NVIDIA's Alleged Monopoly Practices Under Investigation in China: Profound Implications and Future Outlook for China's AI Industry

NVIDIA's Alleged Monopoly Practices Under Investigation in China: Profound Implications and Future Outlook for China's AI IndustryOn December 9, 2024, the State Administration for Market Regulation (SAMR) of China announced an investigation into global GPU giant NVIDIA Corporation for suspected violations of the Anti-Monopoly Law of the People's Republic of China and the Announcement on the Review of Anti-Monopoly Decisions (SAMR Announcement [2020] No. 16)

NVIDIA's Alleged Monopoly Practices Under Investigation in China: Profound Implications and Future Outlook for China's AI Industry

On December 9, 2024, the State Administration for Market Regulation (SAMR) of China announced an investigation into global GPU giant NVIDIA Corporation for suspected violations of the Anti-Monopoly Law of the People's Republic of China and the Announcement on the Review of Anti-Monopoly Decisions (SAMR Announcement [2020] No. 16). This move has attracted widespread attention, not only because of NVIDIA's dominant position in the global GPU market, but also because its restricted supply of high-end chips to the Chinese market has severely hampered the development of China's artificial intelligence industry, leading to numerous negative consequences. This article will delve into the specific impacts of NVIDIA's supply restrictions on China's industrial development, and the far-reaching significance of this investigation.

I. Background of NVIDIA's Supply Restrictions and Basis for the Investigation

NVIDIA holds an unrivaled market share in the global GPU market, with its high-end chips holding a core position in artificial intelligence and high-performance computing. However, its market conduct in China has been controversial. In 2020, when approving NVIDIA's acquisition of a stake in Mellanox Technologies, the SAMR imposed seven restrictive conditions, explicitly stipulating that NVIDIA could not engage in forced bundling of products in the Chinese market, impose unreasonable trading conditions, obstruct or restrict customers from purchasing and using products individually, or discriminate against customers who purchase products individually.

This investigation stems from NVIDIA's alleged violation of these commitments. The SAMR's investigation will focus on whether NVIDIA, through measures such as restricting the supply of high-end chips, artificially created market shortages to manipulate prices, harming the interests of Chinese companies, and whether it violated the principles of fair competition. This investigation is not accidental, but rather a reflection of the Chinese government's determination to maintain a fair market order and ensure the healthy development of its industries. It demonstrates the Chinese government's resolve to crack down on monopolistic practices, protect the legitimate rights and interests of domestic enterprises, and promote the healthy development of domestic industries.

II. Specific Impacts of NVIDIA's Supply Restrictions on China's Industrial Development

NVIDIA's restricted supply of high-end chips to China has had negative repercussions across multiple sectors, severely hindering the progress and development of China's AI industry:

1. Stagnant R&D and Hindered Technological Innovation: Many companies, universities, and research institutions reliant on high-end GPUs for AI algorithm research and development have experienced slowdowns or complete standstills in their projects due to chip shortages. This not only wastes significant upfront investment in funds and human resources, but more importantly, delays China's technological innovation in the AI field, weakening the nation's technological competitiveness. Many cutting-edge AI model training and research projects cannot be carried out due to insufficient computing power, severely impacting China's competitiveness in the AI field. The scarcity of high-end chips directly prevents Chinese AI researchers from accessing and using the most advanced research tools and platforms, hindering innovation and breakthroughs.

2. Increased Costs and Declining Corporate Profitability: Unable to obtain sufficient NVIDIA high-end chips, many companies have had to resort to lower-performance alternatives or increase the number of servers to compensate for the lack of computing power, leading to significantly increased operating costs and energy consumption. For financially constrained AI startups, this is a massive blow, potentially leading to bankruptcy. These increased costs ultimately translate into higher product prices, impacting market competitiveness and hindering product promotion and adoption.

3. Decreased International Competitiveness and Limited Market Share: The cutoff of high-end chips puts Chinese companies at a significant disadvantage in international competition. When competing with foreign counterparts, they not only face insufficient computing power but may also lose market share, or even market opportunities, due to lagging R&D progress. This predicament further exacerbates the passive position of Chinese companies in global technological competition.

4. Industrial Chain Security Risks and Increased External Dependence: The NVIDIA supply restriction incident exposes the severe dependence of China's AI industry chain on imported high-end chips, rendering the entire chain unstable and insecure. This external dependence not only makes China's AI industry more vulnerable to external factors and shocks, but also increases the risks and uncertainties of industrial development. In the event of geopolitical risks or international trade frictions, China's AI industry will face even greater challenges.

5. Limited Talent Development and Obstacles to Long-Term Industrial Development: The lack of high-end chips also directly impacts the cultivation of talent in China's AI field. Without advanced tools and platforms, researchers cannot conduct cutting-edge research, hindering the cultivation of high-level professionals and ultimately impacting the long-term development of China's AI industry. The shortage of new-generation AI talent will further exacerbate the difficulties faced by China's AI industry.

III. Significance of the Investigation and Future Outlook

The SAMR's investigation into NVIDIA holds significant importance:

• Maintaining Fair Market Competition: The investigation aims to maintain a fair market competition order, prevent the disruption of market order by monopolistic practices, and ensure fair competition opportunities for domestic enterprises.

• Protecting the Legitimate Rights and Interests of Enterprises: The investigation will protect the legitimate rights and interests of Chinese companies and prevent them from suffering losses due to unfair competition.

• Promoting Healthy Industrial Development: By cracking down on monopolistic practices, it promotes the healthy and orderly development of the AI industry and enhances industrial competitiveness.

• Strengthening National Technological Security: It reduces dependence on foreign high-end chips and strengthens China's technological security in the field of artificial intelligence.

However, solving the problem is not a matter of overnight success. China needs to strengthen its independent innovation capabilities and strive to break free from its dependence on foreign technologies. This requires the concerted efforts of the government, enterprises, and research institutions:

• Increased R&D Investment: The government should increase investment in basic research and core technology development in the field of artificial intelligence and support enterprises in carrying out independent innovation.

• Cultivating High-Level Talent: Strengthen the cultivation of talent in the AI field to provide talent support for industrial development.

• Building a Self-Reliant and Controllable Industrial Chain: Accelerate the construction of a self-reliant and controllable chip industry chain to reduce dependence on foreign technologies.

• Strengthening International Cooperation: Under the premise of complying with international rules, strengthen cooperation with other countries in the field of artificial intelligence to jointly promote global AI development.

The NVIDIA supply restriction incident serves as a wake-up call, warning China that it must accelerate the development of its own independent and controllable technological industries to secure a favorable position in future global technological competition. This investigation is a crucial step in safeguarding China's industrial security and development; its results and subsequent measures will have a profound impact on the development of China's AI industry and the entire technological field. Only through continuous efforts and innovation can China achieve genuine breakthroughs in the field of artificial intelligence, possess independently controllable core technologies, and occupy a leading position in future global technological competition.

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