“Arab countries should develop their own Big Tech giants like China BATX”
As war in the Middle East intensifies and expands, there is a big risk of the war from existing Big Tech giants who dominates the Arab tech market.
This article draws attention to potential risks of the war from Big Techs and call on Arab countries to develop their own Big Tech giants learning from the success and rise of China Big Tech giants “BATX: Baidu, Alibaba, Tencent, and Xiaomi” and Tik Tok.
GIGA finance is needed to develop Arab Big Tech Giants. Arab Banks, including Islamic development banks, Arab authorities, and Arab leagues should join hands to develop novel finance instrument towards a strong, independent, and well controlled and regulated Arab Big Tech market.
BIG TECH DOMINATING THE ARAB TECH MARKET
The European Commission (EC) has officially designated six companies as digital gatekeepers of the digital economy. These companies are Alphabet, Amazon, Apple, Meta, Microsoft, and ByteDance. These companies are currently dominating the Arab Big Tech market.
Below is a brief overview of the history of these companies, their founders, affiliates, and their origin country:
Alphabet Inc. is an American multinational technology conglomerate holding company headquartered in Mountain View, California. It was created through a restructuring of Google on October 2, 2015, and became the parent company of Google and several former Google subsidiaries.
Amazon (Amazon.com) is the world’s largest online retailer and a prominent cloud service provider. Originally started as an online bookselling company, Amazon has morphed into an internet-based business enterprise that is largely focused on providing e-commerce, cloud computing, digital streaming and artificial intelligence (AI) services.
Following an Amazon-to-buyer sales approach, the company offers a monumental product range and inventory, enabling consumers to buy just about anything, including clothing, beauty supplies, gourmet food, jewellery, books, movies, electronics, pet supplies, furniture, toys, garden supplies and household goods. Headquartered in Seattle, Amazon has individual websites, software development centers, customer service centers, and data centers around the world. Amazon was founded by Jeff Bezos in his garage in Bellevue, Wash., on July 5, 1994.
Apple Inc. is an American multinational technology company headquartered in Cupertino, California. As of March 2023, Apple is the world’s biggest company by market capitalization and with US$394.3 billion the largest technology company by 2022 revenue. As of June 2022, Apple is the fourth-largest personal computer vendor by unit sales; the largest manufacturing company by revenue; and the second-largest mobile phone manufacturer in the world. Apple was founded as Apple Computer Company on April 1, 1976, by Steve Wozniak, Steve Jobs and Ronald Wayne to develop and sell Wozniak’s Apple personal computer. It was incorporated by Jobs and Wozniak as Apple Computer, Inc. in 1977. The company’s second computer, the Apple II, became a best seller and one of the first mass-produced microcomputers. Apple went public in 1980 to instant financial success. The company developed computers featuring innovative graphical user interfaces, including the 1984 original Macintosh.
Meta Platforms Inc. doing business as Meta, and formerly named Facebook, is an American multinational technology conglomerate based in Menlo Park, California. The company owns and operates Facebook, Instagram, Threads, and WhatsApp, among other products and services. Meta is one of the world’s most valuable companies and among the ten largest publicly traded corporations in the United States. On October 28, 2021, the parent company of Facebook changed its name from Facebook, Inc., to Meta Platforms, Inc., to “reflect its focus on building the metaverse”. According to Meta, the term “metaverse” refers to the integrated environment that links all of the company’s products and services.
Microsoft Corporation is an American multinational technology corporation headquartered in Redmond, Washington. Microsoft’s best-known software products are the Windows line of operating systems, the Microsoft 365 suite of productivity applications, and the Edge web browser. Its flagship hardware products are the Xbox video game consoles and the Microsoft Surface lineup of touchscreen personal computers. Microsoft ranked No. 14 in the 2022 Fortune 500 rankings of the largest United States corporations by total revenue; it was the world’s largest software maker by revenue as of 2022. Microsoft was founded by Bill Gates and Paul Allen on April 4, 1975. It rose to dominate the personal computer operating system market with MS-DOS in the mid-1980s, followed by Windows. The company’s 1986 initial public offering (IPO) and subsequent rise in its share price created three billionaires and an estimated 12,000 millionaires among Microsoft employees. Since the 1990s, it has increasingly diversified from the operating system market and has made several corporate acquisitions, the largest being the acquisition of LinkedIn for $26.2 billion in December 2016, and its acquisition of Skype Technologies for $8.5 billion in May 2011. As of 2015, Microsoft is market-dominant in the IBM PC compatible operating system market and the office software suite market.
