US Investigates Security Threats of China's Alibaba Cloud, 4th Largest Globally

[Asia Economy Reporter Yujin Cho] The U.S. Department of Commerce has launched an investigation into whether Alibaba's cloud business in the United States poses a threat to national security. This move comes amid ongoing sanctions against Chinese tech companies following the inauguration of the Biden administration amid U.S.-China tensions. If the U.S. government imposes sanctions on Alibaba's cloud services, which the company has positioned as a new growth engine, it is expected to deal a significant blow.

According to major foreign media on the 18th (local time), the focus of the investigation is how Alibaba stores information of U.S. customers, including personal data and intellectual property, and whether the Chinese government can access this information. Depending on the results, U.S. authorities may force Alibaba to take measures to reduce risks or prohibit U.S. companies from using the service, foreign media reported.

The Information Security Bureau of the U.S. Department of Commerce, responsible for this investigation, was established under the Trump administration and is tasked with banning or restricting transactions between U.S. internet, communication, and technology companies and adversarial countries such as China, Russia, Iran, and North Korea.

Previously, in August 2020, the Trump administration launched the Information Security Bureau targeting Chinese cloud service providers, including Alibaba, citing threats to sensitive personal information and corporate intellectual property. It is known that President Biden has been formally reviewing this investigation since shortly after taking office in January last year.

Alibaba's cloud service business ranks fourth globally in terms of revenue. According to Gartner, Alibaba's cloud business revenue in the U.S. is less than $50 million, indicating minimal influence, but Alibaba has been focusing on expanding this service as a "core pillar of new growth."

In 2015, Alibaba launched its first cloud computing hub outside China in Silicon Valley and later added a data center in Virginia. However, amid escalating conflicts with China during the Trump administration, the company has halted its U.S. business plans.

Foreign media reported that if regulators ultimately decide to block transactions between U.S. companies and Alibaba Cloud, it would damage the company's most promising business and its overall reputation. Alibaba's cloud business dominates within China, and continuing this business requires cooperation in semiconductor and software supply from the U.S.

Alibaba is aware of these business risks. In a recent business report, Alibaba stated, "We express concerns about operating our business in the United States," adding, "U.S. companies contracted with us may be prohibited from fulfilling contractual obligations related to our cloud services or maintaining business."

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