Regulatory Body in China Accuses Nvidia of Breaching Merger Conditions

The State Administration for Market Regulation (SAMR) of China has initiated an extensive investigation into Nvidia, stemming from allegations of non-compliance with the conditions set forth during its acquisition of Mellanox Technologies. This inquiry follows a preliminary investigation that began in December 2024.

Nvidia's acquisition of the networking company Mellanox, completed in 2020 for $7 billion, was approved by Chinese authorities under specific conditions, which remain undisclosed. However, it is reported that these conditions included assurances against discrimination towards Chinese firms.

According to sources, the ongoing investigation may relate to recent restrictions imposed by the U.S. government, which prevent Nvidia from exporting numerous AI accelerators to China. The U.S. claims that these technologies could be repurposed for military applications by the Chinese government.

These export limitations also encompass Nvidia's own servers, which integrate Mellanox's networking technology. The synergy between Nvidia's GPU offerings and Mellanox's networking solutions has become increasingly significant, particularly as Mellanox developed the widely used Infiniband interconnect technology, facilitating communication among multiple server boards. In the last quarter alone, Nvidia reported nearly $7.3 billion in revenue from its networking segment.

There are concerns that Nvidia, along with other chip manufacturers like AMD, may be compelled to engage in discriminatory practices due to these external pressures.

In a related development, the Chinese Ministry of Commerce has also launched an anti-dumping investigation against several U.S. chip manufacturers, including Broadcom, Texas Instruments, and Analog Devices. These companies produce a variety of controllers and analog circuits that are vital for numerous Chinese manufacturers. The investigation suggests that U.S. chips might be contributing to unfair price competition within the Chinese market, leading to discussions about imposing tariffs to bolster domestic manufacturers.

Currently, officials from both China and the United States are engaged in negotiations in Madrid, addressing various contentious trade issues, with mutual tariffs being a prominent topic of discussion.