This is not a subtle signal of an ambiguous political attitude. Heavy-handed China generally demands that private international companies mark borders that are in deep conflict in a way that serves its political worldview. This is another escalation in the digital cold war that has been intensifying in recent years and is pushing the world of technology more and more toward nationalistic lines. Thus the slogan that led the glorious innovation of Silicon Valley, “free and open”, continues to be emptied of content in the face of geopolitical tensions. And the Internet, which was once the perfect free market, is shrinking with each new system that opens, divides, closes, and seals.
1. The division did not start today
Since the terrorist attack by Hamas on October 7, the local Israeli technology industry has been sucked into the void created by the lack of swift government activity. But at the same time, industry officials also began to draw the lines of legitimacy themselves. This is how, for example, the local industry rallied to cancel all major sponsorships at the annual Web Summit conference in Lisbon after its founder published a series of controversial Posts on X. Another front was opened against another cyber conference, while on the other hand, an online list of several venture capitalists who expressed support for Israel was distributed, with a call to boycott them.
Similar moves occurred with the Russian invasion of Ukraine. Western countries and companies quickly cut off contact with their partners and partnerships in Russia. Some Russian companies, such as Yandex, which operates in Israel under the local company Yango, tried to create a separation between the local activity and the parent company. But this enjoyed limited success. The very presence of a Russian technology company, that maps the streets of Israel, creates fears that this is nothing less than a national security problem. To date, over 400 technology companies have severed their ties with Russia. Among them, the chip manufacturers Qualcomm and Intel, gaming companies such as Nintendo and Sony, and the payment company PayPal have stopped selling their products or services to Russia. Google suspended in Russia all its services that are based on payment and monetization such as YouTube. On the other hand, Chinese companies have not withdrawn from operations in Russia, and thus the lines of conflict only sharpen with each significant international event.
Of course, the division did not start today and it looks as if all the players in the international arena are fulfilling their historical role – between the “free” world and the rest. The division is led by China and the United States, which are working to achieve a strategic victory. In China, the government works to drive the market, while in the United States, they rely on private companies. As mentioned, against the backdrop of growing tensions, the technology companies themselves are also acting in a way that reflects the general sentiment of the conflict.
Until now, the technology giants were actually eager to enter the Chinese market. In 2016 Facebook founder Mark Zuckerberg developed a censorship tool to try to enter the Chinese market and in 2017 Google opened an artificial intelligence laboratory in Beijing. However, with the election of Donald Trump to the presidency of the United States and the escalation of relations with China, senior officials in American industry began to adopt anti-Chinese rhetoric in order to strengthen business ties with the American security establishment, obtain military contracts, and justify their various business moves. In 2019, for example, the same Zuckerberg told Congress in a hearing that they must approve the digital currency project for him otherwise the spread of “America’s democratic values and control around the world through financial leadership” would be in danger.
Over the past few years, this rhetoric has been backed up by actions. At one point, President Trump acted to compel the Chinese Bytedance to sell its TikTok subsidiary to an American company in order to ensure that the information collected on American users does not pass into the hands of the Chinese government – a real danger in light of China’s 2017 National Security Law, which requires Chinese companies to hand over information to national intelligence agencies the Chinese.
Although the sale process was never completed, the campaign against China did not subside. The United States began to close itself more and more to Chinese companies, and to push its Western allies to behave in a similar manner. Today, companies like Huawei are not allowed to sell their products in the United States, in the UK there is a ban on using the company’s telecom equipment for its 5G networks, and in Germany, they began to investigate Huawei in March as part of a general reassessment of its relations with China. The European Union itself, although it did not ban the sale of Huawei products or the Chinese telecom company ZTE throughout the continent, banned the use of the devices of the companies in its organization.
2. A real fear for national security
The conflict intensified with the Russian invasion of Ukraine. The isolation imposed on Russia by the democratic countries brought China and Russia closer together, which increased their economic and security ties. In a short time, the parties began to gather even more around themselves, and there is almost no area where the division into groups is more apparent than in the technology sector, which is seen as a key to future prosperity. A few weeks after the Russian invasion, the Biden Administration imposed a strict and unusual series of export controls in the field of chips in order to stifle China’s activities. Japan and the Netherlands, important players in the field as well, have joined in and imposed restrictions on the export of chip manufacturing equipment, further suffocating China.
For the American technology companies, the anxiety about the strengthening of the Chinese technology sector stemmed from the fear that this would mark the end of their dominance, but in the geopolitical arena, there is talk of a real fear for national security.
In this context, the developments between China and the United States during Trump’s tenure were seen more as a race for dominance, not a cold war, with each side working to increase investments as much as possible and get ahead of the other. But in the last two years, with the start of the war in Russia and now in Gaza, these concerns have expanded to include the balance of power in the world.
The growing convergence into two distinct camps is shrinking what was once in some ways the closest thing to a global free market – the Internet. It is a market that has almost no borders, but it expresses neoliberal ideas and Western dominance. Innovation was seen as if it only came from Silicon Valley, while all the cheap imitations came from China.
Today the situation is far from that. Chinese companies lead many markets, dominate market segments, and are a real challenge to that dominance. The government in Beijing leads in public investment in the development of these areas, while in the West investments are consistently reduced. This dynamic draws more complex geopolitical events into it and pulls the various satellite countries to the edges of the map. The technology companies have no choice but to draw even more into the campaign and strengthen their ties with the governments, within the ideological limits they set.