ByteDance Ltd. is a Chinese internet technology company headquartered in Beijing and incorporated in the Cayman Islands. Founded by Zhang Yiming, Liang Rubo and a team of others in 2012, ByteDance developed the video-sharing social networking services and apps TikTok and Chinese-specific counterpart Douyin. The company is also the developer of the news platform Toutiao. As of June 2021, ByteDance hosts 1.9 billion monthly active users across all of its platforms.
The above mentioned companies are considered gatekeepers of the digital economy by the European Commission because they have an annual turnover of at least €7.5 billion in the European market or a market capitalisation of at least €75 billion, and also more than 45 million monthly users and 10,000 yearly business users across the European Union territory. This has granted them an “entrenched and durable” position of dominance in the digital economy.
Samsung, the South Korean tech giant, was removed from the list, despite the company having previously notified the European Commission of its potential to be a gatekeeper.
X, formerly known as Twitter, was also not considered as a gatekeeper of the digital economy. Asked about these omissions, senior European Union (EU) officials said they could not disclose details due to the confidential conversations with the firms but underlined the selection would be proportional to the role the platforms play as a “gateway” for users and businesses.
China Batx: the rival of the designated gatekeepers
BATX is an acronym standing for Baidu, Alibaba, Tencent, and Xiaomi, the four biggest tech firms in China, often compared to GAMA (Google, Amazon, Meta (Facebook), Apple) in the United States. BATX are the first tech companies that started in the 2000s during the rise of the Chinese technology revolution and quickly became widely popular among Chinese netizens. Notably after 2015, some other tech companies like Huawei, DiDi, JD, DJI and ByteDance have also become some of the up-and-coming biggest tech giants in the industry.
Revenue by 2018
Chief Executive Officer (CEO)
In 2000, under Chairman Jiang Zemin’s instruction, China started the Golden Shield Project to manage the media and information flow within China. Under the Golden Shield Project, many American tech companies such as Google, Facebook, Netflix, and the like were denied access into China from the Great Firewall due to their refusal to follow local data laws, while others, such as Microsoft and LinkedIn, were allowed.
At the same time, the population of Chinese netizens grew substantially since the introduction of internet in 1994. By 2018, China contains a population of 800 million netizens, 98% of whom are mobile users. Many Chinese tech companies flourished under this system, without competition from foreign businesses. BATX are a few of the earliest tech companies who saw the chance and began to occupy the internet market in the early ages of China’s internet transformation.
Below is a brief overview of China Big Tech companies BATX:
Baidu Search is the most popular search engine in China. Baidu is often contrasted with Google, which is the biggest search engine company founded in United States. Google is banned in China. So Baidu provides an equivalent search experience for China’s netizens. Baidu also provides many different other products, such as Baidu Maps, Baidu Cloud, Baidu Tieba, Baidu Knows, and more. Baidu accounts for 64.55% of the search engine market share in China, and also is the third biggest search engine website in the world.
Alibaba Group was first started as an e-commerce company in 1999 in Hangzhou, China. Since then, it has become a giant tech corporation, including branches like e-commerce, entertainment, online payment, cloud-computing, and AI technology. Its most famous products are Taobao and Alipay, which are closely incorporated into every Chinese online shopping experience. In 2017, Taobao.com was the third most visited website in China after Baidu.com and QQ.com. Taobao accounted for 58.2% of the e-commerce market share in China by 2018.
Tencent was first started by Ma Huateng as a social network platform. Now, Tencent has developed many more areas of business, including social platform, entertainment, e-commerce, online payment, information services, and artificial intelligence. WeChat, one of the most famous messaging apps from Tencent, had 169.6 million active monthly users in 2018. WeChat is the third most commonly used messaging app worldwide in 2018, after WhatsApp and Messenger. Tencent Entertainment is also the No.1 in the online gaming industry in the world by 2018, followed directly by Sony.
