Amazon Web Services Launches 2nd Data Center Region In China

Amazon.com Inc.’s (NASDAQ:AMZN) Amazon Web Services (AWS) is gradually expanding its presence in China.

The online retail giant has entered into a partnership with Ningxia Western Cloud Data Technology Co. Ltd. (“NWCD”) and has announced the launch of its second data center region in China. The second data center is located in the Ningxia autonomous region in central China.

AWS Region is already available in China. The new opening will mark the second AWS Region (Ningxia) in China, operated by NWCD. This region will join the AWS China (Beijing) Region, operated by Sinnet.

Based in Ningxia, China, NWCD is a licensed datacenter and cloud services provider. It will join Sinnet, the operator of the AWS China (Beijing) Region, as AWS’s second operating partner in China.

Notably, Amazon, the world’s leading cloud platform, has underperformed the industry it belongs to on a year-to-date basis. The company’s shares have gained only 55.5% compared with the industry’s growth of 60.3%.

More to the Headlines

The recent launch is in response to increasing customer demand for AWS presence in the China region.

The new AWS China (Ningxia) Region will comprise two separate AZs. These AZs are actually data centers located at distinct places within a single region but equipped to operate independently of other AZs. Although these remain interconnected over a low-latency network, their power sources, cooling and physical security are totally independent of one another. These factors contribute to lower down time and therefore increase efficiency for companies using cloud resources.

Amazon believes that from now on, the new AWS China (Ningxia) Region, operated by NWCD, will help in better serving the Chinese developers, startups, and enterprises, as well as government, education, and non-profit organizations.

AWS Expansion Continues in the Asia-Pacific Region

The company forayed into this region in 2010 with the opening of its first AWS Region in Singapore. Since then AWS has expanded its bases in Beijing, Mumbai, Seoul, Singapore, Sydney, China and Tokyo.

On a global basis, AWS is now accessible across 46 Availability Zones (AZs) through 17 technology infrastructure regions worldwide. These AZs enable businesses to save costs, accelerate innovation, expedite the time to market as well as expand their geographic presence within minutes.

The new investment in the region will not only perk up the service for existing customers but also attract new businesses to the cloud. This has led Amazon to believe that Asia Pacific will be one of AWS's main regions in the long run.

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Our Take

AWS is into providing computing infrastructure like a utility, so companies are not required to maintain their own IT infrastructure. It facilitates the movement, which we have come to know as cloud computing.

In the last reported third quarter, the AWS segment was up 11.8% sequentially and a massive 41.9% year over year with revenue share at nearly 10%. AWS is also the biggest public cloud infrastructure provider in the market, ahead of Google (NASDAQ:GOOGL) , Microsoft (NASDAQ:MSFT) , IBM Corp. (NYSE:IBM) , VMware and many others.

However, the speed at which businesses are moving to the cloud and increasing innovation in the space has intensified competition. Microsoft already operates a pair of cloud regions in China, with data centers in Shanghai and Beijing. Additionally, homegrown tech titans like Tencent and Alibaba (NYSE:BABA) also offer their own cloud computing services.

Despite the increasing competition, we remain positive about AWS' growth prospects. Amazon’s continued efforts to launch new features, open more data centers globally and lower prices will give it a competitive advantage.

Zacks Rank

Amazon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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