Mainland China’s cloud infrastructure spending increased 6% year-on-year in Q1 2023, reaching $7.7 billion and constituting 12% of total global cloud expenditure, according to market analysis firm Canalys.
Despite a market slowdown, with growth in the single digits for the third consecutive quarter, AI technologies, spurred by initiatives such as OpenAI’s ChatGPT, are expected to stimulate new market opportunities.
Mainland Chinese enterprises have adopted a restrained approach to cloud adoption, emphasizing the cost benefits associated with cloud technology.
To lower the entry barrier, several Chinese cloud vendors have announced price reductions for their services, while others invest more in developing cloud partner ecosystems to expand their reach, particularly into the SME sector.
“The drive to gain market share has led cloud vendors to aggressively lower their prices to appeal to price-sensitive customers, particularly during periods of stagnant market demand,” stated Canalys Research Analyst Yi Zhang.
In Q1 2023, the top four players—Alibaba Cloud, Huawei Cloud, Tencent Cloud, and Baidu AI Cloud—retained their stronghold, accounting for 79% of total expenditure, marking a 6% increase year-on-year.
Even though focus on PaaS (Platform-as-a-Service) has increased among vendors, IaaS (Infrastructure-as-a-Service) continues to dominate, making up over 75% of the overall cloud services market in mainland China.
Alibaba Cloud maintained its market leadership, commanding 34% of the mainland China cloud market, despite experiencing its first year-on-year decline in revenue due to delayed hybrid cloud projects.
Following Alibaba Cloud, Huawei Cloud seized 20% of the market share, showing a strong 19% year-on-year growth, largely attributed to investment in its partner ecosystem.
Tencent Cloud captured 17% of the market share, whereas Baidu AI Cloud held 8%, even with a marginal 1% decline in revenue.
As these cloud vendors vie for larger market share, strategies like price reduction and partner program expansion are being deployed to increase their footprint.
Even as the market shows signs of slowdown, the rise of AI technologies and related services continues to promise fresh avenues of growth in the cloud services sector.
Cloud infrastructure services, as defined by Canalys, include services that offer IaaS and PaaS, either on a dedicated hosted private infrastructure or shared public infrastructure. This doesn’t directly include SaaS expenditure but does account for revenue generated from infrastructure services used to host and operate them.
IDC predicts that the global share of China’s public cloud service market will increase from 6.5% in 2020 to more than 10.5% by 2024.