China Attacks U.S. Leadership in Southeast Asia Cloud Market

Alibaba, Huawei, Tencent Increase Investments in Southeast Asia
Intensified Competition with US IT Giants in Southeast Asian Market

[Asia Economy Reporter Jeong Hyunjin] As global demand for the cloud market rapidly expands, Chinese IT companies such as Alibaba, Tencent, and Huawei are threatening the dominance of the United States in the Southeast Asian market. Chinese companies, emphasizing low prices as their core competitiveness, are continuing large-scale investments to secure a foothold in the Southeast Asian market.

According to the Wall Street Journal (WSJ) on the 14th (local time), Chinese IT companies including Alibaba, Huawei, and Tencent have planned to pour hundreds of millions of dollars into the Southeast Asian region over the next several years.

[Image source=Reuters Yonhap News]

Alibaba, China's largest cloud service provider, announced in September last year that it would invest $1 billion over the next three years and decided to establish an international business headquarters in Singapore in January this year. Huawei is providing cloud services to government agencies in Thailand and Malaysia, where digital government and smart city projects are underway.

The reason Chinese cloud companies are making such investments is to secure the new market of Southeast Asia ahead of the industry-leading U.S. companies. According to market research firm Statista, the global cloud market share leader is Amazon AWS (34% as of Q3 2022), followed by Microsoft's Azure (21%), Google Cloud (11%), and Alibaba Cloud (5%). Tencent holds 2%, and Huawei has an even smaller share.

However, the situation is different in Southeast Asia, according to WSJ. Analyzing the availability zones (AZ) of six cloud providers from the U.S. and China, WSJ found that Alibaba, Tencent, and Huawei have a total of 25 availability zones in Southeast Asia, significantly surpassing Amazon, Google, and Microsoft’s 15. Availability zones, where multiple data centers are interconnected to exchange and back up data in real time, are essential infrastructure for cloud services.

WSJ reported, "Although Amazon and Microsoft's cloud computing divisions overwhelmingly dominate market share in established markets like Singapore, Chinese companies are entering emerging markets such as Thailand and Indonesia ahead of U.S. companies." Market research firm Gartner also evaluated that Chinese companies have surpassed Google in market share in Thailand.

The market analysis suggests that Chinese companies win business by offering services priced 20-40% lower to customers who are more price-sensitive compared to Amazon, Microsoft, and Google. WSJ explained that through this strategy, Chinese companies may see somewhat reduced profits but can secure a large number of small and medium-sized enterprise customers. Additionally, Alibaba provides cloud services to related companies in Southeast Asia based on its experience in e-commerce and digital finance, while Tencent leverages its social networking service subsidiary WeChat.

Jesse Tang, co-founder of Singapore-based market research firm Twimbit, said that while the U.S. companies’ dominance will not be overturned overnight, Chinese companies have been in the region for a long time and are investing heavily to nurture local talent and help them become familiar with Chinese technological infrastructure and ecosystems.