Global Economics

WeChat Restrictions Could Cause Communication Failures In Tech

In the same executive order issued by President Trump last week, both WeChat and TikTok have been banned from doing business with American companies. The TikTok ban has been splashed across headlines predominately. However, it’s also become apparent that a WeChat ban can cause a severe impact on American tech companies who work closely with Chinese manufacturers.

WeChat is the largest chat app currently in use in China, with over 1.2 billion active users each month. American apps like Google (GOOG), Twitter (TWTR), and Facebook (FB) have all been mostly banned from China. These bans have propelled Chinese-owned messaging app WeChat forward as being one of the most important forms for Chinese residents to communicate with the outside world; this includes communication between American-owned tech companies and Chinese manufacturers.

With COVID-19 sweeping the world since the beginning of this year, communication forms like WeChat have become increasingly important for use by companies who can no longer travel overseas due to current restrictions and health hazards. Because WeChat is one of the only messaging apps allowed for use in China, a U.S. ban could potentially place a detrimental impact on tech companies seeking to prepare for the holidays and roll-out new product launches.

With an already unstable electronics industry, a hit to communication channels could potentially cause serious harm. Tech developers rely on chat apps like WeChat to collaborate with their build and design teams in China and tackle problems as they arise. Other apps like Google and Zoom (ZM) are similarly banned in China.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Trader Buzz). I have no business relationship with any company whose stock is mentioned in this article.


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