Alibaba, in a move to remain competitive, has announced price cuts of up to 50% for its core products and services in China, effective from May 7. According to analysts, this move could help the company carve out a larger share of China’s cloud computing services market but could also kick off a price war.
Alibaba Cloud remains the market leader in China, but its market share fell to 32.6% in the second half of 2022 from 34.5% in the first half, according to a report by research firm IDC. The announcement of the price cuts followed a major service outage in Hong Kong and Macau last December.
Although Alibaba still leads in the cloud market, followed by Huawei Technologies Co and Tencent Holdings, growth has been getting harder to come by. In the three months ended December 31, Alibaba Cloud posted a 3% year-on-year revenue increase to 20.18 billion yuan (US$2.92 billion), marking its slowest quarterly growth last year.
Analysts at research firm Canalys wrote in an article that Alibaba Cloud experienced a tough year in 2022, with quarter-to-quarter growth slowing after a strong 2021. However, the contraction in revenue from internet-based customers, which form Alibaba’s strongest business segment, is expected to diminish in 2023.
Although the price cuts may put pressure on Alibaba Cloud’s revenue in the short term, analyst Zhang Chengyu of research firm Analysts believes that it may be a good competitive strategy in the long run Alibaba Cloud remains the top industry player in China but is grappling with slowing growth.
Alibaba Cloud, has announced it will launch its own ChatGPT-style product Tongyi Qianwen before.