- Government-backed financing gives Chinese companies significant operational advantages
- Lower-cost Chinese AI models attract developing countries around the world
- Microsoft invests billions to strengthen AI tools and infrastructure globally
Microsoft Chairman Brad Smith has warned that U.S. technology companies could face growing challenges from Chinese competitors who benefit from substantial state subsidies.
Beijing has provided multibillion-dollar support, including a national AI fund and energy vouchers, to reduce operational costs for domestic companies.
Smith compared the situation to China’s previous successes in telecommunications, highlighting how state-backed companies like Huawei and ZTE have disrupted the global market and put pressure on European and American companies.
Growing competition is fueled by government support
“I think we always have to think about, maybe even worry a little about, Chinese subsidies. Some American companies have disappeared. European companies like Ericsson and Nokia have been put on the defensive,” Smith said. CNBC.
“I think for the rest of us, we have to compete with this, and we have to be good at competing with this, with the support of our governments. »
He also pointed out that similar strategies could make lower-cost AI offerings from Chinese companies attractive in developing countries, where affordability is often key.
Chinese AI companies have rapidly expanded their international presence, often relying on partnerships instead of building wholly owned data centers outside China.
Alibaba, for example, provides cloud-based AI services in several regions, but frequently collaborates with local infrastructure providers.
Smith pointed out that existing Chinese data centers around the world could be leveraged with government support, giving Chinese companies a potential cost advantage in deploying AI models at scale.
China’s approach includes both direct funding and operational incentives: a national AI fund worth around $8.4 billion has been created to support early-stage projects, while local governments provide vouchers to reduce IT costs.
Low energy prices in many Chinese regions further reduce barriers to building and operating energy-intensive AI infrastructure.
These measures create a competitive landscape in which U.S. companies may face pricing pressures and constraints in emerging markets.
Microsoft is responding with its own investment strategy, aiming to dedicate $50 billion by 2030 to AI initiatives in developing countries, efforts that combine infrastructure development, training programs and support for AI tools designed to improve local productivity.
Smith argued that U.S. companies must compete effectively while leveraging their advantages, including access to high-performance chips and cutting-edge technologies, to maintain their influence in global AI markets.
Analysts suggest that Chinese AI models could become dominant in resource-constrained regions, forming a “Chinese tech sphere” over the next five to 10 years.
For governments and businesses in developing countries, cost effectiveness may trump national origin when choosing AI tools.
Microsoft’s response is to deploy AI and productivity tools that are scalable, reliable and capable of operating in the same environments targeted by Chinese competitors.
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