Nvidia is facing potential charges from the French antitrust regulator over allegations of anti-competitive behaviour, marking an enforcement agency’s first action against the chip giant. The scrutiny follows raids conducted last September in the graphics cards sector, explicitly targeting Nvidia as part of a broader inquiry into cloud computing. The company’s prominence in AI and graphics chips, boosted by the popularity of applications like ChatGPT, has drawn regulatory attention in Europe and beyond.
While Nvidia and the French authority declined to comment, the European Commission is unlikely to expand its current review, focusing instead on the French investigation. Concerns highlighted by the French watchdog include Nvidia’s CUDA chip programming software, essential for accelerated computing using GPUs, and its investments in AI-centric cloud providers like CoreWeave. These legal developments represent provident measures for potential risks associated with market dependence and competition in the rapidly evolving AI sector.
Why does it matter?
Under French antitrust rules, companies in violation could face fines of up to 10% of their global annual turnover, though concessions can mitigate penalties. Simultaneously, the US Department of Justice is leading an investigation into Nvidia, which is part of the broader scrutiny of Big Tech alongside the Federal Trade Commission. Nvidia’s regulatory challenges reflect worldwide scrutiny over its market dominance and strategic expansions in critical technology sectors.
Micron Technology surpassed revenue expectations in the third quarter due to robust demand for its memory chips, particularly in AI applications. However, its fourth-quarter revenue forecast, while meeting expectations, disappointed investors, leading to a 7.2% drop in after-hours trading.
The forecast failed to meet recent optimistic projections fuelled by the AI boom, which tempered market enthusiasm following a significant rise in Micron’s stock price earlier in the month. Micron’s Chief Business Officer emphasised their strategic advantage in AI chip supply, highlighting robust ongoing demand for their products in the years ahead.
Why does it matter?
Micron remains a prominent player in high-bandwidth memory chips essential for advanced AI systems, positioning it strongly in the semiconductor market. The company’s performance typically establishes benchmarks for the broader chip sector, influencing market sentiment toward competitors like Nvidia, whose stock declined following Micron’s earnings report.
The leading producer of vital semiconductors, including transistors and diodes, Nexperia, revealed on Thursday that it will invest $200 million in manufacturing capacity at its main plant in Hamburg, Germany. With this step, Nexperia—a Dutch business controlled by the Chinese electronics manufacturer WingTech (600745. SS)—makes a substantial investment in European computer chip manufacturing independent of the EU’s Chips Act, which was introduced in 2023.
As the European Union considers possible unfair subsidies from China in producing “legacy” chips used in cars and household appliances in Europe by companies like Nexperia, the Dutch company announced a significant investment decision. Chief Financial Officer Stefan Tilger underlined how vital their products are to advancing renewable energy, electric vehicles, and digitisation. Producing 100 billion chips annually, Nexperia accounts for nearly a quarter of the global supply. Their production occurs in Europe, with assembly and packaging facilities in China, Malaysia, and the Philippines.
After being acquired by WingTech for $3.6 billion in 2018, Nexperia, based in Nijmegen, Netherlands, has faced growing scrutiny from European governments. In 2022, the British government recently required Nexperia to sell a factory in Newport due to security concerns.
The German government refused to subsidy Nexperia in 2023 for creating a battery-efficiency technology. In addition, following a retrospective review, the Dutch government authorised Nexperia’s acquisition of the startup Nowi. Nexperia plans to establish two “wide bandgap” chip production lines in Hamburg as part of its expansion plans. These chips use Silicon Carbide (SiC) and Gallium Nitride (GaN), vital electrical infrastructure components. Because of these chips’ efficiency, speed, lightweight design, and capacity to function in extremely hot and high-voltage environments, they have an advantage over conventional silicon processors.
South Korea will begin providing financial aid to chipmakers in July, launching a 26 trillion won ($19 billion) support package to bolster the critical semiconductor industry. The initial phase will include an 18 trillion won package, offering preferential loans and investment capital. Next month, eligible companies can access a 17 trillion-won loan program at the lowest market interest rates. Additionally, the government will help establish two funds totalling 1.1 trillion won to invest in local chipmaking equipment and materials by 2025.
The following initiative aligns South Korea with other nations like the US and China, which are investing heavily in the semiconductor sector amid growing geopolitical tensions and fragmented global supply chains. With Samsung Electronics and SK Hynix leading the way, South Korea remains the world’s largest producer of memory chips. The government is also investing $470 billion to develop a semiconductor ‘mega cluster’ near Seoul, which will become the core of its chip industry.
The aid package comes as the US urges its allies to limit China’s access to advanced semiconductor technology. Reports suggest that American officials want South Korea to restrict the export of equipment and technologies needed for high-end chip production to China. The South Korean government plans to extend tax incentives for eligible firms by three years to support the industry further. It is considering expanding these benefits to include chip materials, parts, and equipment manufacturers.
Etched, an AI startup based in San Francisco, announced that it secured $120 million, aiming to create a specialised kind of chip tailored to run a specific type of AI model commonly used by OpenAI’s ChatGPT and Google’s Gemini.
Unlike Nvidia, which dominates the market for server AI chips with a roughly 80% market share, Etched aims to create a specialized processor optimized for running inference tasks. The produced chip would focus on generating content and responses, which is particularly suited for transformer-based AI models. The company’s CEO, Gavin Uberti, sees this as a strategic bet on the longevity of transformer models in the AI landscape.
In Etched’s funding round, key investors include former PayPal CEO Peter Thiel and Replit CEO Amjad Masad. The startup has also partnered with Taiwan Semiconductor Manufacturing Co. (TSMC) to fabricate its chips. Uberti highlighted the importance of the funding to cover the costs associated with sending chip designs to TSMC and manufacturing the chips, a process known as ‘taping out.’
