Market Research Report
Webscale Playbook - Tencent: Mega 'new infrastructure' Plan to Drive Network Spending amid U.S. Sanctions
|Published by||MTN Consulting, LLC||Product code||953765|
|Published||Content info||15 Pages
Delivery time: 1-2 business days
|Webscale Playbook - Tencent: Mega 'new infrastructure' Plan to Drive Network Spending amid U.S. Sanctions|
|Published: August 14, 2020||Content info: 15 Pages||
Tencent's meteoric rise into one of the leading internet businesses coincides with China's internet boom that started at the end of 20th century. According to the ITU estimates , just ~1.8% of China's total population were internet users in the year 2000 - two years after Tencent was founded - that has now exploded to about 64% . Tencent's initial journey began with the desktop-based instant messaging offering, QQ (initially QICQ), which slowly gained popularity and provided the company with a strong footprint in the domestic market. The start of the new decade saw more users going mobile with the increased cellphone penetration in the country, which led Tencent to launch its popular mobile instant messaging app, WeChat (Weixin in China) in 2011.
Since then, there has been no looking back for the company, which has now evolved into a sprawling conglomerate with businesses such as online gaming, advertising, audio and video streaming, cloud computing, and fintech services. Indeed, online gaming and advertising are turning into new growth engines for the Chinese internet behemoth. The exponential growth aided Tencent to top U.S.$500 billion in valuation in 2017, becoming the first Asian tech firm to achieve the feat. In addition, Tencent has become a major global investor in startups and unicorns - the tech giant even has stakes in Tesla and Snap . However, Tencent's breakneck growth story is now under threat, with macro risks in both domestic and international markets impacting its businesses. Back home, Tencent faces regulatory curbs on online gaming, while internationally, the U.S. government recently imposed a ban on WeChat-related transactions.
Tencent would be hoping these macro risks would just turn out to be minor hiccups in its future growth path. To ensure it remains on the growth trajectory, Tencent recently announced a massive U.S. $70 billion "new infrastructure" investment plan over the next five years that includes building next-generation data centers, self-designed servers, IoT operating systems, etc. Also, the company could potentially foray into chip development for gaining self-sufficiency and possibly end reliance on foreign chip vendors in due course - a stretch in the current scheme of things given that China currently lacks industry experience to manufacture high-end chips that could rival the ones produced by the likes of TSMC and Qualcomm. However, like Huawei, Tencent could rope in China's largest contract chipmaker, Semiconductor Manufacturing International Corporation (SMIC), which gained traction recently with U.S. $2.2 billion investment from the state but is still supposedly years behind peers such as TSMC.
Below are a few highlights from the report:
This report is the last in MTN Consulting's Webscale Playbook series, which analyze the "Super 8" webscale network operators (WNOs), i.e. Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Microsoft, and Tencent. The objective of this report is to assess Tencent's: