CITIC Securities: NVIDIA is under antitrust investigation, which is expected to boost the sentiment of the domestic computing power and chip market in the short term
CITIC Securities released a research report stating that the State Administration for Market Regulation is conducting an antitrust investigation into NVIDIA, which is expected to boost the sentiment in the domestic computing power and chip market and accelerate the localization process of the domestic semiconductor industry. This investigation mainly targets NVIDIA's bundling sales practices, which may affect its dominant position in the GPU accelerator and AI chip markets
According to the Zhitong Finance APP, CITIC Securities released a research report stating that on December 9, 2024, the State Administration for Market Regulation will legally initiate an investigation into NVIDIA Corporation (NVDA.US). This is a legitimate management measure to regulate and maintain fair market competition order, which is expected to lead the domestic chip industry and may boost market sentiment for domestic computing power and chips in the short term. Combined with the increased emphasis from relevant domestic departments and industry associations on self-controllability, it is expected that the overall pace of domestic semiconductor industry localization will further accelerate, and the manufacturing sector is also expected to benefit.
Event Background:
The State Administration for Market Regulation has legally initiated an investigation into NVIDIA Corporation. This is due to NVIDIA's suspected violation of the Anti-Monopoly Law of the People's Republic of China and the announcement of the State Administration for Market Regulation regarding the approval of NVIDIA's acquisition of Mellanox Technologies, Ltd. with additional restrictive conditions (Announcement No. 16 [2020] of the State Administration for Market Regulation).
According to the announcement mentioned in the report, in April 2020, the State Administration for Market Regulation made a decision to approve NVIDIA's acquisition of Mellanox with additional restrictive conditions, requiring NVIDIA not to engage in forced bundling or discrimination against customers when selling related products in the Chinese market, and to ensure product interoperability. NVIDIA is required to continue supplying GPU accelerators, Mellanox high-speed networking devices, and related software and accessories to the Chinese market based on the principles of fairness, reasonableness, and non-discrimination. CITIC Securities believes that this antitrust investigation mainly targets NVIDIA's bundling sales practices involving NVIDIA chips and Mellanox switch products.
Currently, NVIDIA dominates the GPU accelerator market and the AI chip market, while Mellanox also holds a leading market share in the dedicated networking device market and high-speed Ethernet adapter market. In recent years, NVIDIA has received multiple antitrust "yellow card" warnings globally. In February 2024, NVIDIA disclosed that antitrust regulators in France, the European Union, and other regions requested information regarding GPU sales and distribution; in August, the U.S. Department of Justice also began an antitrust investigation into NVIDIA; on December 7, the European Union also started investigating whether NVIDIA bundled products in a way that could hinder competition, specifically whether it required customers to purchase networking equipment in addition to GPUs in contracts.
Domestic relevant departments and industry associations have increased their emphasis on self-controllability, with a clear main line.
On December 3, 2024, the Ministry of Commerce of China strengthened export controls, and four major industry associations in the domestic semiconductor/automotive/Internet/communication sectors collectively issued a statement calling for the active use of chips produced by domestic and foreign-funded enterprises in China. On December 5, the Ministry of Finance proposed to grant a 20% price evaluation discount for domestic products in government procurement.
In the short term, the State Administration for Market Regulation's legal investigation into NVIDIA's suspected violation of the Anti-Monopoly Law is a legitimate management measure to regulate and maintain fair market competition order, which is expected to lead the domestic chip industry and may boost market sentiment for domestic computing power and chips in the short term. CITIC Securities believes that the antitrust investigation into NVIDIA at this time encourages the clear main line of adopting domestic chips and may also be a proactive response before the U.S. further implements export controls on AI chips In the long term, China has a large downstream industrial cluster and demand market. This presents an opportunity for various industries to increase the adoption of domestic chips, promoting the development of local chip manufacturing and design. On the other hand, some foreign companies, such as STMicroelectronics and Infineon, are also implementing "China for China" and other localization production strategies, placing China's demand in mainland wafer fabs, which is expected to promote the development of the chip manufacturing segment.
Risk Factors:
Downstream demand may fall short of expectations, changes in the international industrial environment, intensified trade frictions, slower-than-expected progress in localization, and intensified U.S. sanctions, among others