Tencent’s Silicon Valley Data Center Opens While Foreign Firms Lack China Access

Tencent’s Silicon Valley data center, which is the company’s first data center in the U.S., has commenced operations.

Tencent will build four additional overseas data centers in Frankfurt, Mumbai, Seoul, and Moscow to handle the continuous expansion of its overseas cloud computing businesses. Tencent’s target customers are Chinese enterprises who want to expand businesses abroad and multinational companies who want to expand businesses in China or other parts of the world. All those data centers are expected to be put into operation in 2017.

Tencent has more than ten data centers in operation in mainland China. The company started overseas expansion from 2014 and it already set up data centers in Hong Kong, Singapore, and Toronto.

China’s e-commerce giant Alibaba also established data centers in foreign countries. Like Tencent, Alibaba is also expanding overseas cloud computing businesses.

In 2016, China’s Cloud Infrastructure as a Service market scale reached USD1.47 billion, a year-on-year increase of 68%. Alibaba held 40% of the market share and its largest foreign competitor Microsoft held 5% market share.

While kudos should be given to Tencent for its aggressive overseas push, it is playing in a lopsided game against its foreign counterparts in China. Tencent can open, run, manage, and own its own data center facilities in the United States, but Chinese law prohibits a company like U.S.-based Rackspace from full ownership of its data centers in China.

China’s laws related to Internet Service Provider disallow full foreign ownership of data centers in China. So Rackspace, Amazon Web Services, and others must partner with Chinese companies like Tencent, Huawei, or Alibaba to co-host or piggyback on top of the Chinese companies’ services in mainland China.

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