China's semiconductor regulations on U.S. may also impact SK hynix

China is tightening its so-called "merger and acquisition (M&A) trap" against global semiconductor companies. U.S. chip giant Nvidia is the primary target, but Korean firms are also far from safe, analysts say.

Nvidia logo and Chinese flag are seen in this illustration from Aug. 27, 2025. [REUTERS/YONHAP]

China is tightening its so-called merger and acquisition (M&A) trap against global semiconductor companies. U.S. chip giant Nvidia — already caught in U.S.-China trade tensions — is the primary target, but Korean firms are also far from safe, analysts say.

China’s State Administration for Market Regulation (SAMR) announced Sept. 15 that Nvidia had violated the country’s antitrust law and that it would launch a further probe into the company. The regulator began its investigation in December last year and released its interim findings this week. Depending on the outcome, SAMR may impose fines ranging from 1 to 10 percent of the company’s previous year’s revenue.

The case centers on Nvidia’s 2020 acquisition of Mellanox, an Israeli developer of high-speed interconnection chips and solutions. Its InfiniBand technology is widely used in building large data centers.

SAMR approved the deal after 12 months of review but only under conditions that included “supplying products to the Chinese market without discrimination.” Last December, however, the regulator suddenly began investigating the deal again, notifying Nvidia of alleged antitrust violations while Washington and Beijing were in the middle of sensitive trade negotiations. U.S. Treasury Secretary Scott Bessent called it "poor timing," according to a Bloomberg report on Sept. 16.

Nvidia’s $6.9 billion acquisition of Mellanox is considered a masterstroke that transformed the company from a graphics processing unit (GPU) vendor into a broader AI infrastructure firm. China now appears to be striking at the heart of Nvidia’s business.

Nvidia CEO Jensen Huang speaks at the opening ceremony of the third China International Supply Chain Expo (CISCE) in Beijing, China, July 16, 2025. [REUTERS/YONHAP]

SK hynix Wuxi semiconductor factory line in China [SK HYNIX]

SK hynix may also have gotten caught up in the issue. In December 2021, the company secured SAMR approval for its acquisition of Intel’s NAND business after a 14-month wait, but with six binding conditions attached, including: Capping the China sales price of enterprise solid-state drives (SSD) at no more than the average level over the previous 24 months; committing to continuous expansion of enterprise SSD production within five years; ensuring stable supply of all products to the Chinese market; and even helping third-party competitors enter the sector.

According to the official notice at the time, SK hynix can apply for a review to lift these conditions five years after they took effect — which would be in December 2026. However, unless SAMR explicitly grants approval, the obligations will remain in force because the notice specifically said that SAMR reserves the right to audit compliance and may take action for violations of the antitrust law.

Compounding the challenge, Washington has recently tightened restrictions on the Chinese plants of both Samsung Electronics and SK hynix. Last month, the United States revoked the Verified End User status that had allowed relatively free shipments of semiconductor equipment to the two companies' Chinese facilities. The revocation included the Dalian NAND production site that SK hynix acquired from Intel. As upgrading equipment at Chinese fabs becomes increasingly difficult, the company remains bound by Beijing’s condition to expand SSD output.

Nvidia has already acknowledged the catch-22 facing global semiconductor firms, where compliance with U.S. sanctions risks violating Chinese law. In its most recent quarterly business report, the company specified that Chinese authorities are investigating whether its compliance with U.S. export control regulations constitutes discrimination against Chinese customers. If deemed unlawful, its networking products may face restrictions.

SAMR has long served as the final hurdle in semiconductor M&A, often dragging out reviews before granting conditional approvals. In 2023, it cleared U.S. chipmaker Broadcom’s takeover of VMware, imposing obligations — including confidential clauses — for 10 years. But some deals have been blocked entirely. Last year, Intel was forced to abandon its bid for an Israeli semiconductor firm after failing to win Chinese approval, paying a termination fee of $353 million instead.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom. BY SHIM SEO-HYUN [yoon.soyeon@joongang.co.kr]