Chip War Intensifies As China Launches Probe Into Nvidia After US Restricts Export Of Semiconductor Equipment

On Monday (9 December), China announced that it has initiated a probe into Nvidia, suspecting the company of infringing the nation's anti-monopoly regulations. This action is broadly interpreted as a countermeasure against the recent restrictions imposed by Washington on the Chinese chip industry.

The declaration from the State Administration for Market Regulation, which introduced the investigation, did not provide details on how the United States (US) firm, recognised for its artificial intelligence and gaming chips, could have breached China's anti-monopoly regulations.

The US chipmaker is also reportedly under suspicion for breaching the commitments it agreed to during its purchase of the Israeli chip design firm, Mellanox Technologies. These commitments were part of the terms set by the regulator in the 2020 conditional approval of the acquisition.

Shares of Nvidia ended 2.5 per cent down on Monday. A representative from Nvidia stated that the company strives to deliver the finest products possible in all regions and uphold their commitments wherever they operate. They also expressed readiness to respond to any inquiries regulators might have regarding their business.

The probe follows the US's third clampdown on China's semiconductor industry in as many years, which occurred last week. This action by Washington resulted in export restrictions to 140 companies, inclusive of chip equipment manufacturers.

Following Washington's recent announcement, China has shown its determination to retaliate firmly by promptly prohibiting the export of crucial minerals - gallium, germanium, and antimony - to the US.

In a unique and coordinated reaction, four of the nation's leading industry associations cautioned Chinese companies on the same day. They warned against purchasing US chips, deeming them as "no longer safe," and advised to opt for local purchases instead.

Nvidia, among several other companies, has been entangled in the tensions between the US and China. A previous set of export restrictions imposed by the US prevented Nvidia from marketing its top-tier AI chips to China. This led to the development of new versions specifically for the Chinese market that adhered to US export regulations.

“It’s clear that the Chinese government is trying to react against recent restrictions from the US, but their ability to impact the US semiconductor industry continues to decrease over time,” O’Donnell further said.