Tencent earmarks big bucks in cloud to take on US rivals in Asia

China’s tech titan Tencent is gearing up to invest 500 billion yuan  – approximately US$70 billion – in cloud computing, AI and cybersecurity over the next five years. 

The announcement follows China unveiling plans for a nationwide digital transformation push, with President Xi floating US$1.4 trillion as the estimated figure going into the country’s local digital economy in efforts to drive areas like AI, 5G and smart transportation. 

For its part, Tencent wants to push further into cloud computing. Business Insider notes the lofty investment figure directed at new technologies will diversify revenue streams, more than half of which come from online video games (35 percent) and social networks (23 percent). 

In its home market of China, where Tencent’s current cloud operations are focused, the tech firm has captured less than a fifth of cloud infrastructure spend, a distant second behind leader Alibaba who claimed just under a half (46 percent), according to Canalys.

With businesses in China largely ‘locked in’ to Alibaba, then, Tencent wants to take the fight to US rivals in markets outside of China, in markets where the battle between these two cloud blocs continues. 

The cloud infrastructure markets of India and Indonesia will be crucial grounds for Tencent’s growth ambitions, and here it will be able to compete for market share against its own local rival Alibaba Cloud, and US firms Google Cloud, Microsoft Azure and AWS. 

India 

India is one the world’s largest digital economies. Despite that, cloud services here accounted for just 1.2 percent of the global market in 2019 – but that’s an indication that it’s ready to boom. With growing adoption of big data, analytics, AI and IoT in business, Nasscom believes the cloud market in India could grow three-fold to US7.1 billion by 2022.

Tencent already operates in India alongside aforementioned rivals, but ramping up investment in the market could see it reduce operating costs – and make itself more appealing – to Indian tech startups including Flipkat and Ola which it has invested in. 

Indonesia

At a 29 percent annual rate in 2019, Gartner reports say Indonesia’s cloud services market growth was behind only China. 

Again, Tencent is already active in the region, but investing in the market can give it a chance to capitalize on its continued and rapid rise, and to take advantage of existing tie-ups with e-commerce platform Shopee and stake in on-demand, multipurpose super app Go-Jek. 

In expanding in the region, Tencent will be up against the growing ambitions of AWS and Google Cloud, which have plans to launch availability zones, while Alibaba also has two zones based near Jakarta. 

But not all of its funds earmarked for expansion will leave the boundaries of Tencent’s home market. In support of China’s push for “new infrastructure”, Tencent will be building huge data centers containing more than one million servers each, according to CNBC.

Other initiatives include building new industrial parks and innovation centers, and investments into major technological research.

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