On April 1st, 2019, UCloud, which is a public cloud service provider, got the approval for its IPO in the Science and Technology Innovation Board. According to UCloud’s prospectus, it aims to finance CNY 4.7 billion to help with the building on its UCloud Datacenter and multi-media cloud platform projects in Jining District (集宁区), Ulanqab city. Other projects, for example, the safe circulation platform for application data under the Internet environment, and the new generation artificial intelligence service platform, also need finance to promote.
The prospectus of UCloud represents the first time for UCloud to show its performance. From 2016 to 2018, the revenue of this company was CNY 516 million, CNY 840 million and CNY 1.2 billion. The net profit attributable to the shareholders of the parent company was CNY -197 million, CNY 76.8 million and CNY 80.3 million.
JI Xinhua (季昕华), the CEO and founder of UCloud, said that UCloud is the first public cloud service provider which achieve a net profit in China. From 2016 to 2018, the revenue from UCloud’s public cloud business occupies its total business ratio is 91.43%, 90.97%, and 85.15%. According to JI, different companies use different strategies, and the strategies of a company decide whether it could make a profit. Ji said that many companies use the content delivery network (CDN) to gain the market shares, however, UCloud would not do this.
According to UCloud, in the early stage of cloud computing, it’s a relatively standard service. However, with the increasing number of the cloud service provider, the cloud computing market entered into a stage with different competition. The users have a specific requirement for cloud computing services, and they have different preferences under different environments. For example, the financial cloud requires a safer cloud service, while the game and E-commerce companies require the cloud computing system which is more adjustable and flexible.
After its IPO, UCloud may receive a violent competition from magnates including Ali Cloud, Tencent Cloud, and Baidu Cloud. Although the market of cloud computing is increasing, some early players still occupy a large market share. These companies make use of scale effect to decrease their marginal cost and gain better bargaining power. With several years’ development, those early comers have a richer production line and a larger market share. According to IDC, in the first half of 2018, the market share of Ali Cloud is 43%, which ranks top 1 of the total market. That of Tencent Cloud and Chinese Telecom is 11.2% and 7.4%.
The market share of UCloud is close to Kingsoft Cloud, which revenue in 2018 is CNY 2.2 billion. Although the market share is close, UCloud still has a long way to go to make more profit. Due to the increasing competition, it becomes harder for UCloud to survive after its IPO. According to its prospectus, the capital power of UCloud is relatively weak. “Only broaden the financing channels of UCloud could the company gain enough money for the development and achieve the performance goal as soon as possible.” The infrastructure of cloud computing, including the data center, network bandwidth, and storage devices all requires a lot of investment, which make a hard barrier. The cloud computing industry not only requires the enterprises invest lots of money to build its IT structure but also requires the enterprises keep updating and developing, provide more technologies and productions in order to offer better service.
JI Xinhua believes that in the cloud computing industry, it is impossible that only magnates can survive. JI believes that the market is being clear and orderly, which is beneficial for companies which focus on cloud computing. EqualOcean will keep focusing on UCloud.