The Reason China' ByteDance Chose Oracle To Become TikTok's US 'Tech Partner'

The US government does not want Chinese technology 'invading' the US. TikTok does not want to lose the US market. China does not want its companies compelled to sell AI technology to foreign companies.

Which is why Oracle 'won:'  it's CEO is a major Trump supporter and donor. If China can be convinced that this is, as it appears, a licensing agreement not a sale of the algorithm and if Larry Ellison can convince Trump the deal should go through, then ByteDance will have made the best of a bad situation. JL 

Timothy Lee reports in ars technica:

The deal will not be an outright sale. Oracle will become ByteDance's US "tech partner." The details aren't yet public. ByteDance will need the approval of  Chinese authorities, as well as Trump, before a deal can go through. Beijing's export controls restricting sale of AI technology apply to the algorithm TikTok uses. Chinese officials prefer to see TikTok shut down than for foreign governments to seize control of Chinese technology. ByteDance's decision to make the Oracle deal less than a sale might be to respect the Chinese government. If ByteDance believed Larry Ellison could use his relationship to Trump to get the deal approved, that would be a reason to choose Oracle.

Oracle has apparently won the competition to take over TikTok's US operations. Microsoft disclosed on Sunday that ByteDance, TikTok's Chinese owner, rejected Microsoft's rival bid earlier in the day.

The Wall Street Journal reports that the deal will not be an outright sale. Instead, Oracle will become ByteDance's US "tech partner." The details of the transaction aren't yet public, but they will soon be submitted to US regulators for their approval.

It's a victory for Larry Ellison, the chairman of Oracle and one of the few technology tycoons who has been openly supportive of Donald Trump. Ellison held a fundraiser for Trump in February.

In August, a reporter asked Trump about the possibility of an Oracle TikTok deal. Trump had a favorable reaction.

"I think Oracle is a great company, and I think its owner is a tremendous guy," Trump said. "He's a tremendous person. I think that Oracle would be certainly somebody that could handle it."

ByteDance is in a tricky situation

The big challenge facing ByteDance is the need to satisfy the potentially conflicting demands of the US and Chinese governments. The US government has threatened to shut down TikTok over concerns that the Chinese government would compromise Americans' privacy or exercise undue influence over the content Americans see. Transferring TikTok's US operations to an American company could address those concerns.

But the Chinese government isn't happy about the possibility of the US government essentially seizing a major Chinese technology asset for the benefit of a US competitor. Late last month, Beijing announced new export control rules restricting the sale of artificial intelligence technology—rules that apparently apply to the algorithm TikTok uses to recommend videos to its users. This means that ByteDance will need the approval of the Chinese authorities—as well as the Trump administration—before any deal can go through.

Rumors have suggested that Chinese officials might prefer to see TikTok shut down than to create a precedent for foreign governments to seize control of Chinese technology platforms. ByteDance's decision to make the Oracle deal something less than an outright sale might be an effort to respect the sensitivities of the Chinese government.

But efforts to mollify the Chinese government could easily sour US regulators on any deal. And if the Trump administration rejects ByteDance's proposed deal, there's a significant chance that TikTok will get shut down and ByteDance will get nothing.

So if ByteDance believed Larry Ellison could use his personal relationship to Trump to get the deal approved, that would have been a compelling reason to choose Oracle.