China Tech Companies Has Overtaken The America Companies, What Now?

Ethan
0

China Tech Has Overtaken The America Tech, What Now?


CHINA’S DOMINANCE

The title is not clickbait. China now officially has more companies in the Fortune 500 than America. China and Hong Kong together have a total of 136 companies in the Fortune 500 while the US now only has 124 companies in the Fortune 500. 


Moreover, the aggregate revenue of these companies based in Chinese-speaking countries has surpassed that of US companies for the first time. And taking a look at the Fortune 500 list really puts this in perspective. 


The top 10 to 20 companies on the list are still largely American. But, if you scroll down the list, you’ll see Chinese names pop up more and more often. Most of these companies, you’ve probably never heard of as they’re national giants with little public presence outside the country. 


chinese companies list on fortune 500


Companies like Sinopec, PetroChina, China State Construction Engineering, China Railway Group, China Railway Construction, and so on. This, however, is not a new trend. Given the communist nature of China, they’ve always had these massive national giants within the banking and construction industries. 


What is a new development, however, and one of the main driving forces that pushed China ahead of America is Chinese tech companies. You know, the likes of Tencent, Pinduoduo, Alibaba, Xiaomi, Baidu, JD, Huawei, and Bytedance. 


And unlike their industrial counterparts, these companies are by no means limited to China. In fact, they’re much more like their American counterparts with global reach and dominance. Tencent, for example, has a stake in virtually every Western gaming company. 


This includes Riot Games, Epic Games, Bluehole, Ubisoft, Grinding Gear Games, Supercell, Discord, and recently Activision Blizzard as well. And that’s just within the gaming space. Within the social media space, we of course have TikTok which went from a nobody just a couple of years ago to momentarily surpassing even Google as the most visited website of 2021. 


More recently, we’ve seen the roaring rise of Temu which has very much been eating into dropshipping and Amazon’s 3rd party marketplace. In fact, Temu already controls 17% of the American discount store sector and hasn’t even been around for 18 months at this point. 


So, at this point, Chinese giants are not only establishing a global presence but they’re competing head-on with American giants, and honestly, they’re probably the only ones who are capable of actually taking on the American big tech industry. 


So, here’s how exactly we got this point and what this means for the future of the global tech industry.  



PHASE 1: RETURNING TO THE HOMELAND

Taking a look back, the rise of the Chinese tech industry takes us back to the 80s and 90s not to China but to America. You see, this was really the first big wave of Asians immigrating to America for better education and better jobs primarily from China and India. 


This wave of immigration is what led to notable figures like Sundar Pichai, Satya Nadella, Arvind Krishna, and Shantanu Narayen. You’d probably have a much harder time listing Chinese counterparts that rose to the top ranks of American tech companies. 


The most notable examples are probably Jensen Huang, Lisa Su, and Morris Chang, but technically those guys aren’t even Chinese, they’re Taiwanese but don’t let that fool you. The brightest Chinese engineers and entrepreneurs simply chose a different path than the Taiwanese and Indians. 


You see, they too came to America in the 80s and 90s and attended prestigious universities like Stanford, Harvard, and UPenn. Many of them even turned around and got jobs in Silicon Valley at companies like Microsoft, Google, and IBM, but this is where their paths would diverge. 


Instead of climbing the corporate ladder like Indians, the Chinese would go back to China to start their own companies. In fact, as of 2017, a whopping 80% of Chinese students would return home after studying abroad. 


For perspective, only 30-35% of Indians end up returning home and that was as of 2023. And this trend is especially true with all of the leaders of Chinese big tech. Take Robin Li, for example, the founder of Baidu, the Chinese version of Google. 


Before founding Baidu, Robin got a master's in computer science from the University of Buffalo and he worked as a staff engineer at the American startup: Infoseek, which was a pioneer in the search space. It’s the same thing with Zhang Yiming, the founder of Bytedance/TikTok. 


Before founding his own company, he used to work at Microsoft. The trend is even more obvious with their current CEO: Shou Zi Chew. Shou was actually born in Singapore, but he would go on to get a bachelor's from University College London and an MBA from Harvard. 


From there, he would intern at Facebook and work at Goldman Sachs before going to China. You can even say the same thing about Jack Ma. Technically, he never got admitted to Harvard despite applying 10 times, but I have a feeling that even if he was admitted, he would’ve eventually returned to China. 


And this brings me to the key difference between Chinese immigrants and basically all other immigrants. Most immigrants travel to a new country to achieve a better life for themselves and their families. Chinese immigrants, on the other hand, travel abroad to become more competitive within their home country. 


And a lot of this is thanks to a healthy dose of national pride. China’s youth is largely optimistic about the country’s future development and tend to believe that they have better career prospects in China. In fact, most of them have little doubt that China will become the world’s largest economy shortly and they’d much rather be part of that movement than help a bunch of westerners get even richer. 


So, having all these Chinese geniuses return home has very much helped China over the years, but that was just phase 1 of China’s master plan. 



Also Read:

What Happened To Browser Toolbars?

Exploring Walmart's Flower Selection: Types, Prices, and Options

What Happened To The Once-massive Telecom Company Sprint

Why LinkedIn may be the most powerful social media platform

How Did Europe Fall So Far Behind In Technology



PHASE 2: CULTIVATING GIANTS AT HOME

Having hundreds of business superstars return home is great and all but that only helps if they have a highly talented workforce to lead. And the reality was that only the smartest and richest had the opportunity to study and work abroad. 


