct further investigations in accordance with the law.

Reuters reported on the same day that the latest statement from China brought more uncertainties to NVIDIA's business in China, as the Chinese market accounted for 13% of its total sales last year. Under pressure, NVIDIA's stock price fell sharply before the US market opened on September 15, with the drop expanding to 2.4%, and it also dropped nearly 2% during the session, before partially recovering.

Considering the geopolitical situation, Reuters analyzed that in the past six months, the United States and China have been clashing. President Trump imposed exorbitant tariffs on China, then reduced them, while also threatening to stir up the TikTok issue. In response, China immediately retaliated with tariffs and launched anti-monopoly investigations against multiple companies, including Alphabet, Google's parent company, signaling a move to strengthen regulation over American companies.

Zhengyuan Bo, a partner at consulting firm Plenum, said: "This is a warning. If the U.S. export control model continues to operate as it has in recent years, there will be consequences, and China will not hesitate to take action against American companies." He added that just before China issued its preliminary ruling on NVIDIA, the Trump administration announced on September 12 local time that it would add several Chinese entities to the export control "Entity List."

The New York Times cited Lester Ross, a partner at WilmerHale, a law firm that provides consulting services to companies in China, who stated: "This is part of China's broader effort to use its regulatory policy toolbox and diplomatic negotiations to increase access to advanced semiconductors and ultimately reduce reliance by surpassing foreign competitors."

The report also noted that officials from China's regulatory agencies (the State Administration for Market Regulation) recently mentioned "building an international cooperation platform in the field of fair competition" and "strengthening global fair competition governance," indicating China's willingness to participate in the development of global antitrust standards and to enhance scrutiny of foreign acquisitions in the advanced technology sector. "China has sent a signal that it is willing to conduct antitrust investigations on foreign companies, which was once rare," the report said.

Photo: Huang Renxun, founder and CEO of NVIDIA, Visual China

As early as December 9 last year, Chinese regulatory authorities released a statement saying that due to NVIDIA's suspected violation of the Anti-Monopoly Law of the People's Republic of China (hereinafter referred to as the "Anti-Monopoly Law") and the Announcement on the Approval of the Antitrust Review Decision on the Acquisition of Shares in Mellanox Technologies Limited by NVIDIA Corporation by the State Administration for Market Regulation (Announcement No. 16 of the State Administration for Market Regulation), the State Administration for Market Regulation lawfully initiated an investigation into NVIDIA.

Reuters stated that Mellanox Technologies Ltd., which was established in Israel and listed on the NASDAQ Stock Exchange in the United States, produces high-speed network equipment for data centers. NVIDIA bundles it with chips to provide advanced cloud computing products.

"The real concern is that China may introduce new measures to restrict NVIDIA's ability to sell network solutions to Chinese customers," said Ray Wang, Chief Semiconductor Analyst at Futurum Group. "This business is worth billions of dollars annually and continues to grow as demand for network infrastructure in data centers increases."

Wang added that Mellanox's equipment plays an "extremely important role" in helping NVIDIA provide the world's most advanced network technology, second only to CUDA (NVIDIA's computing platform).

Lian Jye Su, Chief Analyst at consulting firm Omdia, said that NVIDIA may be required to sell chips without Mellanox technology in China separately.

However, Zhengyuan Bo of consulting firm Plenum believes that compared to China's efforts to cultivate domestic products that can replace NVIDIA's most powerful AI chips, an adverse ruling from the antitrust investigation would not have a significant impact on NVIDIA's profits. "This should not be interpreted as China trying to drive NVIDIA out of the market," he said.

Reuters mentioned that in recent times, NVIDIA has faced constant troubles in the Chinese market, indicating that Huang Renxun, founder and CEO of NVIDIA, hopes that his "charm offensive" in China is insufficient to offset the pressure.

Since the beginning of this year, Huang Renxun has visited mainland China three times, demonstrating his commitment to the Chinese market. He also believes that continuing to sell artificial intelligence (AI) technology products to China is key for the United States to maintain its leadership in this field.

