The tech landscape is changing
Big technology companies and billionaires running them are facing unprecedented heat from governments around the world. The final outcome will reshape the technology innovation and research landscape quite dramatically. While governments around the world have moved to curb the powers of big tech, it is the actions of the US and China, where most of the tech giants are headquartered, that will have the biggest impact. The approaches being used are very different though.
The US action had started earlier and had largely focused on four big companies — Amazon, Apple, Facebook and Google — that are perceived to be too big and powerful for consumers and potential competitors. The antitrust investigations by the US House Judiciary Subcommittee started in 2020 and the first case was filed against Google and was initiated in late 2020 by the Trump administration. After the Biden administration took over, the antitrust action has accelerated, multiple cases have been filed against the quartet and the government is seeking stronger action.
Chinese President Xi Jinping’s actions have been far swifter and more radical with the government and regulators clipping the wings of tech giants based in that country. It also seems more like a move to cut down to size the billionaires who have become too prominent and powerful. It started with the cancellation of the Ant Financial IPO at the last moment and a probe into Alibaba after their founder Jack Ma’s remarks criticising the government and regulators. Jack Ma vanished for a long time before surfacing but now keeps a studiedly low profile.
Since then, other Chinese billionaires have faced the wrath of the government — including Pony Ma of Tencent, Cheng Wei of Didi, the ride-hailing service, the Chinese edtech billionaires and several others. These actions have seen $1 trillion being wiped out of the market cap of the collective Chinese big tech companies. In some cases, regulations have been tweaked and, in others, probes and orders have been used to bring the companies to heel.
In the US, by contrast, the outcome of the antitrust cases may take several more years before any verdict is arrived at. The options include breaking up some companies like Facebook and Amazon or curbing the power of others like Google and Apple and forcing them to change their policies.
On the other hand, other prominent tech companies like Tesla, Netflix, Uber or Airbnb have not been considered to have reached a stage where they have a dominant position. In the past though, both IBM and Microsoft have faced antitrust action in different eras.
What are the long-term implications of the action against big tech in the US and China? In the US, antitrust action against technology companies — AT&T, IBM and Microsoft — in the past have given rise to new tech companies getting their chance to shine. (Each faced antitrust action in different decades).
In China, it is less clear what will happen. Most of these companies and their heads being disciplined currently have contributed hugely to the rise of the country as a technology power almost on a par with the US. In areas like artificial intelligence, quantum computing, fintech and others, these companies were among those in the forefront.
Crucially, the Chinese government has always chosen the direction tech research would take and also singled out private entrepreneurs to focus on specific areas. Currently, the Chinese focus is on designing and building cutting-edge chips to catch up with the US, and also take a lead in artificial intelligence and quantum computing, two areas where some analysts think they are neck and neck with the Americans. It also wants to dominate self-driving cars, drones and solar energy.
In some areas like facial recognition, mobile technology and robotics, China might actually lead the US and the action against tech giants may not significantly hurt their progress. In fact, the Chinese government would have ensured that before it took action. One area it may suffer would be in attracting Chinese origin researchers in the US and Europe back to mainland — this was largely being done by the private tech companies.
In the US, the technology race may actually accelerate as new entrepreneurs get funding and freedom to pursue their own ideas. There may be some change in the long-term VC outlook because a number of them depended on big tech companies providing the exit they wanted. But it would not materially affect them in the long run because companies like Microsoft, IBM and Tesla would jump in to buy promising start-ups that are not going for an IPO.
The action against big tech in the US could affect start-ups in other countries like India both positively and negatively. US companies as well as the Chinese often provided big funding to promising entrepreneurs and even helped in refining the tech applications. This could possibly reduce. But then, there could be others who may jump in to fill the breach. Yet one thing is certain — the balance of power in the current technology landscape will change completely.