Spending on cloud infrastructure services in Mainland China grew by 20% year on year in the first quarter of 2024, reaching US$9.2 billion, according to Canalys estimates.
The leading trio in China's cloud market – Alibaba Cloud, Huawei Cloud, and Tencent Cloud – maintained their dominance, collectively growing 22% and capturing 72% of the total market. However, this represents a 2% decrease from last quarter.
Cloud services offered by telcos, led by China Telecom, are gradually capturing share. Cloud investments to support AI applications and significant price reductions by the top cloud providers have stimulated customer spending on the cloud.
The Chinese cloud market is entering a new phase of intense price competition. Leading cloud vendors have effectively driven business growth by attracting customers through aggressive pricing strategies.
In April 2024, Alibaba Cloud announced price reductions for its core products worldwide, followed by further cuts for its AI foundation model in May 2024. Tencent Cloud quickly followed suit, announcing significant price reductions for its foundation models in May.
"To maintain higher profitability in an intensely competitive market, fostering a robust partner ecosystem is indispensable. Partnerships can enrich customer offerings with value-added services, maintaining competitive pricing strategies while enhancing overall customer satisfaction," said Canalys Analyst Yi Zhang. "Simultaneously, partnerships enhance market differentiation while mitigating risks through optimized operations and flexible financial support."
Both Huawei Cloud and Tencent Cloud introduced AI-focused partner programs, seeking to leverage their partner ecosystems to drive AI adoption and speed up time to market. During the first quarter of 2024, cloud revenue generated through partners accounted for 26% of the total Chinese market, and this share is expected to increase further.
Alibaba Cloud retained pole position in the Chinese cloud market in the first quarter of 2024, commanding a 37% market share. During the quarter, it increased its focus on public cloud adoption while reducing private cloud integration projects. This move aims to limit customized projects and focus on more scalable opportunities.
Following the successful implementation of product price reductions in China, in April 2024, Alibaba Cloud announced substantial price cuts for its core products in 13 global regions, with an average decrease of 23%. In May 2024, Alibaba Cloud introduced further price reductions, offering its foundational model, "Tongyi Qianwen" Qwen1.5-32B, for free for a limited time to lower entry barriers and attract more customers. Regarding capital expenditure, Alibaba Cloud revealed in May that it will establish new data centers in five countries, South Korea, Malaysia, the Philippines, Thailand, and Mexico, to accelerate its global expansion efforts.
Huawei Cloud remained the second-largest cloud vendor in Mainland China in the first quarter of 2024, holding a market share of 19%. Cloud continued to strengthen its robust partner ecosystem. In April 2024, Huawei Cloud hosted the APAC Partner Connection Summit, which marked the launch of the Huawei Cloud AI Services APAC Partner Ecosystem. This initiative included collaborations with prominent partners, such as iFLYTEK, PwC, and KBQuest.
Furthermore, Huawei Cloud committed to providing additional incentives of 15% to 25% to support partners in enhancing their professional services and sales capabilities, thereby deepening the focus on AI products and solutions within specific market segments.
Tencent Cloud secured a 16% market share and ranked third in the first quarter of 2024. In May 2024, Tencent Cloud introduced three categories of large model tools – Knowledge Engine, Image, and Video – designed to facilitate enterprises' development of AI applications.
Concurrently, it officially launched the Generative AI Ecosystem Plan, partnering with 17 companies to expand the application scenarios of its AI foundational models. To keep pace with Alibaba Cloud's price reduction strategy, Tencent Cloud announced significant price cuts to its foundational models in May, with reductions of up to 70%, closely following Alibaba Cloud's lead.
Canalys defines cloud infrastructure services as services that provide infrastructure-as-a-service and platform-as-a-service, either on dedicated hosted private infrastructure or shared public infrastructure. This excludes software-as-a-service expenditure directly but includes revenue generated from the infrastructure services consumed to host and operate them.
