Nvidia investigation signals widening of US and China chip war
The Biden administration has expanded sanctions to prevent China extending its AI capabilities – now, China is going after Nvidia
Reports from Chinese media that China has launched an antitrust probe into Nvidia is the latest move in an unfolding trade war with the US.
The decision to investigate Nvidia is seen as a response to the US imposing further restrictions on the export of high tech to China. On December 2, the Biden administration put restrictions on the export of 24 chip-making tools and three software tools to China.
The US sanctions are being seen as a way to prevent China from building advanced artificial intelligence (AI) hardware that can rival US technology.
“This action is the culmination of the Biden-Harris administration’s targeted approach, in concert with our allies and partners, to impair the PRC’s [People’s Republic of China] ability to indigenise the production of advanced technologies that pose a risk to our national security,” said US secretary of commerce Gina Raimondo.
Alan Estevez, under-secretary of commerce for the Bureau of Industry and Security (BIS), added: “We are constantly talking to our allies and partners as well as reassessing and updating our controls. Today’s announcement represents the next step in that ongoing work.”
Ratings agency Moody’s said that the new rules reflect the US administration’s increased drive to not only impede China’s “ability to procure and produce the technologies necessary for its military modernisation”, but also to prevent the circumvention of export restrictions by extending the export controls to chipmaking equipment manufactured outside of the US.
In what appears to be a response to the US restrictions, China’s State Administration for Market Regulation (SAMR) has begun an investigation into Nvidia’s $6.9bn March 2024 acquisition of Mellanox, which provides interconnects powering more than 250 of the world’s TOP500 supercomputers.
Jensen Huang, founder and CEO of Nvidia, described the acquisition as a way to meet increasing demand for AI. Nvidia’s approach is to provide what Huang describes as “holistic architectures that connect vast numbers of fast computing nodes over intelligent networking fabrics”, which form a giant datacentre-scale compute engine. The Chinese regulator is looking at whether the acquisition is anti-competitive.
Last year, the Chinese Ministry of Commerce and Administration of Customs put export restrictions on several gallium and germanium-based compounds to safeguard national security and interests.
Moody’s noted that China has also tightened these existing restrictions on exports of critical materials to the US by banning exports of gallium, germanium, and antimony, adding further scrutiny about end-use on exports of graphite.
Nigel Green, CEO of independent financial advisory deVere Group, described the antitrust probe into Nvidia as “of critical importance”, and demonstrates that the semiconductor sector is very much part of the ongoing geopolitical battle between the US and China.
“China’s move to investigate Nvidia, citing its acquisition of Mellanox Technologies, is part of a broader effort to weaken America’s edge in this field,” he said. “This follows the Biden administration’s recent restrictions on exporting advanced chips and chipmaking equipment to China – a policy Trump is expected to amplify when he takes office.
“This isn’t just a regulatory issue; it’s a calculated geopolitical manoeuvre. China is sending a strong message that it won’t hesitate to push back, and Nvidia’s targeting is a harbinger of more aggressive measures to come.”
There is little doubt that the US will look to expand sanctions further to prevent China from building out advanced AI. Speaking earlier this month, US National Security Advisor Jake Sullivan said: “The United States has taken significant steps to protect our technology from being used by our adversaries in ways that threaten our national security.
“As technology evolves, and our adversaries seek new ways to evade restrictions, we will continue to work with our allies and partners to proactively and aggressively safeguard our world-leading technologies and know-how so they aren’t used to undermine our national security.”
Read more about US semiconductor sanctions
- Experts doubt US retaliation following China’s Micron ban: The Biden administration likely won’t retaliate for China’s Micron Technology ban but will continue to play the long game garnering independence from China in semiconductor chips.
- US-China relations will affect businesses in 2024, whether it’s through more export controls or building alliances with other countries on technology.
Originally published at ECT News
