China has launched an investigation into Nvidia, based on a now quite dated acquisition.
China’s market regulator has launched an investigation into Nvidia, TechCrunch knows. The subject of the investigation is its acquisition of Israeli company Mellanox. Nvidia bought Mellanox to expand its networking capabilities, especially with an eye on interconnects for HPC systems. The acquisition dates back five years.
That China is now suddenly raising the magnifying glass is not surprising. The U.S. keeps tightening its trade embargo, and China is defending itself. Despite the restrictions imposed by the U.S. government, China is both an important market for U.S. chip companies, and an important part of the supply chain.
You may therefore view the antitrust investigation into the Mellanox acquisition through a political lens. China has the teeth to bite back. The country can make it difficult for U.S. companies to still sell what is permissible under embargo rules, as well as impose restrictions around exports of key components or raw materials, for example.
Major acquisition
In 2019, Nvidia acquired Mellanox for nearly seven billion dollars and with certain commitments. Nvidia promised to share information about new products within 90 days of release. Nvidia also allowed Chinese chipmakers to test products with Mellanox technology to make sure they work.
Nvidia is between two fires because of restrictions imposed by Washington. It is not allowed to sell its AI chips to Chinese companies. China, in turn, banned some sales of Micron products. The economic conflict between China and the US has been going on for some time, and Nvidia is now playing a key role in it.