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Alibaba Cloud and Midea Announces Higher-level IoT Cooperation
COVID-19 and China
Alibaba Cloud display board. Photo credit to Alibaba Cloud Weibo account

On March 21st, 2019, 2019 Alibaba Cloud Summit was held in Beijing and Alibaba Cloud and Midea (美的) announced that they would conduct cooperation at a higher level in IoT (internet of things). Two parties will co-work in developing customized integrated circuit and smart home electronics OS platform.

As early as in March 2014, Alibaba Cloud and Midea have formed a strategic and cooperative relationship in IoT. Midea is one of the largest home electronics producers in China with high reputation. The top 3 home electronics companies in China are Midea, Gree, and Hier. The cooperation with Alibaba Cloud is a move for the traditional home electronics company to look for new growth point while the domestic market tends to saturate.

Alibaba Cloud, which is the No. 4 cloud service provider in the world in IaaS (infrastructure as a service) and PaaS (platform as a service). Cloud service is the fundamental technology that could assist other technologies’ development like virtual reality, IoT, and others. The IoT development of Alibaba Cloud is somehow below expectation.

Tmall Genie, which provides similar function to Amazon’s Echo, has a better performance in China market comparing to Xiaomi’s MI AI (小爱音箱), the smart speaker produced by Xiaomi. According to StrategyAnalytics, Tmall Genie had the highest China market share from 2018Q3 observation with 2.2 million shipments, while the second and the third’s shipment volumes of 1.9 million each.

China IoT market’s star company should be Xiaomi, which is a cell manufacturer at the same time with aggressive expansion in home electronics. Xiaomi’s IoT platform can support over 2,000 device models, and more than 132 million devices have connected to its platform. Due to large volumes of cloud computation requests from IoT devices, Xiaomi is developing its cloud service. The difference between Xiaomi and Alibaba’s cloud and IoT relation in the order is clear. Xiaomi’s IoT service pushed its cloud service while Alibaba is the inverse.

IoT is only a part of Alibaba Cloud business but a large part for Xiaomi. From the present 5G network process, IoT will trend up along with the maturity process of telecommunication technologies. More devices will connect to IoT platform and urge the cloud computation level to be compatible with the size growth. Xiaomi’s advantage in IoT is greatly attributed to its IoT ecological system which includes Xiaomi’s products, cloud, and platform, and other affiliated companies’ devices. Alibaba lacks the own-brand device part except for Tmall Genie in its IoT ecological system.

The portion of cloud service based on IoT in total cloud service will rise since the IoT in home electronics is still at an infant stage. Robotic vacuum cleaner, a type of smart home electronics, had the highest penetration rate in online market 50.1% and the second highest in offline at a rate of 19.2%. The average penetration rate of current smart home electronics ranges from 4% to 9% regarding the information provided by Zhongyikang (中怡康).

The low penetration rate signals that the market has tremendous potential to grow. Though Midea and Alibaba have become strategic partners for years in IoT area, Midea is still waiting for a breakthrough in the smart home electronics market, and so is Alibaba.

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