China's Antitrust Probe of Nvidia: A $5 Billion Fine and a Global Chip War

China's Antitrust Probe of Nvidia: A $5 Billion Fine and a Global Chip WarChina's antitrust investigation into American chip giant Nvidia, with a potential fine of up to $5 billion, has drawn global attention. The move immediately wiped 640 billion RMB off Nvidia's market capitalization, causing it to be overtaken by Apple and losing its position as the world's most valuable company

China's Antitrust Probe of Nvidia: A $5 Billion Fine and a Global Chip War

China's antitrust investigation into American chip giant Nvidia, with a potential fine of up to $5 billion, has drawn global attention. The move immediately wiped 640 billion RMB off Nvidia's market capitalization, causing it to be overtaken by Apple and losing its position as the world's most valuable company. Underlying this event is the intensifying US-China tech competition and the profound transformation of the global chip industry landscape.

Nvidia's investigation isn't coincidental. Its roots trace back five years to its $6.9 billion acquisition of Israeli chipmaker Mellanox. Given Nvidia and Mellanox's dominant market positions in the US, Europe, and China, the acquisition required antitrust scrutiny from various governments. To gain access to the Chinese market, Nvidia pledged seven conditions, including providing graphics cards to Chinese companies fairly, reasonably, and non-discriminatorily for six years, and prohibiting bundled sales in the Chinese market.

However, the US's technological blockade of China disrupted this equilibrium. Nvidia subsequently announced it would stop supplying high-end GPUs to the Chinese market, instead offering lower-performance, "castrated" chips. This action severely violated Nvidia's previous commitments in the Chinese market, directly triggering the antitrust investigation.

Nvidia responded aggressively, claiming its market dominance was earned through merit and expressing willingness to cooperate with the investigation. This strong stance isn't unfounded. Nvidia currently holds over 90% of the global AI chip market share, with its H100 and A100 chips accounting for 80% of the high-end AI chip market. Tech giants like Microsoft, Google, Facebook, and Tesla are all major customers.

Since 2020, Nvidia has actively pursued mergers and acquisitions, acquiring 27 AI-related companies, further solidifying its monopoly in the AI chip sector. This activity has also prompted antitrust investigations in France, the US, and the EU.

China's antitrust investigation comes amidst a "trade war 2.0" between the US and China. On December 2nd, the US unexpectedly added 140 semiconductor-related companies to its blacklist, prompting immediate Chinese retaliation. Four major Chinese industry associations publicly advised cautious procurement of US chips, while the Ministry of Commerce announced restrictions on the export of gallium, germanium, antimony, and ultra-hard materialskey chip raw materials. China is the world's leading supplier of gallium and germanium, providing 94% and 83% of the global market, respectively. This move will significantly increase chip production costs for US companies.

The antitrust investigation is a direct and powerful move by China in the US-China tech competition, akin to a precise strike at its opponent's vital point. However, this situation didn't arise overnight. Facing US supply cuts, China has been actively developing its domestic chip industry, increasing R&D investment, and striving for technological breakthroughs and market substitution.

China is now the world's largest investor in chip equipment, with investments exceeding $25 billion, surpassing the combined total of the US, South Korea, Japan, and Europe. Chinese chip manufacturers' output is projected to reach one-third of the global total by 2025. In the first eleven months of this year, China's integrated circuit exports exceeded one trillion RMB, a year-on-year increase of over 20%.

These figures demonstrate significant progress in China's chip innovation and industrial development. This tech competition revolving around AI and chips has entered its second half, and the US-China game will continue, influencing the future trajectory of the global tech industry. Nvidia's predicament is just one specific instance in this game, reflecting the profound transformation of the global chip industry landscape and the intensity of national technological competition.

China's antitrust investigation targets not only Nvidia's monopolistic practices but also serves as a crucial step for China to safeguard its industrial security and promote technological self-reliance, foreshadowing a more complex and intense technological competition. The ultimate outcome of this competition will have a profound impact on the global tech industry landscape.

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