China’s cloud infrastructure spending reached US$9.2 billion in the third quarter, with “relentless” focus on artificial intelligence

According to analytics firm Canalys, spending on cloud infrastructure services in mainland China reached $9.2 billion (£7.29 billion) in the third quarter of 2023, accounting for 12% of global cloud spending.

China’s top three suppliers – Alibaba, Huawei and Tencent – account for nearly three-quarters (73%) of the market and customer spending. Alibaba Cloud has the largest market share at 39%, followed by Huawei Cloud (19%) and Tencent Cloud (15%).

Canalys noted that cultivating and prioritizing the partner ecosystem is a top priority for vendors; a full quarter of cloud infrastructure services spending in Q3 2023 came from this channel. However, this is especially important for the development and deployment of artificial intelligence. Both sides need the other; cloud providers need the AI ​​companies’ innovation, and the latter need the former’s computing power—real estate, if you will.

This can be seen from the market trends in the past quarter; both Alibaba Cloud and Huawei Cloud have launched AI model development platforms that allow the integration of third-party open source AI models.

Canalys points out that this relative openness goes against the grain (in many ways). The analyst said China’s cloud services market “remains conservative…relying heavily on the government and state-owned enterprises to drive growth.” However, the country’s suppliers remain “relentlessly focused” on AI innovation and investment.

Canalys analyst Zhang Yi said: “Without the help of a series of partners, it is almost an impossible task for vendors to achieve widespread deployment of artificial intelligence technology.” “This relies heavily on developers, An AI ecosystem of ISVs and experts that are critical to delivering value to customers at scale.

“The collaboration between Salesforce and Databricks and cloud hyperscalers such as AWS and Google demonstrates that collaboration between cloud vendors and service providers, as well as between different cloud vendors, is a strategic necessity,” Zhang added. “Combining technology offerings and expertise is critical to capturing market growth opportunities and driving value.”

Alibaba Cloud Intelligence Group’s revenue in the latest quarter was US$3.79 billion, an increase of 2% year-on-year. For the fifth consecutive year, the company is the world’s third-largest IaaS provider by revenue. Yet the headline news from Alibaba’s latest earnings report was the abandonment of plans to spin off its cloud business unit. In terms of artificial intelligence, Alibaba launched the Bailian platform in October, aiming to create a one-stop artificial intelligence basic model development platform.

To understand what cloud investment means at the provincial level in China, the Hebei Provincial Department of Industry and Information Technology issued a curious press release on December 27. Hebei Province is China’s sixth most populous province, but its cloud technology adoption rate ranks first for the second consecutive year, with more than 90,000 companies and an industrial equipment utilization rate of 21.2%.

Photography: aboodi vesakaran

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Label: Alibaba Cloud, China, IaaS, infrastructure