This article first appeared in The Edge Malaysia Weekly on April 8, 2024 - April 14, 2024

TENCENT Cloud — the cloud computing unit of Hong Kong-listed Chinese tech giant Tencent Holdings Ltd — plans to bring its cutting-edge technology to Malaysia’s manufacturing industry, in a move to boost the country’s productivity in the areas of production line management and quality control.

With Malaysia being a significant manufacturing hub in Asia, its traditional manufacturing industries have room to grow in their digital transformation journey, according to Tencent Cloud Southeast Asia regional director Kenneth Siow.

“Today, cloud platforms are a prerequisite for running an international business — providing the scalability, redundancy and performance needed for overseeing global operations.

“For Malaysian companies looking to enter the Chinese market, deploying cloud solutions in China is a unique process with its own set of local considerations and challenges. Tencent Cloud is well positioned to provide such support with our one-stop Go-China solution,” he tells The Edge in an interview.

Siow, who is also general manager of Singapore and Malaysia at Tencent Cloud International, highlights that the group, with its over two decades of experience in internet operations and extensive knowledge of China’s digital ecosystem, is a “natural fit” for multinational companies looking to implement their Go-China strategies.

“Given our presence in Southeast Asia, we could provide our support to Chinese companies who intend to expand abroad to Malaysia. Meanwhile, we also offer our services to Malaysian clients through various channels, including direct sales and partnerships with local resellers, wholesalers and system integrators,” he elaborates.

Apart from operating Weixin — a widely used messaging and payments app in China — and its sister app WeChat, designed for overseas users, Tencent is also one of the world’s largest video game vendors.

Today, the Shenzhen-headquartered internet and technology giant’s Tencent Cloud provides 400 customised products and 130 industry solutions for its partners across the region. It currently has data centre facilities in 26 geographic areas on five continents.

Siow points out that Malaysia boasts a diverse range of industries, including those in manufacturing with strong legacy systems, as well as a strong digital-native population.

“As local companies and clients in Malaysia embark on their digital transformation journey and adopt cloud technology, they seek flexibility and customisation options to meet their specific business requirements,” he explains.

Given the swift growth of digital transformation across industries, Siow believes there is a demand for improved cloud computing capabilities and a variety of cloud deployment options to meet operational requirements.

“More specifically, cloud-native, data-driven, artificial intelligence (AI)-powered solutions can help transform customer service and business success as more companies embrace mobile-first strategies,” he says.

Siow adds that sectors such as live streaming, gaming, entertainment and media are anticipated to benefit from cloud technology to enhance customer experience and drive business innovation.

Apart from that, there is also potential for private deployment in the financial sector, and leveraging AI communication technology to improve customer service efficiency and quality, he says.

“Tencent Cloud’s strengths lie in providing cost-effective high-performance products, as well as offering highly flexible customised services to our local partners,” Siow highlights.

For example, he says, some of Tencent Cloud’s local partnerships include supporting Global Resources Management Sdn Bhd (GRM) in establishing a Cloud Dedicated Zone (CDZ) in Malaysia, and enabling YTL Communications Sdn Bhd to provide secure and reliable identity verification services for mobile apps using Tencent Cloud’s eKYC solution and AI technology.

GRM is a Sarawak-based company that is planning to set up advanced AI data centres in Kuching, which would cater for powerful AI servers built to handle large tasks as it aims to enhance the state’s digital connection and to drive its digital transformation.

Tencent Cloud International senior vice-president Poshu Yeung shares that the cloud company had since last year supported GRM in establishing a dedicated integrated data centre in Malaysia.

“This collaboration will seek to bring more powerful cloud computing capabilities to Malaysia, and help accelerate the digital transformation journey across various industries. Tencent Cloud and GRM are also set to join hands to expand the cloud computing market in Malaysia and establish a more comprehensive cloud ecosystem in the country,” he tells The Edge.

Notably, Tencent Cloud’s international expansion plan started in 2016 with it establishing global partner networks in Asia, Europe and America, which paved the way to bring Chinese enterprises to the world while helping global enterprises enter China.

Its internationalisation journey picked up in 2018 when it rolled out a strategic upgrade to embrace the “Industrial Internet” by focusing on innovative solutions for industries, while integrating technologies across AI, big data, security and machine learning.

“In less than 10 years of Tencent Cloud’s presence in the overseas market, our global expansion has quickly grown, backed by a long-term strategy to invest in markets and technological offerings where we see significant potential for growth,” says Yeung.

