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On September 25, e-commerce group Alibaba Group Holdings Ltd (China) has announced its newly developed chip called Hanguang 800 for automated tasks, which will be used to enhance services for Alibaba's cloud division.
Hanguang 800, the first artificial intelligence (AI) chip developed by Alibaba itself, will be used for product research, automated translation and personalization of search results on the group's website. The chip was developed by DAMO Academy (founded by Alibaba in late 2017) and T-Head, Alibaba's specialized semiconductor unit.
According to Alibaba Chief Technology Officer (CTO), Jeff Zhang, the introduction of Hanguang 800 chip is an important step in the effort of pursuing Alibaba's next generation technologies, strengthening information technology, thereby promoting existing and new businesses, and helping improve energy efficiency.
However, according to an Alibaba spokesman, the company has no plans to sell the chip as an independent commercial product.
Alibaba's focus on chip production comes amid China's efforts to accelerate the development of the domestic semiconductor industry and reduce dependence on key technologies imported from other countries. Meanwhile, major technology enterprises in other countries like Alphabet Inc and Facebook Inc are also developing their own chips to improve the performance of AI tasks in their data centers.
China's Alibaba is often compared to Amazon of the US. While both companies don't really compete with each other, there are many similarities in their businesses: Both run e-commerce websites and have streaming services. And the most important thing that can shape the future of Alibaba is what now makes Amazon a big business - cloud computing. This is also a business segment that is considered very important for the future of Chinese companies.
Alibaba started as an e-commerce company in 1999. It has broken down into smaller businesses such as payments, traditional stores, streaming services and food delivery. But cloud computing is still the most promising field.
Alibaba launched its cloud computing division in September 2009 and is currently the largest company in China in the field. According to research firm Canalys, in the field of cloud computing, Alibaba is now dominating in its hometown with 47% market share of cloud infrastructure services in the first quarter of 2019. For the quarter ended in June 2019, the division brought in 7.79 billion yuan (US $ 1.13 billion) in revenue, equivalent to 66% growth.
According to Daniel Ives, leader of market research firm Wedbush Securities, cloud computing will be Alibaba's next frontier. The company has basically owned the e-commerce and consumer markets in China. Now, they are facing an opportunity to encroach on a cloud market worth up to US $ 100 billion in China. This is a real gold mine that Alibaba was aiming at during the last time it was driven by Jack Ma.
Cloud computing accounted for 7% of Alibaba's revenue last quarter. In fact, the business segment is still losing money but the losses have been narrowed and the profit margin improved (compared to the previous quarters).
Alibaba has two advantages in China. One is that there is less competition and secondly, Chinese companies can easily migrate to the cloud because they are not constrained by the aging IT infrastructure.
Alibaba currently dominates the cloud computing market in China. However, companies like Baidu and Tencent are focusing more on their cloud businesses. Therefore, besides the economic downturn in this country, this is also a big challenge for Alibaba. Cloud computing is bringing many challenges and opportunities for vendor pursuing the market.
By: Paul Stevens