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In a threat to AI cloud computing services offered by the country's major tech groups such as China's artificial intelligence group Alibaba, Baidu and Tencent, companies are seeking “AI-in-a-a” to run on their own premises. -box” products are being sold.
Huawei has signed up more than a dozen AI startups to bundle and market its big language models with its AI processors and other hardware. Its partners include groups such as Beijing-based Zhipu AI and language specialist iFlytek.
Chinese groups are deploying boxes to bring generative AI advances to on-premise, or private cloud, setups, which account for about half of the cloud market in the country.
Huawei estimates that the Chinese market for “all-in-one machines”, as they are known locally, will reach Rmb16.8bn ($2.3bn) this year. Munsheng Securities analysts predict that the government market for AI boxes could reach Rmb450bn by 2027.
Liu Qingfeng, founder of iFlytek, said at a product launch event for its AI box last year that the company's “all-in-one machine is highly efficient, safe and controllable and ready to use out of the box. “.
The move departs from how AI is being commercialized in the West and takes advantage of Chinese companies' concerns about protecting their data.
This trend could crush the ambitions of tech giants that have invested heavily in building AI infrastructure and large language models that can be sold as a service to consumers on the cloud. Baidu's Robin Li envisions hundreds of AI apps running on top of the company's core models.
The spread of AI-in-a-box may also stabilize the segmentation of the Chinese cloud market.
During the first rollout of cloud computing in China, Huawei established itself as a dominant provider for private clouds, especially for deep-pocketed government and government groups. Alibaba and Tencent were mostly looking to provide computing power to other Internet groups.
That became a problem when Beijing cracked down on its tech customer base in 2021, upending the business models of key customers like online education companies. Alibaba's cloud arm has averaged single-digit quarterly growth since then.
“Baidu and Alibaba are focused on the public cloud, but the ecosystems in China and the US are very different,” said one local investor. “They will need to adapt to survive.”
Baidu said last week that generative AI and foundational models contributed Rmb324mn to sales in the first quarter. The company has also started selling all-in-one machines, but analysts say the tech giant has little leverage in this market, where it is difficult to tap into its data centers with vast pools of processing power.
Dylan Patel, chief analyst at research group SemiAnalysis, said that while some Chinese companies want on-premise AI, it would be inefficient compared to a public cloud or using APIs to connect to larger language models.
“Usage is going to be very low, which means you're going to have all this very expensive AI hardware that's not being used properly,” he said.
Research notes from Chinese investment banks have played up security flaws among Western AI groups, such as when OpenAI's ChatGPT accidentally shared users' search histories or when Samsung employees allegedly traded on a chatbot. Revealed the secret.
“Organizations need to be able to protect their data, and building a private cloud is the way to prevent valuable data from leaking,” iFlytek's Liu told potential customers.
Kent Fan, a banker at tech advisory China Renaissance, said the all-in-one boxes helped China offset a shortage of computing power caused by Washington's export controls on advanced chips.
Procurement records show that China's major government groups have prioritized private cloud AI.
A smart city services provider in Chengdu recently issued a Rmb2mn tender to run China Unicom's large language model on Huawei's all-in-one machine hardware.
China National Nuclear is also trying to build an on-premise system bundling hardware with a model that contains more than 10bn parameters, the variables used to train the system and ultimately shape its output. Startup Zhipu AI is in the running for the project, according to a person familiar with the matter.
According to Minsheng Securities, Zhipu charges Rmb1.8mn a year for a 12bn-parameter model packed with eight Huawei Ascend 910 chips. The Ascend 910 is Huawei's most advanced AI chip with the processing power to train large models and handle “inference,” or answering user questions.
Huawei, Baidu, Alibaba and Tencent declined to comment.