Huawei, Tencent lose cloud market share as Alibaba, Baidu extend their lead

Chinese tech giants Huawei Technologies Co and Tencent Holdings lost cloud services market share in the third quarter amid tough competition from market leader Alibaba Group Holding and foreign players, according to a new report.

The digital transformation of Chinese enterprises has given the country’s cloud infrastructure services market a major boost, with third-quarter revenues growing 43 per cent year on year to US$7.2 billion, according to data provider Canalys.

However, the growth rate was the slowest since the second quarter of 2019, and well below the rapid pace of 2020 when cloud spending was fuelled by the shift to online amid Covid lockdowns.

The cloud units of Alibaba (which owns the Post), Huawei, Tencent and Baidu held a combined 80 per cent of the home market in the third quarter.

However, the market shares of Huawei Cloud and Tencent Cloud, the second and third biggest players, declined to 17 per cent and 16.6 per cent respectively, compared with 19.3 per cent and 18.8 per cent in the previous quarter.

Their biggest rival, Alibaba Cloud, led the mainland Chinese market with a 38.3 per cent share, up from 33.8 per cent in the second quarter, while No 4 player Baidu AI Cloud held 8.2 per cent of the market compared with 7.8 per cent in the previous period.

Year-on-year growth rates for all four major players have been robust, with Baidu leading the group with 64.7 per cent growth for the quarter, thanks to its larger customer base across different sectors, as well as its industrial internet projects.

Alibaba grew 33.3 per cent, driven by the internet, financial services and retail sectors. Both Huawei and Tencent saw year-on-year growth of nearly 50 per cent in the same period.

Cloud computing services enable companies to buy, sell, lease or distribute a range of software and other digital resources as an on-demand service over the internet, just like electricity from a power grid.

The demand for cloud computing accelerated after the Covid-19 pandemic forced activities like work, shopping and entertainment to migrate online. The Chinese government also introduced its “Digital China” initiative to drive economic growth.

Domestic cloud players are facing increasing competition from international rivals seeking to boost their presence in the Chinese market. Earlier this year, Microsoft Azure announced that it would double its cloud capacity in collaboration with local partner 21Vianet.

“The uptick in interest from the US-based hyperscalers mostly comes from the fact that mainland China is the world’s second largest market,” said Canalys analyst Blake Murray. “This couples with its status as one of the fastest growing markets in the world due to its rapidly digitalising economy,” he said.