Wednesday, December 6, 2023

Alibaba scraps plans to hive off cloud business amid growing chip uncertainties

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Credit: Michael Kan/IDGNS

Alibaba Group Holding has abandoned its plans to spin off and list its cloud computing unit because of “uncertainties” related to the recent US controls on exporting chips to China.

“We believe that these new restrictions may materially and adversely affect Cloud Intelligence Group’s ability to offer products and services and to perform under existing contracts, thereby negatively affecting our results of operations and financial condition,” the company said in a statement. “These new restrictions may also affect our businesses more generally by limiting our ability to upgrade our technological capabilities.”

The unexpected decision to abandon plans to hive off the cloud computing business led to a $20 billion decline in Alibaba Group’s market value on Friday, as its shares fell 10 per cent in Hong Kong. 

Earlier this year, the Chinese ecommerce giant announced a plan to hive off the cloud computing business and list it by May 2024. This was part of the restructuring plan that would have divided its business into six groups.

Other than the Cloud Intelligence Group or the cloud computing unit, the other businesses included Taobao Tmall Commerce Group, Global Digital Commerce Group, Local Services Group, Cainiao Smart Logistics Group, and Digital Media and Entertainment Group.

Alibaba Cloud is one of the biggest public cloud service providers in the region and competes with the US-based Amazon Web Services, Google Cloud, and Microsoft Azure. The chip restrictions by the US are expected to help the US cloud providers gain an upper hand over their Chinese rivals.

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