China's Cloud Challenges US Big Three

Alibaba Announces 34 Trillion KRW Investment Over 3 Years... Declares Expansion into 17 Countries

Tencent Also Invests 86 Trillion Won Over 5 Years

[Asia Economy Reporter Kwon Jae-hee] Following 5G, China has once again signaled a showdown with the United States over the next-generation growth engine, the cloud market. Alibaba has thrown down the gauntlet aiming to enter the global top three in the cloud market, which is currently dominated by the world’s top three giants: Amazon, Microsoft (MS), and Google. In particular, with Google recently withdrawing from the Chinese cloud market, Alibaba is seen as the biggest beneficiary.

According to the South China Morning Post (SCMP) on the 13th, Alibaba Cloud Intelligence, a subsidiary of Alibaba, recently formed a partnership with the US data center operator Equinix and announced its entry into 17 global markets including the US, Dubai, Germany, Hong Kong, Indonesia, Singapore, and the UK. Through this, Alibaba Cloud will directly connect to more than 9,700 systems, including over 1,800 network providers worldwide, to provide related services. Additionally, it announced plans to invest 200 billion yuan (approximately 34 trillion won) in cloud infrastructure over the next three years.

Alibaba’s market expansion is considered a meaningful move given the characteristics of the cloud market. Cloud computing is a system where information processing is done by connecting to the cloud provider’s computers rather than the PCs or infrastructure owned by the company, regardless of time and place. The more the cloud is dominated, the more advantageous it becomes in building an internet ecosystem. According to market research firm Canalys, the global cloud market is growing at a high rate of 37.2% annually. The more Alibaba expands its cloud presence worldwide, the more it gains a twofold effect of 'profit' and 'ecosystem creation.'

Alibaba Cloud has already dominated not only China but also the Asia-Pacific market. According to Gartner, Alibaba’s market share in the Asia-Pacific cloud market last year was the highest at 28.2%. However, in the global market, it still lags significantly behind US companies such as Amazon Web Services, MS Azure, and Google Cloud.

Google’s recent withdrawal from the Chinese market is seen as an opportunity for Alibaba. Google decided not to pursue cloud business in China citing distrust of the market following the implementation of the Hong Kong National Security Law, and Alibaba is accelerating its market expansion in response. Following Alibaba, Tencent, the second largest in China, announced in May that it would invest 500 billion yuan (approximately 86 trillion won) over five years solely in cloud service infrastructure and has hired more than 3,000 employees this year alone.

However, the more the cloud market share increases, the more intensified US scrutiny could become a variable. Since social network services (SNS) like TikTok are already subject to sanctions, the possibility that cloud services will also fall under scrutiny grows as Chinese companies perform well. The US congressional media outlet The Hill analyzed that "the US government is trying to cut off the sprouts of China’s advanced IT."

This content was produced with the assistance of AI translation services.