Potential TikTok Ban Boosts Competitors and Threatens Global Expansion

TikTok finds itself at a critical juncture in the United States, where its Chinese parent company, ByteDance, faces the formidable challenge of selling the app within a tight timeframe or confronting an outright ban in its most significant market.

by Faruk Imamovic
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Potential TikTok Ban Boosts Competitors and Threatens Global Expansion
© Getty Images/Michael M. Santiago

TikTok finds itself at a critical juncture in the United States, where its Chinese parent company, ByteDance, faces the formidable challenge of selling the app within a tight timeframe or confronting an outright ban in its most significant market. The U.S. Congress has recently passed legislation, expected to be signed into law by President Joe Biden, that mandates ByteDance to either divest TikTok or cease its operations across the country. This decision underscores a broader geopolitical conflict, accentuating the rift between U.S. and Chinese technological spheres.

Beijing's firm stance against the forced sale, coupled with its updated export control rules, complicates matters for ByteDance by potentially blocking the sale on national security grounds. This situation presents a grim outlook for the future of TikTok in America, which boasts a user base of approximately 170 million.

Alex Capri, a research fellow at the Hinrich Foundation, warns that any forced divestiture could be detrimental not only to TikTok's operational capabilities in the U.S. but also its global prospects. "A forced sale of TikTok in the U.S amounts to a downgrade of the app, as the Chinese government won't approve the sale of its algorithms," Capri explains. This scenario might compel ByteDance to sell TikTok without its crucial algorithms, significantly diminishing the app's appeal and functionality.

A Catalyst for Broader Technological Bifurcation

The potential ban on TikTok could serve as a boon to its competitors, including industry giants like YouTube, Google, and Instagram. Users may migrate to these platforms, seeking alternatives to TikTok's unique content delivery that relies heavily on its sophisticated algorithms. This shift could mark a significant setback to ByteDance's ambitions for global expansion and influence, as noted by tech industry analyst Richard Windsor. "It would be the end of ByteDance's global expansion, as it would be a sign that the Chinese state values the algorithm's security more than ByteDance's financial prosperity and global expansion," Windsor observes.

The ramifications of a U.S. ban on TikTok extend beyond corporate losses and into the realm of international tech dynamics, potentially accelerating a division that sees the world's tech landscape split into U.S.-centric and China-centric blocs. This split encompasses not just consumer apps but also more significant infrastructural elements like data centers, satellite communications, undersea cables, and semiconductors. Alex Capri highlights this aspect, emphasizing that a U.S. ban "will spark renewed efforts to spread China's digital footprint in Southeast Asia and other mostly developing markets worldwide."

Potential TikTok Ban Boosts Competitors and Threatens Global Expansion
Potential TikTok Ban Boosts Competitors and Threatens Global Expansion© Getty Images/Michael M. Santiago
 

Legislative Context and Future Challenges

The TikTok legislation was part of a broader foreign aid package supporting allies such as Israel, Ukraine, and Taiwan, which President Biden is set to enact. This law gives ByteDance up to one year to finalize a sale or face an operational ban, adding to the myriad of challenges Chinese companies face in the U.S.

Concerns over national security risks, such as potential data sharing with the Chinese government or manipulation of content, have long plagued TikTok. However, the company has consistently denied these allegations. Paul Triolo, a partner at Albright Stonebridge Group, suggests that the bill is partly driven by lobbying from Silicon Valley interests who stand to gain from a weakened Chinese tech presence in the U.S. "The new divestiture bill is the result of a concerted lobbying effort by Silicon Valley venture capitalists associated with U.S. technology companies that stand to benefit from the China threat narrative proponents of the bill have been pushing," Triolo states.

As the Biden administration intensifies efforts to protect U.S. information technology supply chains, future legislative and regulatory actions could further restrict Chinese tech firms' access to the U.S. market. Triolo predicts, "It seems unlikely that Congress would single out another Chinese company like TikTok for a specific bill, but the Commerce IT supply chain rule could be used in the future to limit the ability of Chinese companies and apps to have access to portions of the U.S. market."

Anticipated Reactions and International Implications

China's response to the U.S. legislative actions remains to be fully realized. While Beijing has expressed strong opposition to any forced sale of TikTok, it may not retaliate directly against the social media ban. However, it has already taken significant steps, such as ordering the removal of several social messaging apps from Apple's China App Store and maintaining stringent controls over VPN usage.

Paul Triolo notes that China's actions reflect its strategic priorities: "While Beijing is already on record as opposing any forced divestiture of TikTok U.S. from ByteDance, its primary concern would be the transfer of technology involved. In general, Beijing cares much less about a social media company than about U.S. technology controls."

The Role of National Security in Tech Regulations

The U.S.'s aggressive stance on TikTok is part of a broader strategy to mitigate potential risks posed by foreign technology companies. This approach is grounded in concerns that foreign control over significant digital platforms could compromise American data privacy or be manipulated for misinformation. The debate over TikTok underscores the challenge of balancing economic interests with national security, especially when it involves the sprawling tech landscapes of the world's two largest economies.

Further complicating the scenario is the U.S. government's scrutiny under the Trump-era rule, aimed at protecting U.S. information technology supply chains. This legislation exemplifies the continuing trend of national governments fortifying their defenses against perceived foreign technological threats.

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