China's cloud service market is entering a new stage of fierce price competition. According to Canalys, in the first quarter of 2024, the mainland China's spending on cloud infrastructure services increased by 20% year-on-year, reaching US$9.2 billion. The three giants of China's cloud service market - Alibaba Cloud, Huawei Cloud, and Tencent Cloud - continue to maintain their leading positions, with a total growth of 22%, occupying 72% of the entire market share, a decrease of 2% compared to the previous quarter. Operators led by China Telecom are gradually rising in the cloud service market and are gradually eating away at market share. Customers' enthusiasm for AI application investment is high, and the top cloud vendors have greatly stimulated customers' consumption in the cloud by significantly lowering the prices of their cloud products this quarter.
China's cloud service market is entering a new stage of fierce price competition. Market leaders attract more customers through aggressive pricing strategies to drive business growth. In April 2024, Alibaba Cloud announced a price reduction on its core products globally, followed by another price cut on its AI basic models in May 2024. Tencent Cloud quickly followed suit and announced a significant price reduction on its basic models in May.
China's cloud service market is entering a new stage of fierce price competition. Market leaders attract more customers through aggressive pricing strategies to drive business growth. In April 2024, Alibaba Cloud announced a price reduction on its core products globally, followed by another price cut on its AI basic models in May 2024. Tencent Cloud quickly followed suit and announced a significant price reduction on its basic models in May.
Canalys analyst Zhang Yi said, "To maintain profitable growth in a highly competitive market, building a robust partner ecosystem is essential. Vendors can leverage the value-added services provided by partners to enrich the customer experience, while maintaining competitive pricing strategies to improve overall customer satisfaction. In addition, partnerships enhance market differentiation and reduce risks through optimized operations and flexible financial support."
In order to maximize the use of partner ecosystems to drive AI applications and speed up product launches, both Huawei Cloud and Tencent Cloud have introduced a partner program focusing on AI. In the first quarter of 2024, cloud revenue generated through channel partners accounted for 26% of China's total market revenue, and this percentage is expected to further increase.
Alibaba Cloud continues to occupy the first place in the domestic market with a 37% market share. In the first quarter, Alibaba Cloud increased its focus on public clouds and reduced its integration projects for private clouds. This move aims to limit customized projects and focus on more scalable opportunities. After successfully lowering product prices in China, Alibaba Cloud announced in April 2024 a significant reduction in the prices of its core products in 13 regions around the world, with an average reduction of 23%. In May 2024, Alibaba Cloud further reduced prices by offering its basic model "Qwen1.5-32B" for a limited time for free, thus reducing the entry threshold and attracting more customers. In terms of capital expenditures, Alibaba Cloud disclosed in May that it will establish new data centers in five countries: South Korea, Malaysia, the Philippines, Thailand, and Mexico, to accelerate global expansion.
Huawei Cloud still maintains its position as the second-largest cloud service provider, with a market share of 19%. The company continues to deepen its strong partner ecosystem and held the Asia-Pacific Regional Partner Leadership Summit in April 2024. This marked the official launch of the Huawei Cloud Asia-Pacific AI partner ecosystem. The event included collaborations with well-known partners such as iFlytek, PwC, and KBQuest. In addition, Huawei Cloud promises to provide additional incentives of 15%-25% to support partners in improving their professional services and sales capabilities, thereby strengthening their focus on AI products and solutions in specific market segments.
Tencent Cloud occupies 16% of market share and ranks third in the first quarter of 2024. In May 2024, Tencent Cloud launched three large model tools: Knowledge Engine, Image, and Video, aimed at promoting enterprise AI application R&D. At the same time, Tencent Cloud partnered with 17 companies and officially launched the Generative AI Ecosystem Plan to expand the application scenarios of AI large models. To keep up with Alibaba Cloud's price cuts, Tencent Cloud significantly lowered the price of its basic models in May, with a reduction of up to 70%.