Xiaomi focuses on hardware technology like smartphones, home automation, smart Televisions TVs and other smart devices. Two thirds of Xiaomi’s profit is generated by smartphone sales. Xiaomi became the biggest smart phone maker in China in 2014 before plummeting down to fifth place in 2016.
There are also many other Chinese tech big firms including:
Huawei is founded by Ren Zhengfei at 1987 at Shenzhen China. It focuses on information and communications technology (ICT) infrastructure and smart devices. Huawei became the No.1 at Telecommunication network in the world by 2012.
DiDi Chuxing is the most popular taxi hailing service app in China. In 2018, there were over 30 million rides being used on DiDi each day. DiDi is available in more than 400 cities in China and has over 550 million users. DiDi accounted for 71.4% of the taxi hailing service share in China in 2018.
DJI is a private Shenzhen-based technology firm which is the leading consumer and industrial unmanned aerial vehicles (drones) manufacturer today, holding a 76% market share worldwide as of August 2021. Their products are sold worldwide and include the Phantom and Mavic camera drone series, the Osmo camera and gimbal series.
THREATS OF THE WAR FROM the BIG TECH
Threats of the war from the big techs include:
- Leveraging sensitive data: social media platforms developed by the Big Techs, gatekeepers of the digital economy, contains a huge amount of sensitive data about users. This includes financial, medical, social, and personal data. If the Big Techs operating in the Arab market decided to shift their role from profit seekers to war seekers, then they own a wealth of data about users in Arab countries and they can leverage these data adversely, including highly sensitive and financial data.
- Control over accounts: Big Tech companies owns and control users’ accounts registered on their platform. At any moment, Big Tech platforms can cancel or put on hold the account of users in Arab countries. This is dangerous, particularly if it is undertaken by the most popular social media platform like Meta Whatsapp.
- Spread of Misinformation and Disinformation: Misinformation is false or inaccurate information (getting the facts wrong). Disinformation is false information which is deliberately intended to mislead (intentionally misstating the facts). Spreading misinformation and disinformation is very common these days and intensifies in time of wars. Many regulations were issued to regulate and control the spread of misinformation and disinformation, however, the Arab world still need more adapted regulations that can filter and approve content posted on social media platforms that are widely used in Arab countries. Misinformation and disinformation spread quickly and could be adversely leveraged in time of wars. Arab countries should remain vigilant and control content on social media platforms including content generated by Artificial Intelligence tools like ChatGPT.
- A big blow to e-commerce: e-commerce platforms developed by Big Techs are very popular in Arab countries and were heavily used during the pandemic. If Big techs operating e-commerce platforms decided to suspend accounts of users in Arab countries, then this could cause a big loss to online sellers on e-commerce platforms.
CHINA BATX SUCCESS: China vs America big tech
Meta, Apple, Amazon, Netflix and Google are facing strong competition from China’s major tech companies BATX, as China pushes to become an ‘innovation nation’.
BATX are at the top of China tech sector that is making major strides in artificial intelligence (AI), games, payment systems, livestreaming, social media, search engines, cloud services and more, as the country looks to transform into an ‘innovation nation’.
China BATX success relies on the following factors:
China Innovation Strategy
BATX companies have consistently outperformed earnings estimates by focusing on subscription fees and merchant commission, rather than relying like their Western counterparts on advertising revenues.
More importantly, the BATX also focus on continually refreshing their offerings through innovation. Some of the tech players in the United States, on the other hand, have been criticized for simply building on past successes, rather than being true innovators.
China Investment Strategy
China Big Techs established strategic partnerships and made big investments and are continuously looking for global expansion.
Chinese tech companies have been expanding aggressively into Asia over the last few years. Alibaba, for example, has made some high-profile acquisitions, such as the South China Morning Post and e-commerce company Lazada, and it is expanding into services such as cloud offerings to compete with its Western counterparts.
Xiaomi have expanded aggressively into Southeast Asian markets and India, with an initial wave of budget smartphones, Xiaomi is now moving into other areas such as domestic appliances and other complementary areas.
China policies have all worked together to effectively enhance China’s development into a technology powerhouse. The government in Beijing remains cautious about the global prospects of the country’s tech leaders.
