Alibaba To Unveil In-House Server Chip In A Bid To Strengthen Cloud Business: Report

Chinese e-commerce behemoth Alibaba Group Holding Ltd -  ADR BABA, which has a strong presence in the Chinese cloud market, is reportedly moving into an arena that could improve its positioning in that market.

What Happened: Alibaba will announce its first custom-designed server processor to power its cloud computing business, Chinese media outlet Caixin said, citing several sources.

The new chip is reportedly based on British chipmaker Arm Holding's architecture and will use the 5nm technology. It has been under development by Alibaba's subsidiary Pingtouge since 2019, the report said.

Alibaba is expected to launch the server chip during its annual Apsara Conference for developers, scheduled for Thursday and Friday, Caixin said.

Related Link: How Alibaba's Cloud Business Stacks Up Against US Rivals

Why It's Important: The company's decision to make server chips in-house is precipitated by the competition presented by rivals such as Huawei Technologies and Amazon.com, Inc. AMZN, the report said.

Alibaba was the top cloud vendor in China in the second quarter and its share of the Chinese cloud market stood at 33.8%, according to a report released by Canalys.

In comparison, Huawei Cloud and Tencent Holdings ADR TCEHY took the second and third spots with shares of 19.3% and 18.8%, respectively. Baidu, Inc BIDU AI cloud placed fourth with a 7.8% share.

BABA Price Action: At last check Monday afternoon, Alibaba shares were down 0.14% at $167.72.

Related Link: Why These 2 Alibaba Analysts Expect Muted Near-Term, Positive Long-Term Prospects

Photo: Courtesy Alibaba