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TikTok Replaces Chipmakers at Frontline of Trade War

TikTok has replaced chipmakers at the frontlines of the US-China trade war. But while semiconductors have been caught in the crossfire, social media is unlikely to take a hit.

The viral video app looked set to splinter operations after President Trump issued two orders banning it from continuing to operate in the US under Chinese ownership, citing national security concerns. This pushed TikTok’s parent Bytedance to put the platform’s American, Canadian, Australian and New Zealand operations up for sale.

Oracle, Microsoft, and Walmart were among the willing suitors, but negotiations have since come under fire from the Chinese government. For the first time since 2008, China revised export rules concerning commodities to include “personalised information recommendation services”. This means TikTok’s parent ByteDance needs approval to sell off its prized algorithm – arguably the secret to TikTok’s success.

Without the algorithm, TikTok is less appealing to buyers, and less likely to sell before the September 17th deadline that Trump gave Bytedance to divest operations from China.

As competitors for TikTok are already waiting in the wings, including Facebook’s clone Reels and Triller, another American platform on which Trump is releasing presidential campaign videos, it seems unlikely that efforts to block the sale of the TikTok algorithm will have a lasting impact on the American social media market.

Chinese semiconductor factories on the other hand, remain reliant on US imports of software and equipment for the production of high-end chips for applications like artificial intelligence and 5G. At least until the country builds out its own advanced semiconductor foundries.

“US regulations are damaging Chinese chipmaking. The recent threat of adding SMIC to the US’ naughty list illustrates China’s dependence on US and European IC fabrication technology and their lack of any home-grown alternatives. In contrast, the regulation levied on TikTok is not earth shattering; it is simply going to create stronger equivalents on US soil and marks another milestone in the gradual decoupling of China and the US.”

Matthew Byatt | Managing Partner

Matthew is a Co-Founder and Managing Partner at Acuity and leads the Acuity Advisors’ Deeptech practice.

Matthew has held senior leadership and corporate finance positions with some of the UK’s most successful and influential technology and consultancy companies. Roles with ARM, McKinsey and Cadence have given Matthew an exceptional insight into the world’s most successful businesses and a number of the UK’s eminent start-ups, underpinning his success at Acuity.

Matthew has considerable experience across a broad range of technology sectors throughout the UK, US and Asia, ranging from nanotechnology, semiconductor and cleantech to digital media and internet businesses. It’s experience that has given him a robust, well-developed and international network. Having also run and successfully exited his own business, Matthew has a deep understanding of the financial and emotional aspects of this demanding process, bringing a unique and authoritative perspective to each business sale.

One of Matthew’s strengths is understanding complex technical value propositions, one of the benefits of training as an electronic engineer. He gets to the heart of what drives a company’s value and communicates this persuasively to potential buyers and investors. Matthew understands a buyer’s motivation intuitively and delivers a compelling rationale for why a business sale should be of strategic interest. His insight consistently yields higher deal values and results in great successes for his clients.

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