China’s push to become a tech innovation leader began in 2015, when the government unveiled Internet Plus, an action plan to integrate the internet with traditional industries. This was subsequently incorporated into Made in China 2025, an innovative manufacturing strategy that aims to upgrade domestic high-tech industries such as robotics, aerospace and pharmaceuticals.
Momentum for both initiatives has continued under China’s 13th Five-Year Plan, which has set objectives for the country to become an ‘innovation nation’ a ‘world powerhouse of scientific and technological innovation’ by 2050. Municipal governments are playing their part by developing tech hubs for entrepreneurs, researchers and corporations.
The Chinese government has pursued a set of policies and regulations to create an environment to implement the Internet Plus initiative. It provided funding through loans and subsidies to support companies focusing on high-tech research, innovation and acquisition of overseas technology. It has formulated industrial standards for the integration of the internet and traditional industries.
Procedures for business registration have been streamlined to reduce market entry barriers to encourage more startups to be formed. And more preferential social security and taxation policies have been rolled out to attract and retain domestic and overseas entrepreneurial professionals.
The government has also recognized the importance of protecting intellectual property (IP) rights for local innovation. In March 2018, the State Intellectual Property Office was restructured and strengthened in an effort to bolster law enforcement concerning IP rights.
China economic transition and world leadership
China is in transition to a high-tech economy. China made great technology achievement in various areas including:
- Biotech: The market for biologics and biosimilars is still in its infancy in China, but it has grown quickly in recent years due to a large domestic market, a favourable regulatory environment and strong government support.
- Big Data and artificial intelligence: Lately, China’s Big Data sector grew by 65 per reaching a volume of $2.32bn. This represents 10.7 per cent of the global Big Data market.
- Internet of Things (IoT): The IoT is the new mega-trend in China that is expected to drive demand for technology across the hardware, software, services and infrastructure sectors. The country is already the world’s largest hardware manufacturer and it has a broad internet user base.
- New energy vehicles (NEVs): China is now the largest NEV market in the world. Sales of alternative-powered vehicles in the country are rising.
- Nuclear power: China is planning nuclear projects that will make it the world leader in this area. It has ambitious nuclear energy generation plans.
China Success factors
China key success factors are execution, product quality, speed and data. According to the Harvard Business Review, the ability of Chinese companies to conduct rapid prototyping and shorten the time for new product introductions sets them in a competitive place in the world.
In addition, China is one of the world’s top digital retail markets, with consumers who are extremely willing to buy products online.
China is highly creative in leveraging technology. The vast amount of data produced by Chinese digital companies can be used to advance machine learning and Artificial Intelligence (AI) research. China has a unique mix of culture, state-led developments and sheer size and the government role is very important.
Recommendations and road ahead for Arab countries
Arab countries should be alerted to potential threats of a war from the Big Techs dominating the Arab technology market.
Learning from China BATX success and rise, Arab countries should develop their own Big Tech giants.
Below is a roadmap to be adopted by authorities, banks, and financial institutions in Arab countries:
Step #1: Develop a technology innovation strategy
China success builds upon a strong innovation strategy that sets a vision and a plan to transform China into a technology powerhouse. Similarly, Arab countries should put a unified innovation strategy to develop Arab Big Tech Giants fully controlled by Arab authorities.
Step #2: Develop a technology investment strategy
So far Arab countries made huge efforts to support start-up technology firms. But currently there is a need for a Big Tech Investment strategy that supports the development of Big Tech giants in Arab countries including Arab social media and e-commerce platforms. These platforms should be developed by Arab countries and for Arab countries in the same way that China did in developing BATX.
Step #3: Set Policies to encourage Big Tech development
Arab countries should set policies, enforced and supported by governments, to develop Big Tech Giants. These policies should include incentives and support for Big Tech development.
Step #4: Set Key Success Factors
Arab countries should identify key success factors that can put Arab Big Tech giants in a highly competitive position in the global tech market
Step #5: Be creative
Following existing Big Tech models should not be the first choice for Arab countries. On the other hand, Arab countries should be creative in developing their own Big Tech Giants learning from China and Western Big Techs … but not imitating or replicating them.
Euronews, Intereconomics, Harvard Business Review, Irish Times, Forbes, Techtarget, Ibanet, Investopedia, Wikipedia.