NetEase has decided to discontinue one of its public cloud services amidst growing competition in China’s cloud computing market. The Hangzhou-based internet and gaming company notified corporate clients that the service will be taken offline on April 7 as part of a “business strategy adjustment.” Clients with unused credits can request refunds, according to a message from the South China Morning Post.
A customer service representative confirmed the decision and advised customers to migrate to alternative cloud platforms before the shutdown. The service’s domain, 163yun.com, now redirects visitors to Shufan, NetEase’s big data solutions business.
A spokesperson for NetEase mentioned that the service had a small number of clients in mainland China. “We have set up a dedicated team to communicate with existing users to minimize the impact on them,” the spokesperson added.
Pressure from competition and AI growth
NetEase’s move to close its cloud service comes at a time when China’s public cloud market is experiencing rapid growth driven by artificial intelligence (AI). Analysts suggest that the company has struggled to keep pace with AI-related advancements.
Ivan Lam, a senior analyst at consultancy Counterpoint, highlighted that AI has brought new momentum to China’s public cloud market. A report from IDC China in October indicated an 8% growth in the domestic market in the first half of 2024, driven by the increasing demand for AI-related services.
However, AI cloud services require substantial investment. Alibaba recently announced a $52 billion investment in cloud computing and AI infrastructure over the next three years, marking the largest project of its kind by a private Chinese company. ByteDance has also made significant investments to enhance its AI capabilities.
Li Chengdong, founder and chief analyst at Beijing-based consultancy Dolphin, pointed out that NetEase lacks the competitive edge of its competitors. While Alibaba and ByteDance have launched successful general-purpose AI models—Alibaba’s Qwen and ByteDance’s Doubao—NetEase’s Fuxi AI models remain focused on specific industrial applications such as robotics and video game development.
Strategic shift toward core business
The closure reflects NetEase’s strategic shift towards strengthening its core industries, particularly video gaming. The company has been a prominent player in China’s gaming sector, and this adjustment indicates a consolidation of resources to focus on markets where it holds a competitive advantage.
Competition in China’s AI cloud market is projected to intensify as providers increase investments in computing infrastructure and tailored solutions. Lam suggested that major players are likely to expand their cloud capabilities to meet the growing demand for AI.
(Photo by Unsplash)
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