As such, China would decide to bring “the abroad” home. You see, we always hear about Chinese censorship and the great Chinese firewall, but it’s not actually like that. In fact, China is a lot more lenient with American companies setting up shop in China than you might think, and one of the first examples of this was Google. 


Back in September of 2000, Google launched a simplified and traditional Chinese version of Google, and this would naturally lead to Google expanding to mainland China. The CCP would allow this for nearly a full decade to learn about the intricacies of how Google runs its business and simultaneously train thousands of Chinese engineers. 


Once they were satisfied with Google’s contribution to China, they launched a cyber attack against Google and a slew of other American companies in late 2009 called Operation Aurora. After this hostile move, Google would obviously largely reduce its operations in the country, but China had already gotten what it wanted from Google. 


Moreover, Google was one of the only companies to leave and they have since largely returned and that’s just one example. Intel and Qualcomm invested $40 billion into Chinese AI companies between 2015 and 2021. 


Similarly, Amazon has continued the expansion of its Chinese AI operation despite Andy Jassy publicly conceding that China is on the verge of overtaking the United States. At the same time, Microsoft has continued to run its Asian research center despite thousands of Chinese researchers defecting to Chinese AI giants after learning what they need. 



Why do these companies tolerate this behavior despite knowing exactly what’s going on? 


Well, very simple, China has a lot of things that they need and want. This includes a highly talented workforce, cheap labor, manufacturing, and of course, access to China’s rapidly evolving population of 1.4 billion people. Fun fact, iPhones actually often sell better in China than they do in the United States. 


And if they want to continue having access to all of these perks, that’s simply the price they have to pay. For American big tech, it’s a simple case of choosing profits over politics. For China, however, it’s always been the opposite. 


They already had a bunch of superstars who decided to return to China and start businesses. And thanks to all these American companies in China, they were also able to train hundreds of thousands of people to staff these new businesses. 


The nail in the coffin was the CCP throwing all of its political and economic might into these up-and-coming businesses. And this is how China ended up with dozens of top-tier homegrown tech companies like Tencent, Alibaba, Baidu, JD, Xiaomi, and so on. 


But, there was still one more phase in this tech superiority master plan. They had successfully retained their talent, and grown a tech industry that was worth trillions, and now it was time for global expansion. 



PHASE 3: CASHING IN GLOBALLY

You know how it’s hard for a mom Phase 3: Cashing In Globally and pop shops to survive against big national corporations and VC-funded companies. Well, it’s basically the same case with Chinese big tech but on a whole different scale. 


Take TikTok for example. In retrospect, it’s really not surprising why TikTok was so successful. They essentially relaunched a business that had already been proven to be extremely popular: Vine. Back in 2015 during the peak of Vine, they had 200 million active users. 


One of the main reasons that they shut down was not because the format was not popular but because the format was simply not profitable. It was extremely difficult to monetize short-form content and the economics simply did not make sense. 


douyin/tiktok worldwide download graph


And that hasn’t changed, that’s why TikTok lost $7 billion in 2021. This is only made worse by the fact that TikTok’s growth is very much stalling out, but TikTok doesn’t seem to care. TikTok’s parent company, Bytedance, is extremely profitable within China with revenue exceeding $100 billion per year. 


As such, they’re very much willing to basically invest $7 billion every year to control the 6.5 billion people who don’t live in China. There’s only a handful of American tech companies who can regularly stomach this sort of loss and most of them aren’t all that interested in doing that. 


That’s why Meta has squarely stepped back from short-form content. And YouTube is only keeping up with shorts so that they don’t fall behind TikTok. Otherwise, it would be a very stupid decision to actively choose short watch time over regular watch time. 


More recently, it seems that China is also coming after the American e-commerce market with Temu. Like TikTok, one of the main reasons that Temu is so popular is because they’re willing to take extraordinary losses to gain market share. 


In fact, Temu is losing an average of $30 with every single order, but its parent company, Pinduoduo, doesn’t really care because once again they’re extremely successful in China pulling in nearly $30 billion every year and growing exponentially. 


They’re very much ok with Temu being a loss leader for years or however long it takes to dominate Western e-commerce. I suspect that drop shippers and Amazon FBA sellers aren’t willing to do the same and they’ll probably get crushed in the coming years. 


And when you really think about it, this isn’t even a new trend. This is quite comparable to what Asian carmakers like Nissan, Toyota, and Honda did to American car makers, and what Asian electronics makers like LG, Samsung, Panasonic, and Sony did to American electronics makers, and what Asian computer makers like Asus, Acer, and Lenovo did to American computer makers. 


Now, it’s just happening on a different playing field at a much larger scale: social media and e-commerce, and who’s to say that it stops there. In fact, it’s quite likely that Chinese giants will employ similar strategies to search, AI, VR, AR, language models, voice assistants, EVs, self-driving, you name it. 


This isn’t to say that the American giants are done for. I mean, Ford, GM, Mercedes, BMW, and Volkswagen are still around and they do quite well within certain markets. But, globally speaking, they’re largely overshadowed by their Asian counterparts, and that may very well be what’s in store for big tech as well. Do you see that as a positive or negative? Comment that down below.

Post a Comment

0Comments

Post a Comment (0)