Rebel forces in the China Data Center Market

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The headline picture is ChongQing city LiangJiang New District XinShui High Tech Park, whereby there are five data center buildings built or in the process of construction. Two of them are by a server manufacturer called Inspur.

Chinese server manufacturers are going a completely different route versus non-Chinese server manufacturers. The likes of IBM, HP, Dell are offering their services on in-the-rack (i.e. server) and on-top-of-hardware (i.e. software and services), and are most definitely not building data center using their own money.

In China, it is the other way around. The Chinese server manufacturers are funding and building data centers through-out China in a frenzy!

The following five server manufacturers are Chinese owned companies:

  •  华为 (Huawei)
  • 浪潮 (Inspur)
  • 曙光 (Sugon)
  • 紫光 (Unisplendour – majority owner of H3C)
  • 中兴 (ZTE)

Besides they are all server manufacturers, they have built multiple large scale colocation data centers in China.

Huawei need no introduction, and perhaps ZTE as well. The rest of the server manufacturers mentioned above are relatively unknown outside of China. But, they are well known in China.

Huawei had built more than three cloud data center facilities in China (reference 1, 2). For the data center facility sector, Huawei has containerized data center solution, their own UPS, CRACs/CRAHs. LV switchboards, Back-up generator and chillers are sourced from external parties and re-badged as Huawei. They also have their own Huawei BMS software.

Both ZTE and Sugon are state-owned enterprises, while Inspur had transited from state-owned to private ownership, a portion of its shares is still partially owned by the Chinese government.

Inspur had built a data center facility with capacity of 8,000 racks in ChongQin for China Unicom as a built-operate model. (reference 3). Inspur announced plans to build seven large data center facilities and 50 smaller ones through-out China. (reference 3, 4)

Apple will use Inspur to build and operate a data center in China, according to news. (reference 5).

Sugon is well known in China for their super-computer cluster but they also have server line of product. They have built super-computer data centers in three cities (Wuxi, ChengDu, and Nanjing) and also cloud data centers in many cities. They had announced plans to cover 100 cities. They had ventured outside of China and built a data center in Slovenia for Slovenian ICT company Arctur.(reference 6, 7)

Unisplendour is public listed on Shenzhen stock exchange. Unisplendour had bought 51% of HP’s ownership of H3C and started making and selling HP servers that are branded as H3C in China. Unispendour announced that it will spend 2.2B RMB dollars to acquire or to build data centers. They had announced plan to build a data center facility in FangShan district of Beijing, the built-in area of the building will be 39,725 sqm (about 427,500 sqft) (reference 8).

ZTE had buit a data center facility with rack capacity of 13,000 racks in ChongQing for China Mobile as a built-operate model. (reference 9). ZTE is explicitly stating via their website that they provide a total data center solution from planning, building all the way to hand-over. (reference 10). They were looking outside of China to build data centers to meet the demand of Chinese companies that needs to set-up network point-of-presence (POP) or host their applications and data.

For example, in ChongQing, there are at least two server manufacturers involved in building and managing data centers on behalf of China Unicom and China Mobile, which in turn are for cloud service providers like Baidu and Tencent.

This has been going on for more than 4 years and thus quite a number of data center facilities had been completed> Inspur has been leading the charge, followed by the rest and not surprisingly Huawei was among the last to do so (Unisplendour is slow because it had only acquired the 51% shares of H3C in 2016). Huawei was probably hesitant to encroach onto IDC space but couldn’t forego the market share and potential revenue.

In China, the background and the incentives are vastly different from elsewhere which is why these manufacturers have enter the data center build-operate-(optional)transfer cycle. The data center builds are under an umbrella or a framework package deal whereby the city or district government wanted a public-private-partnership deal that is headlined by smart-city or government-cloud initiative, which usually ties together the following:

  • smart-city projects – communities (residents and busineseses) projects – employment (skilled manpower)- infrastructure (cloud, network, servers, storage) – data center

So the data center is the underpinnings for the whole deal, and the server manufacturers sees the volume of network/servers/storage required (when it is 10s of thousands of racks = 100,000 servers = multiple times investment versus data center core and shell plus electrical and mechanical infrastructure).

The server manufacturers will work with partners to deliver the entire package or supplement with their in-house capability to develop some of the big data / cloud solutions. So these server manufacturers view these huge projects as opportunities for growth. The other thing is that in China, there is very few big third party co-location data center service providers that has the reach and deep pockets compared to these mostly state-backed server manufacturers. Therefore, this creates a unique situation for the Chinese server manufacturers to enter the data center build-operate-(optional)transfer model. Note that these data centers are built by appointed main contractors and not strictly by these China server manufacturers.

Intertwined in this mix is that the Baidu/Alibaba/Tencent (BAT) are also one of such partner with the Chinese server manufacturers in those smart-city projects, thus not necessary that the server manufacturers are squeezing out the BAT in the smart city projects. For example, the Inspur built data center in ChongQing LiangJiang new district, is known as the Baidu ChongQing LiangJiang Data Center.

How this will play out in the future remains to be seen. For the moment, it is worth noting that the China server manufacturers can be a channel or a partner to work with in the China data center market as well as overseas.

Reference:

  1.  http://mt.sohu.com/20170308/n482702087.shtml
  2. http://news.eastday.com/eastday/13news/auto/news/china/20170209/u7ai6476772.html
  3. http://www.liangjiang.gov.cn/Content/2015-06/19/content_90027.htm
  4. http://www.ebrun.com/20150716/141014.shtml
  5. http://www.gold678.com/dy/P/67321072
  6. http://cn.chinagate.cn/news/2016-11/16/content_39716087.htm
  7. http://www.jifang360.com/news/2014422/n402358123.html
  8. http://news.idcquan.com/news/60548.shtml
  9. http://fiber.ofweek.com/2016-09/ART-210022-8120-30033419.html
  10. http://www.zte.com.cn/cn/solutions/cocloud/201508/t20150825_443862.html
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Rebel forces in the China Data Center Market

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