U.S. President Trump approves Oracle-ByteDance deal on TikTok, ban of WeChat halted by California judge
September 22, 2020 Category Foreign trade, Weekly
U.S. President Donald Trump approved “in concept” a proposed deal between Oracle and ByteDance. He had warned that ByteDance would have to sell its TikTok app to a U.S. company or he would ban the use of the app in the U.S. on national security grounds after September 20. The President told reporters at the White House he was giving the deal with Oracle “my blessing” and that U.S. national security concerns had been addressed. “The security will be 100%,” Trump added. “Conceptually it’s a great deal for America.”
Reuters reported that the new company, named TikTok Global, will have a majority of U.S. Directors, a U.S. Chief Executive and a security expert. Walmart is also part of the deal. The company had joined Microsoft to acquire the U.S. activities of ByteDance, but the Chinese company chose Oracle’s bid. Walmart said it was still interested to play a role in the new company in a “commercial partnership”. Trump said the new TikTok company would be “totally controlled by Oracle and Walmart” and would be based in Texas. The company has agreed to make a USD5 billion donation to an educational fund in the state. “That’s their contribution that I’ve been asking for,” President Trump said.
ByteDance will not sell TikTok to Oracle but instead “serve as a trusted technology provider” to ByteDance, securing details of U.S. TikTok’s users. Analysts speculated that Trump would reject the deal, but he approved it instead. Factors which could have influenced his decision include the fact that Oracle Chairman Larry Ellison is a Trump supporter and that Trump did not want to anger TikTok’s 100 million U.S. users one and a half month before the U.S. presidential elections.
Under ByteDance’s proposal, the Beijing-based company would set up a headquarters for TikTok in the United States. U.S. Treasury Secretary Steven Mnuchin also said that ByteDance has offered to create 20,000 U.S. jobs. Oracle would become ByteDance’s technology partner responsible for the management of TikTok’s data. Oracle said it will take a 12.5% stake in the new TikTok Global, while Walmart said that it plans to take a 7.5% stake. Walmart CEO Doug McMillon would serve on its five-member board. TikTok Global will be majority-owned by American investors, including Oracle and Walmart, according to media reports. TikTok Global will be an independent American company, based in the U.S., with four Americans out of the five-member board, according to the Global Times.
The U.S. Commerce Department also issued an order banning any transactions on Tencent’s messaging app WeChat in the U.S. U.S. consumers would not be penalized for using the apps, but they would no longer be available for download on the Apple and Google app stores. But Magistrate Judge Laurel Beeler in California approved a request by the U.S. WeChat Users Alliance to delay restrictions on the use of the app. He said the government’s actions would affect users’ First Amendment rights in limiting their means of communication. The ban on downloading TikTok was postponed by the Trump administration till September 27.
Data analytics firms Sensor Tower estimates that WeChat has been downloaded by 1.1 million first-time users in the U.S. so far this year, down 31% from 1.6 million during the same period last year. Tencent has changed the name of its WeChat office collaboration app to WeCom to circumvent the ban. The WeCom trademark was registered in the U.S. on August 19. After downloading WeCom, users can link their WeChat account to it and add their WeChat contacts. WeCom users can then message, create chat groups, and even receive virtual money from WeChat friends without their WeChat contacts having to download WeCom.
The Global Times commented that the Trump administration has gone to extremes to turn the U.S. market into a slaughterhouse for Chinese firms. Industry observers said this shows President Donald Trump’s determination to kill China’s high-tech companies, which could have been motivated by U.S. firms aiming to prevent top Chinese tech firms from penetrating their home turf. China’s Ministry of Commerce (MOFCOM) vowed to take countermeasures. The U.S. move had “severely disturbed the companies’ normal operations, hurt the confidence of global investors in U.S. markets and undermined the global market order,” MOFCOM said in a statement. “If the U.S. insists on going its own way, the Chinese side will take necessary measures to firmly safeguard the legitimate rights of Chinese companies,” it said.
Meanwhile, Nvidia Corp, a U.S. company, has agreed to pay USD40 billion to buy British chip designer Arm, causing anxiety that the Trump administration could block Arm’s supplies to China in the future. Hermann Hauser, Co-founder of Arm, called the deal a “disaster”, as the company would lose its independence. Arm controls the world’s most widely-used CPU instruction set architecture (ISA), and chips based on Arm architecture are used in more than 90% of the world’s smartphones. Given the U.S.-China tensions and U.S. suppression of Chinese technology enterprises, if Arm falls into U.S. hands, Chinese technology companies would certainly be placed at a big disadvantage in the market, the Global Times warns. If Arm becomes a subsidiary of a U.S. company, all Chinese technology companies on the U.S. Entity List could be cut off from Arm-based chips, while European companies using Arm technology may also encounter difficulties in supplying products to the Chinese market. However, besides regulatory authorities in the U.S., the EU and the UK, China would also need to approve the deal and could decide to block it.
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