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Nvidia’s Mellanox Deal Won China OK in Face of Rival Opposition

Ian King

(Bloomberg) -- Nvidia Corp. won approval for its Mellanox Technologies Ltd. deal from China and other regulators in the face of fierce opposition from competitors, Chief Executive Officer Jensen Huang said.

Rivals that also tried to buy the Israeli chipmaker “hated the transaction,” Nvidia’s founder added in an interview after the deal closed on Monday. He didn’t mention specific companies, but Intel Corp., Advanced Micro Devices Inc. and a growing number of startups are pursuing similar opportunities.

The $7 billion acquisition took longer than expected because of an extended technical review and the collection of industry feedback, particularly in a market as large and complex as China, Huang explained. As the world’s second-largest economy and the biggest market for semiconductors, China gets a say on industry deals.

Some of those opposed to Nvidia’s purchase, including other bidders, wanted explicit assurances that access to Mellanox’s data center network chip technology would remain open, Huang said.

“I was more than happy to do it,” he added, noting that it makes sense for Mellanox to allow open access because that will encourage customers to keep using the technology.

The deal prompted other companies to complain that Mellanox might develop new technology that works better or exclusively with Nvidia chips. To address that, the Santa Clara, California-based company pledged to make sure that data travels between other companies’ chips and Mellanox components at roughly the same speed as Nvidia’s processors.

Mellanox must also provide samples of new products to rivals within 90 days of making them available to Nvidia. Samples are a key part of the industry’s development process because they help companies ensure their gear works properly.

The acquisition is Nvidia’s largest ever deal and should help the company expand its thriving data center chip business. When it was first unveiled in early 2019, some investors and analysts were concerned that the transaction would be blocked due to the U.S.-China trade dispute. China is trying to build its own semiconductor industry, so chip deals have been especially vulnerable. This makes Nvidia’s success with Mellanox particularly important and may presage more consolidation in the $400 billion industry.Huang said the company convinced Chinese regulators by stressing openness and willingness to work with others in the industry. “That attitude plays well in China,” he said. The conditions Nvidia agreed to should give Chinese chipmakers a chance to make sure their products work well with Mellanox’s technology. “No country waits around to be conquered,” Huang added.

The CEO built a multibillion-dollar business by persuading owners of data centers that Nvidia’s graphics chips can process large amounts of information needed for artificial intelligence work, such as image recognition.

Mellanox chips speed up the flow of information across computer servers and between components. That’s well suited to large AI datasets that need to be split up and processed by multiple computers in parallel. Simply building faster components and better stand-alone machines isn’t good enough, according to Huang. Mellanox’s gear will help data centers behave like giant computers by quickly assigning the right resources depending on the type of work, he said.

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