Horizons is a bi-monthly Dasym Research initiative to show you how the Dasym themes have been in the news. We publish the Horizons on our website and as an email newsletter. If you wish to receive the email, please contact Investor Relations.
Do you have a question about the digitization of consumer’s daily lives? As a research-driven investment company, we want to be relevant to you, so please provide us with your questions and remarks. Your feedback will help us to drive our research agenda.
Consumers in the front-row of the deepening tech war
Since President Trump took office, the White House has been taking aim at the Chinese tech industry. They started by banning the use of ZTE and Huawei equipment in critical U.S. communication infrastructure, but recently they have moved the tech war ‘upwards’, from deep infrastructure towards consumer services. With the introduction of the Clean Network Program, the Trump Administration aims to purge major Chinese tech products from the U.S. system. Not only does the program forbid phone makers in China to pre-install and offer downloads of U.S. apps, it also includes a restriction on Chinese applications and platforms in the U.S. Currently, TikTok and WeChat are under attack. While consumers’ exposure to deep infrastructure and hardware is limited, these apps are heavily ingrained in people’s daily lives. Moreover, the backlash might extend to other domains as well. For instance, e-commerce and gaming may be hit hard if the ban is extended to the vast ecosystems of Chinese tech conglomerates.
Strategic Autonomy or Involuntary Dependence?
Other countries increasingly feel the consequences of the ever-rising tensions between the U.S. and China. For instance, when the U.S. placed Huawei on the Entity List in 2019, the company was no longer able to license the full Android operating system. This forced Huawei to release its P40 phone without Google services and apps. While a lack of Google apps and services is standard practice in its Chinese home market, consumers outside China expect their smartphones to come with these apps and services enabled. This, and the more recent actions against ByteDance and Tencent, illustrates how other countries are involuntarily being drawn into the U.S.-China decoupling. In recent months, the E.U. has sought to make clear that it is on its own path towards “strategic autonomy”, aligning with neither the U.S. nor China. Moreover, this strategy explicitly rejects the notion of global affairs being a zero-sum game. Europe’s strategic autonomy, however, might become increasingly difficult in a world where the U.S. and China dominate the tech stacks and where app stores act as gatekeepers.
China in Trump’s 2020 election strategy
Back in June, the Asia Times interviewed Steve Bannon, an important advisor to President Trump, who described Trump’s likely strategy for the 2020 elections. Bannon argued that Trump would try to let the elections focus on China. Interestingly, Trump’s executive order to ban TikTok and WeChat would fit Bannon’s timeline for the campaign as it is reorienting the American public debate towards China again. Although the U.S. elections will not completely center on China (as Bannon argues), it is possible that, as November draws near, the Trump administration will reinforce its aggressive stance towards China. In the short term, anti-China policy will remain ambiguous (and open to modification) as it comes primarily from the executive branch. Trump has already used the Trade Act and the International Emergency Economic Powers Act (IEEPA) to punish China. In the longer term, the legislative branch will increasingly adopt anti-China legislation, such as through the Committee on Foreign Investment in the United States (CIFUS), which has been investigating TikTok since last year.