Price Competition in China’s CDN space Will Remain Fierce, Says ChinaCache

Chinacache CDNChinaCache, a total solutions provider of Internet content and application delivery services (CDN technology) in China, has announced its financial results for the first six months of 2017. “Demand for data center services in China remains strong, but price competition in the CDN space will likely remain fierce,” said Mr. Song Wang, Chairman and CEO of ChinaCache.

“In the first half of 2017, while our core CDN business was impacted by on-going competitive headwinds from large cloud operators, the tough environment did not slow us from continuing to execute our strategic initiatives with a focus on integrating our resources to provide a premium three-layer structured network total solution offering,” said Mr. Song Wang. “We took key steps to respond to the slowing growth with reducing costs and further optimizing our product mix. During the first six months of 2017, our efforts produced notable gross profit improvement despite the significant topline pressure from intensified pricing competition.”

“We further aligned our vision to provide customers with total solutions from our three-layer structured offering portfolio consisting of content delivery networks (CDN), data centers (IDCs) and Internet exchange centers (CHN-IX), and achieved notable progress in this regard,” added Mr. Wang. “For our CDN business, we are pleased to report that our High Performance Cloud Caching platform (HPCC) reached a stable operating level in the first six months of 2017. HPCC now hosts more than 70% of our CDN traffic and provides enhanced service quality with higher flexibility, increased efficiency as well as content encryption transmission and new protocol support. We believe that the optimized platform will serve as our long-term differentiator in this market.

Cloud Ecosystem

ChinaCache’s CHN-IX network provides a cloud ecosystem with upstream and downstream partners offering advanced interconnection and peering services. With footholds in first-tier cities, these carrier-neutral Internet Exchanges would improve connectivity through private backbone lines with high-speed IP interconnection, cloud access and high-level network security.

“In 2017, ChinaCache expanded cooperation agreements with cloud industry leaders like Microsoft Azure and Tencent Cloud and, as a result, are seeing a growing number of customers from the government, finance and Internet sectors attracted to these Internet Exchange centers,” added Mr. Wang. “Besides that, demand for data center services in China remains strong. Our data center campus in Beijing has over 3,000 data center cabinets rented under contract and we have recently signed an agreement with a financial service provider for about 1,000 data center racks with an estimated move-in date in the first quarter of 2018.”

“As we look to the remainder of 2017 and into 2018, we continue to see a very competitive landscape and industry conditions,” concluded Mr. Wang. “Price competition in the CDN space will likely remain fierce. Accordingly, as we position our three-layered, total solution services in the market, going forward we will place greater sales emphasis on our data center and Internet Exchange Center offerings and less on our CDN services. We remain steadfast in our belief that offering customers a suite of offerings that provides total solutions is the best strategy for growth and will remain diligent in monitoring expenses with the goal of returning to profitability and long-term sustainability.”

Furlow consulting