May 16, 2021: AliCloud, JEDI, HarmonyOS, Hillhouse Capital, Tencent Cloud

Hello Interconnected Readers:

I have not written a bilingual news source summary and commentary in a while -- my apologies. Interconnected, as a newsletter and product, will be going through some changes, which we will announce later this week. I’m also going through some professional changes. (If you are a subscriber, you already know what those changes are! More reasons to subscribe perhaps?)

As for today, the news stories I choose to highlight and share thoughts on are around the latest development in the cloud industry and open source, which are two of the most popular topics of Interconnected (see our Cloud Industry and Open Source tags).

[If you’d like to skip ahead to the six news stories and commentaries from last week – three from English language sources, three from Chinese language sources -- here are this issue’s items:

• “Time’s TikToking away for Alibaba Cloud’s relationship with ByteDance” (English Source: Verdict)
• “Pentagon Weighs Ending JEDI Cloud Project Amid Amazon Court Fight” (English Source: Wall Street Journal)
• “Shoppers already love Chinese brands — they just don't know it yet” (English Source: Protocol)
• “HarmonyOS 2.0 released, Huawei’s homemade OS lands in some smartphones on the phone, here’s the good and bad” (Chinese Source: GitHub Daily)
• “Hillhouse Capital’s Zhang Lei: Invested nearly 50 billion in carbon neutrality startups; Aim to be entrepreneurs' Sancho Panza” (Chinese Source: China-Venture)
• “Tencent Cloud reveals its own cloud-native intelligent data lake landscape; Competition in data lake products heats up again” (Chinese Source: CSDN)]

Kevin

Before you read on, please check out last week's deep dive post: "Morris Chang, Global Semiconductor Competition, Make “Making Stuff” Cool"

“Time’s TikToking away for Alibaba Cloud’s relationship with ByteDance” (English Source: Verdict)

My Thoughts: The two big news items that came out of Alibaba’s most recent earnings report are: 1. The company suffered its first ever quarterly loss as a public company, primarily due to the antitrust penalty; 2. Its cloud division lost a significant customer during Q1 2021. All rumors point to this customer being ByteDance’s TikTok. In the long run, I think AliCloud will do just fine, especially considering the less newsy but equally important revelation that the division reached adjusted-EBITA profitability in Q4 2020. Reaching the economies of scale necessary to make a profit in the cloud is no easy feat; the only other hypercloud that’s profitable is AWS. Most people focus on Alibaba’s e-commerce businesses, but in my mind, AliCloud will be its main profitability driver in the next 10 years.

“Pentagon Weighs Ending JEDI Cloud Project Amid Amazon Court Fight” (English Source: Wall Street Journal)

My Thoughts: Speaking of cloud, the largest cloud contract ever may be no more. I’m talking about the US Department of Defense’s JEDI contract, worth $10 billion over the next 10 years. I’ve written about the ongoing legal and political conflict between AWS, Microsoft, Oracle, and the US government around JEDI last year in “AWS vs Azure: Return of the JEDI?”, when Trump was still president. With Biden now president, the new leadership may start from scratch. The design of the contract being winner-take-all has always been problematic, especially as the multi-cloud architecture becomes more widely adopted and popular among large enterprises. The US military is as large of an enterprise as it gets.

“Shoppers already love Chinese brands — they just don't know it yet” (English Source: Protocol)

My Thoughts: Even though China’s manufacturing quality and sophistication have improved by leaps and bounds, “Made in China” the label still conveys cheap, not premium quality. Thus, Chinese brands that are selling directly to consumers globally are constantly looking for ways to get around this hurdle, especially as this reputation no longer captures much of reality. This article reveals an interesting approach -- certain cities in China apparently convey more brand value than the country itself. “Made in China” may not sell well, but “Made in Shenzhen” or “Made in Hangzhou” may.

“HarmonyOS 2.0 released, Huawei’s homemade OS lands in some smartphones on the phone, here’s the good and bad” (Chinese Source: GitHub Daily)

My thoughts: Huawei’s homegrown mobile operating system, HarmonyOS, is slowly but surely making its way into people’s hands, currently in the public beta phase. For readers who’ve never heard of this OS, Huawei began developing it five years ago, but the R&D accelerated in 2019 when Google’s compliance with US sanctions cut off Huawei's access to the Android ecosystem. So what are users saying about their experience using HarmonyOS so far? Apparently, it has a slick transition between Huawei’s phone and tablet display that instantly turns the phone into a remote control...but it might freeze when you play “Honors of King”.

“Hillhouse Capital’s Zhang Lei: Invested nearly 50 billion in carbon neutrality startups; Aim to be entrepreneurs' Sancho Panza” (Chinese Source: China-Venture)

My thoughts: Zhang Lei is one of the most influential investors in China that few in the West has heard of. Rui Ma of Tech Buzz China has done some great tweet threads on Zhang Lei’s investment philosophy, based on his book (in Chinese) called “Value”. This article which contains an interview with Zhang also contains some interesting revelations -- Hillhouse has been pouring money into climate change startups and Zhang likes to use Don Quixote’s loyal squire as a metaphor for his firm.

“Tencent Cloud reveals its own cloud-native intelligent data lake landscape; Competition in data lake products heats up again” (Chinese Source: CSDN)

My thoughts: In and of itself, Tencent Cloud announcing its own native data lake services is not that interesting. Owning “data density” is the key to the success of any cloud platform. The two services announced -- Data Lake Formation and Data Lake Compute -- is an exact representation of that strategy, where the former helps customers load data into Tencent’s cloud while the latter helps the customers manage, maintain, and analyze that data to derive value. The more interesting element is how much Tencent Cloud is leveraging existing open source projects to build its data lake services, namely Apache Iceberg -- an example of open source technology accelerating large scale product development. Embracing open source will be a big strategic direction for Tencent Cloud going forward.

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