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Alibaba launches new server chip to boost its cloud business in challenge to Amazon and Microsoft

Signage at the Alibaba Group Holdings Ltd. headquarters in Hangzhou, China, on Wednesday, March 24, 2021.

Qilai Shen | Bloomberg | Getty Images

GUANGZHOU, China — Chinese e-commerce giant Alibaba launched a new server chip on Tuesday, as it looks to boost its cloud computing business and compete against U.S. rivals like Amazon.

The processor, called Yitian 710, will go into new servers called Panjiu.

The chip and servers will not be directly sold to customers. Instead, Alibaba’s cloud computing clients will buy services based on these latest technology. These servers are designed for artificial intelligence applications and storage.

The company did not say when the services based on the latest chip and server will be available for customers.

Alibaba will not be manufacturing the semiconductor but will be designing it instead.

That’s a trend among Chinese companies. Huawei designed its own smartphone chips and Baidu raised money this year for a standalone semiconductor business. U.S cloud computing rivals including Google and Amazon have also done the same.

Alibaba sees cloud computing as a key part of its future growth but it currently accounts for 8% of the company’s total revenue. The e-commerce giant’s cloud computing business saw slower growth in the June quarter after it lost a major customer that was using its cloud services overseas.

However, Alibaba is China’s largest cloud computing player, according to market analyst firm Canalys, but rivals are investing heavily to catch up.

As U.S. sanctions continue to hit Huawei’s smartphone business, the company is also looking to boost its revenue from cloud.

Alibaba has been trying to expand its cloud business internationally but still trails the likes of Amazon and Microsoft in terms of global market share.

Companies are investing in their own chips as a way to have custom-designed silicon that can power specific applications as a way to differentiate from the competition.

“Customizing our own server chips is consistent with our ongoing efforts toward boosting our computing capabilities with better performance and improved energy efficiency,” Jeff Zhang, president of Alibaba Cloud Intelligence, said in a press release.

Alibaba’s Yitian 710 chip is based on architecture from British semiconductor firm Arm, as well as using some of the latest manufacturing processes. A spokesperson for the company declined to comment on which firm will be manufacturing the chip.

The Yitian 710 is not Alibaba’s first foray into custom-designed semiconductors. In 2019, Alibaba launched its first AI chip called Hanguang 800.

The new server chip comes at a time when China’s internet giants are facing intense scrutiny from domestic regulators looking to rein in some of their power and tighten rules around areas from anti-monopoly to data collection. In April, Alibaba was slapped with a $2.8 billion fine as a result of an antitrust investigation into the company.

However, semiconductors are an area where China is hoping to bolster its domestic capabilities as the country’s industry still relies heavily on foreign technology.

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