From the Biden administration to the Trump administration, the United States has implemented a series of chip export restrictions to contain and suppress China's technological development, and these measures have continued to tighten. NVIDIA's AI chips are a top priority for this. To this end, NVIDIA sought to sell "reduced configuration special edition" chips to China, but still remained under close scrutiny by the Trump administration.

In mid-July, Huang Renxun announced in China that the United States had approved the sale of H20 chips to China. However, controversies surrounding NVIDIA continued to spread and escalate afterwards.

On July 31, in order to protect the cybersecurity and data security of Chinese users, Chinese authorities interviewed NVIDIA and asked it to explain and submit relevant proof materials regarding the security risks of backdoors in the H20 computing chips sold to China. The official new media account "Yuyuantan Tian" under China Central Television published an article, pointing out that the H20 chips were "not environmentally friendly, not advanced, and not safe," and were not a "good choice."

On August 10, the Financial Times reported that American chip companies NVIDIA and AMD had agreed to pay 15% of their chip sales revenue in China to the U.S. government (or could be called "paying a commission") in exchange for export licenses issued by the Trump administration. This caused a public uproar, and Reuters considered this a subversion of the U.S.'s decades-old "national security policy," creating a "new type of corporate risk."

Regarding the current further investigation by Chinese authorities for violating the Anti-Monopoly Law, NVIDIA stated in a statement that the company is complying with relevant laws and will "continue to cooperate with all relevant government agencies to assess the impact of export controls on market competition." However, the company refused to further comment on its position regarding the payment of 15% of its Chinese business income to the U.S. government.

Before NVIDIA, the previous time when Chinese authorities conducted an antitrust investigation on a well-known foreign technology company dates back to 2013, when Qualcomm's subsidiary in China was suspected of excessive charging and abuse of market dominance in the wireless communication standard field. In 2015, the National Development and Reform Commission imposed a fine of 975 million U.S. dollars (approximately 6.088 billion yuan) on Qualcomm, which was the largest antitrust fine ever issued in China at that time.

NVIDIA's artificial intelligence chips are widely deployed around the world. Photo

Observer Net noted that in addition to initiating an antitrust investigation against NVIDIA, in recent years, American memory chip manufacturer Micron also failed to pass China's cybersecurity review, and the China Cybersecurity Association also pointed out Intel's frequent "security vulnerability problems."

There was a time when, due to some shortcomings in China's technology industry, especially in the core chip field, the market generally expected Chinese enforcers not to easily "act" against chip giants to avoid affecting the supply. But now, China has much more confidence in dealing with chip giants' illegal and disciplinary actions. This confidence comes from the collective breakthrough of China's technology industry.

According to provisions of the Anti-Monopoly Law, Article 58, if an operator violates the law and implements concentration, and has or may have the effect of excluding or restricting competition, it shall be fined less than ten percent of the sales of the previous year; if it does not have the effect of excluding or restricting competition, it shall be fined less than five million yuan.

Financial reports show that NVIDIA's revenue in China for the 2024 fiscal year (ended January 31, 2024) was 10.31 billion U.S. dollars, an increase of 78% year-on-year. Calculating based on this data, NVIDIA may face fines ranging from 103 million to 1.03 billion U.S. dollars (approximately 746 million to 7.466 billion yuan).

According to Article 63 of the Anti-Monopoly Law, if the violation is particularly serious, the influence is particularly bad, and the consequences are particularly serious, the State Council's anti-monopoly enforcement agency may determine the specific fine amount at two to five times the fine amount stipulated in Articles 56, 57, 58, and 62 of the law.

Therefore, if NVIDIA's illegal behavior is recognized as particularly serious, with particularly bad influence and particularly serious consequences, the fine could reach two to five times the original fine amount, with the maximum possibly reaching 2.06 billion to 5.015 billion U.S. dollars (approximately 1.4932 billion to 3.6351 billion yuan).

This article is an exclusive article by Observer Net. Without permission, it cannot be reprinted.

Original: https://www.toutiao.com/article/7550535129053807147/

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