Chinese regulators have accused Nvidia Corp. of breaching the country’s antitrust laws after a preliminary review of its 2020 acquisition of Mellanox Technologies Ltd., escalating a case that could result in significant financial penalties for the U.S. chip giant.
The State Administration for Market Regulation (SAMR) said Monday that Nvidia failed to comply with conditions imposed when Beijing conditionally approved the $6.9 billion purchase of Mellanox, an Israel-U.S. supplier of high-speed networking equipment.
SAMR said it would move forward with a further investigation into the matter. Nvidia shares slipped more than 2% in U.S. premarket trading following the announcement. The company did not immediately respond to a request for comment from Caixin.
The development coincides with ongoing trade discussions between Washington and Beijing in Spain, and comes as a separate Chinese regulator has begun a cybersecurity review of Nvidia’s H20 AI chips.
SAMR launched the investigation on Dec. 9, citing suspected violations of the Anti-Monopoly Law and the terms of the conditional approval. The investigation stems from a yearlong regulatory process surrounding the Mellanox deal.
Back in 2020, China gave the green light to the deal only after attaching strict antitrust conditions. The regulator feared the merger could stifle competition, as Nvidia held a near-total monopoly on GPU accelerators in China, while Mellanox was the dominant player in high-speed networking equipment.
The imposed conditions prohibited Nvidia from bundling its GPUs with Mellanox products, restricting customers from purchasing the products separately, or engaging in any anti-competitive conduct such as tying or exclusive dealing. SAMR emphasized that Nvidia’s control of both data computation and transmission after the merger could allow it to limit competitors’ market access — raising concerns it could “exclude or restrict market competition.”
In response to the initial probe last year, Nvidia told Caixin that it "competes on merit" and was “happy to answer any questions from regulators.”
Under China’s amended Anti-Monopoly Law, effective since 2022, companies found to have violated merger conditions may face fines of up to 10% of their previous year’s revenue.
Liu Xu, a researcher at Tsinghua University’s Institute for National Strategic Studies, noted that the law does not clarify whether fines should be based on global or China-only revenue. He cited a 2015 case where Qualcomm Inc. was fined based on its China sales.
Nvidia’s 2023 fiscal-year revenue from China, including Hong Kong, was $5.8 billion. A 10% fine would amount to $578.5 million. If the violation is considered “particularly serious,” the law allows penalties to be up to five times higher — potentially reaching $2.9 billion, according to Liu.
Meanwhile, Nvidia is also under cybersecurity scrutiny in China. On July 31, the Cyberspace Administration of China summoned the firm over potential national security risks tied to its H20 AI chip series. The move comes as Chinese cloud service providers increasingly pivot toward domestic suppliers.
Contact reporter Han Wei (weihan@caixin.com)
