Chinese Tech Giants Invest $300M in Data Center Provider 21Vianet update from December 2014

Chinese data center company 21Vianet has received a big investment from several affiliates of Chinese software developer Kingsoft Corp. totaling $296 million.

The affiliates include Kingsoft, mobile phone vendor Xiaomi, and Temasek, an investment company based in Singapore. There is a lot of crossover between the companies, but the bottom line is it’s a major investment in a Chinese data center player by several of the country's major technology companies.

The investment puts carrier neutral 21Vianet in good position to expand and capture some of the burgeoning Chinese cloud and data center market.

21Vianet will build and maintain data centers in China for Kingsoft. The data center deal is estimated to be at least 5,000 cabinets worth of space over the next three years.

Kingsoft is buying a 20 percent stake in the service provider for $172 million and will hold about a fifth of the voting power at 21Vianet’s general meetings. The company is immediately paying $51.6 million to 21Vianet, with the rest to be settled by April 30 next year.

Chinese billionaire Lei Jun has a 14.8 percent stake of Kingsoft and is also the CEO of major mobile phone vendor Xiaomi. Xiaomi will invest $50 million in 21Vianet and hold around 3.5 percent interest with 10 percent voting power. Temasek is investing $74 million for about 13 percent and 5.8 percent voting power.

Chinese Cloud Market Attracts Global Players

The data center market in China is up around 20 percent from last year and there have been several new builds announced, including by NTT and CenturyLink, the latter recently launching a data center in Shanghai. Several technology vendors like Oracle and CloudFlare are also planning their approach to the market.

The major public cloud providers have been entering the Chinese cloud market as well. Microsoft’s Azure launched in China through 21Vianet. 21Vianet is also the local partner for IBM SmartCloud Enterprise+. IBM also partnered with Tencent, which owns a 12.6 percent stake in Kingsoft.

Amazon Web Services is launching a Chinese region through ChinaNetCenter.

There are several regulatory compliance needs to get within what many dub as “The Great Firewall of China.” Officially called the Golden Shield Project, it is essentially an Internet surveillance and censorship system that makes it hard to serve Chinese customers from outside. Many outside players have gone the partnering route, and 21Vianet has been a beneficiary of that trend.

"We welcome the new strategic investments by Kingsoft and Xiaomi and the additional investment by Temasek," Josh Chen, co-founder, chairman and CEO of 21Vianet, said in a statement. "As we remain fully committed to the carrier-neutral, customer-neutral, and cloud-neutral value proposition, we are confident that their investments offer significant strategic value in strengthening our core operations and expanding new business opportunities."