Cloud infrastructure spend climbs 46% in Q3 2018 as US-China competition intensifies

The worldwide cloud infrastructure services market grew 46% to US$21 billion in the third quarter of 2018. US-based companies represented six of the top 10 providers, with Amazon Web Services (AWS) remaining the largest. It grew 45% during the quarter to account for 32% of total spend. This is still more than Microsoft Azure (17%) and Google Cloud (8%) combined, though the gap is closing as customers opt for multi-cloud environments. Alibaba Cloud, China’s highest ranked provider, was the fourth largest, growing more than 80% to account for 4%.

Competition between US- and China-based cloud infrastructure service providers is intensifying amid escalating trade tensions between the two countries. Tariffs on US imports into China are being used to ensure bilateral engagements take place and pressure China to agree to the United States’ demands. These include opening Chinese markets to US companies, and to removing requirements for IP and technology transfer. The United States Trade Representative highlighted the cloud computing sector as a case in point in the findings of its investigation into China earlier in March. The report stated that US cloud providers were forced to sell data center assets to local Chinese partners under the China Telecommunications Regulation to continue operating in the country.

“US- and China-based cloud infrastructure service providers currently dominate their respective domestic markets, which is unlikely to change anytime soon in the current political climate,” said Canalys Research Analyst Daniel Liu. “But competition between the two groups of providers is growing in other regions, including parts of Europe, the Middle East, Africa and ASEAN, as they expand their data center regional footprints.”