A new reality for China’s tech champions?

One in seven people in the world use TikTok. Yet for the company behind such a cultural phenomenon, the last few years have been a rollercoaster.

Concerns about the app first surfaced more than five years ago, prompting President Trump, in his first term, to sign an executive order aimed at removing TikTok from US stores.

Lawmakers are concerned that the Chinese government could access user data on the 200 million Americans who use the app and potentially manipulate their feeds.

To address these concerns, TikTok’s parent company ByteDance launched Project Texas – storing US user data on American-owned domestic servers. Oracle. The company also moved its headquarters to Singapore and Los Angeles – in part to distance itself from its Chinese roots.

These were seen as significant concessions at the time. But still, in 2024 Congress passed a law threatening to ban the app outright, unless ByteDance transferred majority ownership and changed how TikTok operates in the US.

That deal has now ended with ByteDance signing an agreement to split the US app from the rest of its global business under a new consortium of companies that includes Oracle.

TikTok remains alive in a critical market, but the terms outline the compromises and limitations ByteDance — and perhaps other Chinese tech companies — may face as they try to expand globally.

The US-China rivalry has seen Washington and Beijing destroy each other’s companies over national security concerns.

Despite the latest trade war, TikTok has become the “low-hanging fruit” that China can offer in exchange for other important concessions, such as American agricultural products.

The deal allows China to frame the outcome as a win — exporting technology on its own terms while gaining leverage in broader trade negotiations.

ByteDance will continue to have access to 200 million users in America and 7.5 million businesses, but will lose control of TikTok’s algorithm and data.

Instead, the company licensed the algorithm to the new entity in the US, in a deal that the Trump administration valued at $14bn (£10bn).

“TikTok’s power lies in its content graph — an algorithm that learns from thousands of user signals to deliver hyper-relevant, highly addictive videos,” said Kelsey Chickering, principal analyst at Forrester.

“With a US joint venture retraining the algorithm on domestic data, the experience will change… One thing is certain: TikTok in America will not be the same.”

This transition may have impacts on advertisers and creators due to the changes.

Creators may see their engagement decline especially as global virality hits — content that once took off in one region may become popular in the US organically. A US-only algorithm could undermine that, forcing brands to restructure deals and perhaps have to pay more for US exposure.

TikTok’s global revenue is estimated at $20-26bn by 2024, approximately $10 billion of which will come from the US with advertising accounting for a large portion.

The changes will likely hurt TikTok’s bottom line in the US, but ByteDance retains a 19.9% ​​stake and therefore a share of the profits.

Algorithm retraining may also have consequences for ByteDance’s technology development.

Running separate US and global algorithms, split workforce, and parallel governance increases engineering costs, slows innovation, and increases operational complexity, says Charlie Dai Principal Analyst of Technology Architecture & Delivery at Forrester.

ByteDance has faced political and regulatory hurdles in the past.

Losing India in 2020 – then TikTok’s biggest market, with 200 million users – is a bigger setback than any potential disruption in the US, said Chris Stokel-Walker, author of TikTok Boom: The Inside Story of the World’s Favorite App.

But, he says, even India’s “setback” is not so much a failure.

“They continue to show growth despite these challenges.”

The struggles of the US and India have a common thread: they are triggered by geopolitical tensions.

The ban in India, however, is not aimed at TikTok alone – it targets China more broadly, with approximately 200 apps blocked across the country. And while that ban opened the door for homegrown platforms to emerge, none have come close to matching TikTok’s success.

For some, the TikTok deal inevitably invites comparisons with Huawei — another Chinese technology champion whose global ambitions have been reshaped by geopolitics.

But there are significant differences, with Huawei effectively locked out of Western markets after US sanctions cut access to critical 5G infrastructure.

TikTok in contrast was allowed to remain, despite strict terms for ByteDance.

Chris Stokel-Walker says this reflects a change in how governments respond to Chinese technology companies.

Some are excluded entirely; others are allowed to operate, but only within strictly defined political and regulatory limits.

While TikTok has been revamped overseas, it has full control over Douyin – its Chinese sister app – which is very successful in its own right within China.

Douyin has become a core pillar of ByteDance’s business – it is profitable, politically compatible and capable of change because it is in charge of training the data algorithm with full access to it.

But ByteDance is also hedging its bets for the future, investing in data centers, the cloud and Artificial Intelligence, underscoring the company’s efforts to diversify beyond advertising-led consumer applications.

Chris Stokel-Walker argues that the problem with TikTok is no longer about data security, but about who controls speech, culture and influence in the US.

Trump didn’t like that China might be shaping American culture, he said.

The truth is that ByteDance will continue to operate TikTok in the US, but with different limitations. And it could spill over into other markets it plans to expand with regulators looking for more control over Chinese technology.

Some experts say the licensing aspect of the deal could become a template for how other Chinese technology companies expand globally in an environment that increases Beijing’s reliance.