China launches antitrust probe into US chip giant Qualcomm.

China has opened an investigation into US chip giant Qualcomm, as Beijing intensifies its technology war with Washington amid heightened trade tensions. The US company was suspected of violating China’s anti-monopoly law in its acquisition of the Israeli vehicle semiconductor company Autotalks, the State Administration for Market Regulation (SAMR) said in a statement on Friday, without disclosing further details. Earlier, Qualcomm had announced in June that it has completed the acquisition of Autotalks, which specialises in “direct vehicle-to-everything” solutions.

Qualcomm will face a fine of up to 5 million yuan (US$702,000) for not asking for prior approval of the Autotalks deal, according to Liu Xu, a research fellow at the National Strategy Institute of Tsinghua University, citing China’s antitrust law. Liu said there is a chance Qualcomm could be further punished if the regulator finds the deal had the effect of “eliminating or restricting market competition”.

He added that the investigation might not have a big impact on Qualcomm’s operations in China because the case was also under inquiry in Europe and the US.

Still, it would give Qualcomm’s rivals in the country more “negotiating power”, as the regulator would likely seek their advice on the impact of the deal, Liu said.

The SAMR’s action followed a series of measures by Beijing aimed at strengthening the country’s leverage ahead of an anticipated meeting later this month between President Xi Jinping and his US counterpart Donald Trump. US restrictions continue to limit China’s access to advanced semiconductor.

Earlier this week, the US Department of Commerce added a dozen Chinese companies to Washington’s Entity List over their alleged roles in facilitating the purchase and use of American components found in weaponised drones operated by Hamas and Houthi militants in Yemen. China’s Ministry of Commerce, meanwhile, added Canadian chip consultancy TechInsights to an “unreliable entity list”, impeding Chinese individuals and organisations from sharing data or providing sensitive information to the firm. TechInsights has published several influential reports detailing Huawei Technologies’ semiconductor developments.

The Canadian firm was among 14 overseas companies blacklisted by China’s Ministry of Commerce, which also launched new export control measures related to rare earth materials this week. These limits, encompassing mining, smelting and separation, magnetic material manufacturing, as well as the use and recycling of rare earth secondary resources, would take effect immediately, the ministry said on Thursday. That would cement China’s near-monopoly status in an essential sector for the production of hi-tech goods.

Last month, the SAMR said it found Nvidia in violation of China’s anti-monopoly law. That followed an investigation that began in December regarding the US company’s US$6.9 billion acquisition of Israeli interconnect products provider Mellanox Technologies. China has stepped up its actions against US companies as domestic tech giants, including Huawei Technologies, tout advances in semiconductor production.

In July, the Cyberspace Administration of China summoned Nvidia to discuss concerns over the potential tracking and remote control capabilities of its H20 chips, which are highly sought after by the country’s AI companies, after Washington resumed issuing licences to the US firm to export the processors to China.

Xi and Trump are expected to meet later this month at the Asia-Pacific Economic Cooperation summit in South Korea.

Qualcomm, known for its Snapdragon mobile chips, derives nearly half of its revenue from China, the world’s largest smartphone market and home to several leading smartphone manufacturers.

About 46% of Qualcomm’s sales last year came from China, including Hong Kong, according to the firm’s annual report. It has warned that trade tensions could increase the risks associated with its reliance on the Chinese market. China’s latest investigation was not the first time Qualcomm came under regulatory scrutiny in the country. In 2015, Qualcomm agreed to pay US$975 million in fines after China’s National Development and Reform Commission found that it violated antitrust laws.

Team Maverick