While Etched did not disclose its current valuation, its $5.4-million seed-funding round in March 2023 valued the company at $34 million. The success of its specialised chip could position Etched as an important player in the AI chip market, provided transformer-based AI models continue to be prevalent in the industry.
The United States has introduced draft rules to regulate investments in China, particularly in AI and other advanced technology sectors that could pose national security threats. The US Treasury Department released these proposed rules following President Joe Biden’s executive order in August, which targets semiconductors, quantum computing, and AI investments. The draft rules require US individuals and companies to identify and report transactions that may be restricted or banned, aiming to prevent US expertise from aiding China’s technological advancements.
The Treasury’s proposed rules include various exceptions, such as transactions in the US national interest or involving publicly traded securities. The regulations would specifically ban transactions involving AI for certain end uses and systems using significant computing power but require notifications for other AI-related investments. These rules focus primarily on China, Macau, and Hong Kong, though they might be expanded later.
Former Treasury official Laura Black highlighted that these rules would necessitate increased due diligence by US investors when dealing with Chinese companies in the specified sectors. The regulations also align with existing export controls on advanced semiconductors to China, aiming to hinder China’s military modernisation efforts. Violations of these rules could result in criminal and civil penalties, including unwinding investments.d
Why does it matter?
Treasury officials have engaged with international partners to discuss these investment restrictions, with the European Commission and the United Kingdom considering similar measures to address outbound investment risks. Public comments on the proposed rules are open until 4 August, with final regulations expected by the end of the year.
ByteDance, the Chinese owner of TikTok, is collaborating with US chip designer Broadcom to develop an advanced AI processor. This 5-nanometer chip, compliant with US export restrictions, will be manufactured by Taiwan’s TSMC. The initiative is aimed at securing a stable supply of high-end chips amid ongoing US-China tensions.
Unannounced to the public, the partnership represents one of the few recent collaborations involving advanced technology between US and Chinese firms since Washington’s 2022 export controls on cutting-edge semiconductors. ByteDance’s tie-up with Broadcom, an existing partner, is expected to reduce costs and ensure a steady supply of sophisticated chips, which are essential for ByteDance’s AI initiatives.
The new chip is still in the design phase, with manufacturing not expected to start this year. ByteDance’s push in generative AI requires advanced chips, which have become more challenging to obtain due to US sanctions. The company has been stockpiling Nvidia chips and has purchased AI accelerators from Huawei, emphasising the critical need for powerful algorithms across its platforms, including TikTok and Douyin.
ByteDance is actively hiring for semiconductor-related roles, including ASIC chip designers, and has been recruiting top talent from other Chinese AI chip firms. The company’s strategic efforts highlight its commitment to overcoming challenges posed by restricted access to advanced technology.
In a post on his platform X, tech boss Elon Musk revealed his partnership with Dell Technologies and Super Micro Computer to provide server racks set to power Musk’s AI startup, xAI. According to Dell CEO Michael Dell, the company is responsible for manufacturing half the microchips for the project. To this end, Dell has partnered with Nvidia Corporation, a multinational technology company that supplies electronic chips for computer motherboard chipsets, smartphones and game consoles. The duo, together with Super Micro Computers, will build xAI’s supercomputer, which will, in turn, power the startup’s chatbot, Grok.
Musk’s xAI, a rival to Microsoft-backed OpenAI and Alphabet’s Google, opened its doors last year, and its chatbot is already on version 2. Musk’s timeline for Grok 3 is fall 2025. The chatbot requires 100,000 Nvidia H100 chips to run. Grok 2 utilised 20,000 Nvidia H100 graphic processing units. The Nvidia H100 GPU chip is the most powerful GPU chip on the market and is designed for AI applications only. The chips are in short supply, and on average, one costs $25,000.
Wolfspeed has delayed its $3 billion chip plant project in Germany, highlighting the European Union’s challenges in boosting semiconductor production. Originally set to begin construction this year, the plant in Saarland is now postponed to mid-2025. Wolfspeed, under pressure from an activist investor due to a significant drop in stock value, is focusing on ramping up production in New York instead.
The delay reflects broader issues within the EU’s efforts to enhance its semiconductor industry through the 2022 Chips Act, which aimed to raise €43 billion. Despite ambitious plans from companies like Intel, TSMC, and Infineon, many projects have yet to receive necessary EU state aid approval, crucial for their financial viability. The region’s goal to capture 20% of the global semiconductor market by 2030 appears increasingly unattainable.
Why does it matter?
Germany, a major player in these plans, faces a budget crisis, casting doubt on its infrastructure commitments, though officials claim semiconductor funding remains secure. Meanwhile, European political shifts could threaten support for key projects, complicating efforts to reduce reliance on Asian chip producers. Despite these setbacks, some projects, like TSMC’s in Dresden and STMicroelectronics’ plant in Italy, are progressing with the EU approval and ongoing construction.
A US official is heading to Japan following discussions with the Dutch government to strengthen efforts to limit China’s semiconductor production capabilities. Alan Estevez, the US export policy chief, aims to build on a 2023 agreement between the USA, Japan, and the Netherlands to prevent China from accessing advanced chipmaking equipment, which could enhance its military.
US officials have had ongoing discussions with allies, including visits to the Netherlands, to prevent ASML from servicing certain equipment in China. While ASML expects to service most of its equipment sold to China, US rules prevent using American spare parts.
The Chinese Embassy in Washington did not respond to requests for comment.
