Chinese Tech Companies Launch Low-priced AI Models Amid a Price War in Chinese Market

AsianFin--Alibaba Group has slashed prices for several artificial intelligence (AI) services by up to 97%, a move that further spark a price war in China’s AI sector.

Following Alibaba's announcement of discounts on nine products based on its Tongyi Qianwen model, Baidu Cloud responded by offering free services utilizing its Ernie AI models. This came after ByteDance released last week that it would price its AI services—benchmarked against Ernie and Alibaba’s Qwen—99% lower than typical Chinese industry rates.

Last Wednesday, TikTok’s owner ByteDance launched a batch of large language models (LLMs) – the technology behind ChatGPT and other generative artificial intelligence (GenAI) services – that costs less than those from industry rivals.

The Doubao LLM family, which shares the same name as the Doubao chatbot that ByteDance introduced last year, is made up of at least eight versions. These include the top-of-the-line Doubao Pro, which can handle an input of up to 128,000 tokens, as well as the entry-level Doubao Lite and other versions specifically focused on recognizing audio or creating virtual characters, the company announced at an event on Wednesday in Beijing.

Tan Dai, president of ByteDance’s cloud computing services unit Volcano Engine, said at the event that use of the Doubao Pro LLM costs as low as 0.0008 yuan (0.011 U.S. cents) per 1,000-token prompt. In AI, a token is a fundamental unit of data that is processed by algorithms, which makes 1,000 tokens equivalent to about 750 English words.

Use of the Doubao LLMs, which launched on Wednesday via Volcano Engine, costs 99.8 per cent less than ChatGPT creator OpenAI’s GPT-4 model, which is priced at 0.42 yuan per 1,000-token prompt, according to Tan.

These competitive moves mark the start of a price-driven battle within the AI sector, which is seeing substantial investment from startups and tech giants like Tencent. The influx of investment has led to the development of numerous AI models and an array of consumer and enterprise products, all vying for a large user base to accelerate AI advancements.

Chinese tech companies have a history of using steep discounts to dominate markets, from e-commerce to food delivery and ride-hailing. In March, Alibaba initiated a wave of price cuts in cloud computing, offering discounts of up to 55% on over 100 domestic services, which was quickly matched by competitor JD.com.

Chinese tech leaders, following the footsteps of their Silicon Valley counterparts like Microsoft Corp., are heavily investing in generative AI. In addition to developing in-house models, they are investing substantial amounts in emerging companies like Baichuan and Zhipu AI.

Over the past year, Alibaba has undergone extensive restructuring to regain users for its cloud business, which also supports its primary AI initiatives. The company surprised investors by canceling plans to spin off its cloud unit into an independent public company.

Under the leadership of CEO Eddie Wu, the Hangzhou-based company is concentrating on expanding its public cloud services for enterprise clients. It has undergone significant changes to recover market share lost to traditional competitors like Baidu and Tencent, as well as to new and state-backed players such as Huawei Technologies.

LLMs, which are trained on a vast amount of data, are revolutionizing GenAI applications such as chatbots, virtual assistants and advanced content-generating tools like Sora. GenAI are algorithms used to create new content, including audio, code, images, text, simulations and videos.

As of January, the number of government-approved LLMs and related AI applications on the mainland total more than 40. But at present, there are more than 200 China-developed LLMs in the market, which could lead other mainland providers to compete with Baidu in a price war.