If America’s tech companies are broken up, does China win?

If America’s tech companies are broken up, does China win?
Source: Reuters

Over the past several years, calls to break up American tech industry giants have become more prevalent across the political spectrum in the United States. Advocates for breaking up the tech industry claim that doing so will address perceived abuses in a market dominated by several large megacorporations.

However, some experts and industry officials worry that breaking up corporations such as Amazon, Apple, Facebook and Google would put the US at a disadvantage next to rival Chinese companies, especially as the Chinese government is looking to usurp America’s role as the world’s dominant power.

“Breaking up” is hard to do

American tech companies – particularly the “Big Four,” which consist of Amazon, Apple, Facebook and Google – are hugely dominant in their respective fields and competitive globally.

In the wake of the COVID-19 crisis and the transition to online commerce, Amazon chief executive officer Jeff Bezos’ wealth has increased by some US$34.6 billion and further solidified the company’s position as the dominant e-commerce platform in the world. The rest of the “Big Four” are equally dominant in their fields, which includes search engines, social media platforms and software and hardware development. Apple, in particular, is one of the highest valued public companies in the world, at an astronomical US$1.679 trillion.

As a result of the industry’s large scale and its subsequent domination of the market, calls have come to break up what is perceived by some as anti-competitive monopolies. Plans for breaking up tech companies have been particularly resonant over the last few years in the wake of numerous high profile data scandals, high profile acquisitions and alleged “bullying” on the part of Amazon against its smaller e-commerce competitors.

The politics of a break-up

Breaking up the “Big Four,” in particular, has also become a frequent topic of political conversation in the US.

Elizabeth Warren, the Massachusetts Senator who withdrew from the Democratic presidential primary in March this year, took arguably the most vocal stance in favor of addressing the dominance of the “Big Four.”

Warren argued that “today’s big tech companies have too much power” and her campaign proposed breaking apart megacompanies such as Amazon and strengthening the federal government’s regulatory involvement in the sector.

Taking these sorts of actions has not been limited solely to Democratic Party platforms – these proposals enjoy broad support throughout American society. Two-thirds of Americans in one 2019 YouGov poll favored breaking up large tech firms, including a majority of both Democrats and Republicans.

Criticism of “Big Tech” has also emanated from the White House, albeit for different reasons.

President Trump recently signed an executive order seeking to curtail the powers of social media companies in response to actions Twitter took to fact-check him.

The tech wars

However, industry insiders, as well as some incumbent politicians, worry that the growing support for breaking up Big Tech fails to address the main threat to the American tech industry and, by extension, to America’s national security – China.

Though the scale of American tech companies allows them unprecedented dominance over their respective markets, this scale brings with it important benefits for the US’ ongoing trade and technology wars with China.

Amazon and Alphabet (the parent company of Google) are the two largest Research and Development spenders in the world, with figures ranging in the tens of billions per year.

As argued by Robert Atkinson, the president of the Information Technology and Innovation Foundation, the vast scale of these tech companies has “enabled them to make … big investments in R&D. If we try to break that up, we’re going to lose that.”

The global importance of American tech companies and their research was epitomized in recent months with the development of COVID-19 tracing apps by Apple and Google for a number of countries, including Germany, Italy, Denmark and the United Kingdom.

Some politicians and industry leaders have argued that breaking up American tech companies only benefits Chinese rivals and is a detriment to America’s national security.

In 2019, Democratic Representative Ro Khanna stated that breaking up American tech companies would mean that the “only big tech companies” remaining would “be Chinese – Alibaba, Baidu and Tencent.”

Likewise, during a Congressional hearing in 2018, Facebook founder Mark Zuckerberg similarly shifted focus away from American “Big Tech” to China, arguing that Chinese tech companies pose “a real strategic and competitive threat.”

Although Zuckerberg’s comments were likely made to shift the spotlight from Facebook’s own failings to regulate its content and the company’s abuses relating to data collection, the “competitive threat” outlined by Zuckerberg is indeed real.

One Council on Foreign Relations Report projected that by 2030 China will be the world’s largest R&D spender. Without drastic action from both the federal government and private sector, the CFR argued, the US is projected to fall behind in key emerging technologies such as Artificial Intelligence and 5G communications, especially as top Chinese tech companies such as Alibaba, Huawei, Tencent and Baidu all support of Beijing’s aims to become a world leader in AI by 2030.

Furthermore, Chinese tech company Huawei has managed to secure 91 commercial contracts for developing 5G worldwide in spite of US restrictions.

Google CEO Eric Schmidt has argued that prioritizing the break up of American tech companies instead of coordinated R&D investment will, however well intentioned, result in the US “competing with a country [China] that has a bigger economy, more research and development investments, better research, wider deployment of new technologies and stronger computing infrastructure.”

The implications of China’s application of new technologies domestically has also been on display in its brutalization of the Uighurs, which has been facilitated by mass surveillance, machine learning and mass sterilization.

Ultimately, calls to break up American tech companies for their perceived abuses must take a realistic look at competitors who could end up replacing them in the vacuum left behind.

Have a tip or story? Get in touch with our reporters at tips@themilsource.com