As Tencent Cloud expands its reach across the region, embarking on productive collaborations with local partners becomes more critical than ever to address the needs and demands of the local market, he says.

“We will continue to assess cloud technology opportunities in the markets we operate in, including partnering with regional data centre service providers to best optimise our operations and service to our enterprise clients,” says Yeung.

While Tencent Cloud does not currently have a data centre in Malaysia, it is worth noting that some of its customers plan to have a graphics processing unit (GPU) computing operations in specific countries, including Malaysia.

Though it is expanding abroad, Yeung acknowledges that the Chinese market has been a strong growth engine for Tencent Cloud, and the group will continue to invest in and grow its presence in China to maximise the potential there.

However, developments can be expected from Tencent Cloud on the global front in the coming years, including in Hong Kong and Macau, Southeast Asia, Northeast Asia, the Middle East, Europe and the Americas.

As digital transformation ramps up globally, Yeung observes that the adoption of cloud has become a top priority for enterprises.

“More organisations are opting for cloud solutions and multi-cloud deployment as part of their core business strategy to drive innovation and growth. This is expected to continue being an important megatrend.

“The thinking around cloud technology has also shifted in recent years. The usage of cloud technology was initially considered only for enhancing operational efficiency and cost optimisation. However, it is now seen as a catalyst for digital transformation and business success,” says Yeung.

Specifically, Tencent Cloud is seeing more clients adopting cloud-based media services, and audio and video solutions to support emerging industries such as live streaming, he continues.

For instance, Tencent Real-Time Communication (TRTC) had in 2020 successfully brought one of South Korea’s largest music events, Melon Music Awards, online — serving millions of fans and live-stream viewers.

Another example is Pokekara, a popular karaoke app developed by M&E Entertainment in Japan, that has now implemented an online KTV feature built with TRTC. This feature allows more than a million viewers to watch low-latency live streams simultaneously, significantly reducing operational costs for M&E.

Yeung is of the view that AI is a growth multiplier for the industry, especially for Tencent’s To-B business.

“Our extensive experience in developing and adopting AI technologies has benefited numerous business areas, including advertising, video conferencing, collaborative tools, customer services, short-form videos and cloud computing.

“This includes integrating AI-enabled functions and applications powered by large model capabilities into various products such as Tencent Meeting, Tencent QiDian, Tencent Docs and digital human technologies,” he says.

Tencent Meeting has introduced an AI assistant that can support complex functions such as extracting information, analysing content and managing conference logistics. It can even generate post-meeting notes to facilitate more efficient meeting summaries.

As part of the group’s development around generative AI capabilities, Tencent has also opted to release its large language model, Hunyuan, to enterprise users — an approach which balances the performance of consumer-facing, large-model AI-powered chatbots with the pragmatic needs of businesses to increase operational efficiency, reduce costs and protect the privacy of proprietary data.

Hunyuan, a ChatGPT-like AI-powered chatbot, is open to enterprises in China for testing and building apps via application programming interfaces on Tencent Cloud.

Meanwhile, in the game development space, Tencent Cloud had on March 28 announced its collaboration with game developer Pocketpair as the official partner providing multiplayer servers for the globally popular game Palworld. Through this collaboration, Tencent Cloud will expand its cloud services for building multiplayer servers not only in Japan, but also in the US and Asia-Pacific, including South Korea, Singapore, Malaysia and Thailand.

“At Tencent, we see the goal of AI as one that serves industries, people and society. Our innovations are underpinned by this principle — Tencent is committed to collaborating with regional partners to harness the power of AI, enabling businesses to drive industry innovation and improve its people’s quality of life,” says Yeung.

Over the past 12 months, shares of Tencent have dropped 20% to close at HK$308.40 last Wednesday, giving the company a market capitalisation of HK$2.92 trillion (RM1.77 trillion). The counter is currently trading at a historical price-earnings ratio of 24 times.

Tencent had on March 20 posted a weaker-than-expected 7% rise in fourth-quarter revenue as its gaming revenue shrank. The group reported turnover of RMB155.19 billion (RM102 billion) for the three months ended Dec 31 last year, lower than the RMB157.2 billion average of 23 analyst estimates. For all of last year, Tencent’s top line rose 10% to RMB609 billion, which trails expectations at RMB612.2 billion.

Notably, Tencent said it intends to at least double the size of its share repurchases from HK$49 billion in 2023 to over HK$100 billion this year.

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