On November 4, according to the Financial Times,China has stepped up subsidies, offering up to 50% reductions in electricity bills for some of the country's largest data centers.Currently, China is stepping up efforts to promote the development of its local chip industry to compete with the United States.
Byte, Alibaba and Tencent’s data centers receive electricity subsidies
Local governments in China have stepped up incentives to help Chinese tech giants such as ByteDance, Alibaba and Tencent cope with rising electricity bills, people familiar with the matter said.
Before the new subsidy policy was introduced, many Chinese technology companies reported to regulators that the use of domestic semiconductor products from Huawei, Cambrian and other companies had led to increased electricity costs.
In provinces with dense data centers such as Gansu, Guizhou and Inner Mongolia, local governments have responded by providing electricity subsidies of up to 50% for large data centers using domestic chips. Data centers using chips from foreign manufacturers such as Nvidia are not eligible for subsidies, people familiar with the matter said.
This move further shows that China is using policies to encourage technology companies to get rid of their dependence on Nvidia and promote the development of domestic semiconductor industry to compete with the United States in the field of AI.
Although technology companies usually rent computing power from third-party data center operators, they still need to build a large number of data centers themselves in order to meet the surge in demand for AI business.Although the use of domestic chips will bring higher electricity costs, China's more centralized power grid can still provide cheaper and more environmentally friendly electricity than the United States, and there will be no short-term power shortages.
Energy-rich remote provinces such as Gansu, Guizhou and Inner Mongolia have now become hot spots for data center cluster layout. To attract large-scale projects, these local governments are already competing to provide energy subsidies and cash incentives. According to people familiar with the matter, part of the subsidy is enough to cover the operating costs of the data center for about a year. The unit price of industrial electricity in these provinces is about 30% lower than that in the developed eastern coastal areas. After adding the latest subsidies, the electricity price will further drop to 0.4 yuan (about 5.6 cents) per kilowatt hour.
By comparison, the average price of industrial electricity in the United States is about 9.1 cents per kilowatt hour, according to data released by the U.S. Energy Information Administration in August. Due to the decentralized power grid system and significant differences in electricity prices among states in the United States, technology companies such as Meta and Musk's xAI have built their own power generation facilities near data center clusters to reduce power costs.
As of press time, ByteDance, Alibaba and Tencent have not commented on this.