Jun 11, 2024 07:08 PM

Chinese Tech Giants Bet Big on AI to Boost Cloud Business

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Generative AI on display during the Mobile World Congress 2024 in Barcelona, Spain, on Feb. 26. Photo: VCG

Chinese tech firms are slashing prices of their artificial intelligence (AI) models in a move to stimulate the growth of their cloud businesses, placing a bigger bet on generative AI as they face increasing competition from domestic telecom giants.

In May, TikTok-owner ByteDance Ltd. announced a price level for its large language model (LLM) Doubao that represented a steep discount to Chinese industry norms.

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Chinese tech firms, including ByteDance, Alibaba, Baidu, and Tencent, are slashing prices of AI models to expand their cloud businesses amidst increasing competition from telecom giants.
AI-driven cloud market growth slowed, with Baidu's 12% revenue increase from cloud services minimally attributed to AI models; telecom firms like China Telecom and China Mobile are catching up in market share.
The price war highlights the struggle of Chinese tech firms to profit from AI services, contrasting with U.S. firms like Microsoft, which have successfully integrated AI into various products.

AI generated, for reference only

Who’s Who

ByteDance Ltd.: ByteDance Ltd., owner of TikTok, announced a significantly discounted price for its large language model Doubao in May, sparking a price war among Chinese AI firms. The company has integrated its LLM into work collaboration platforms but faces challenges in increasing subscriptions for paid services.

Alibaba Group Holding Ltd.: Alibaba Group Holding Ltd. is one of the Chinese tech firms that responded to ByteDance's price cuts for AI models by slashing its own prices. Despite launching LLM services, the growth of its cloud business has been limited, partially due to increasing competition from telecom companies. Alibaba Cloud ranked first in China's IaaS market with a 27.1% market share in the second half of 2023. The company struggles to turn its LLM applications into profitable ventures.

Baidu Inc.: Baidu Inc., a leading Chinese tech firm, reported a 12% year-on-year increase in cloud services revenue to 4.7 billion yuan ($648 million) in Q1 2023. Only 6.9% of this revenue was linked to AI models and generative AI services. Despite launching LLM services and training platforms, the growth of its cloud market slowed significantly in the latter half of 2023.

Tencent Holdings Ltd.: Tencent Holdings Ltd. cut prices of their large language models (LLMs) in response to ByteDance Ltd.'s steep discount. Despite launching LLM services and training platforms, Tencent Cloud ranked fourth in the Chinese IaaS market, with an 8.7% share in the second half of 2023. Tencent integrated its LLMs into work collaboration platforms but is struggling to increase subscriptions for paid services.

China Telecom Corp. Ltd.: China Telecom Corp. Ltd.'s cloud division ranked third in China's IaaS market in the second half of 2023 with a 12.9% share. It has launched AI models, including a speech recognition model supporting 30 Chinese dialects and other generative information extraction and decision aid models. The company is positioning itself as a supplier of cloud computing resources and smart computing systems while focusing on developing in-house AI models for enterprise customers.

China Mobile Ltd.: China Mobile has joined the AI race by launching models for 15 industries based on its multimodal AI model trained with hundreds of billions of parameters. The company is focusing on developing AI models in-house and positioning itself as a supplier of cloud computing resources and smart computing systems, targeting vertical domain applications for enterprise customers.

Huawei Cloud: Huawei Cloud is China’s second-largest infrastructure-as-a-service (IaaS) provider, holding a market share of 13.5% in the second half of 2023. It ranks behind Alibaba Cloud but ahead of Tencent Cloud and China Mobile’s cloud division. Like other telecom companies, Huawei Cloud aims to gain a foothold by offering comprehensive cloud computing resources and AI services.

Microsoft Corp.: Microsoft Corp. has successfully integrated its generative AI chatbot, Copilot, across various platforms including GitHub, Office, Teams, Bing, Windows, and Dynamics 365. By the end of the first quarter, GitHub Copilot had 1.8 million paying users, marking a 35% increase from the previous quarter.

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What Happened When

In the first quarter of this year：: Baidu reported a 12% year-on-year increase in revenue from its cloud services to 4.7 billion yuan ($648 million). Only 6.9% of that revenue was linked to AI models and other generative AI services.

At the end of the first quarter of this year：: The number of paying users of GitHub Copilot reached 1.8 million, up 35% from the previous quarter.

In the second half of 2023：: The growth rate of China’s corporate client-focused cloud market slowed to 9.5%, down from 15.9% in the first half of the year.

In the second half of 2023：: China Telecom Corp. Ltd.’s cloud division beat Tencent Cloud to become China’s third-largest IaaS provider with a market share of 12.9%.

In May 2024：: TikTok-owner ByteDance Ltd. announced a price level for its large language model (LLM) Doubao that represented a steep discount to Chinese industry norms.

AI generated, for reference only