Sinnet to buy cloud hardware from Amazon

The logo for Amazon Web Services (AWS) is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada Oct 19, 2017. [Photo/Agencies]

Beijing Sinnet Technology Co Ltd, Amazon's Chinese partner, announced that it will buy specific assets related to cloud services, including servers and IT equipment, for up to 2 billion yuan ($301.2 million) from Amazon.

Sinnet said in a filing on Monday that the move aims to comply with China's rules and regulations and further improve the security and the service quality of the Amazon Web Services' cloud service.

"Chinese law forbids non-Chinese companies from owning or operating certain technology for the provision of cloud services," an AWS spokesman told chinadaily.com.cn.

"As a result, in order to comply with Chinese law, AWS sold certain physical infrastructure assets to Sinnet," the spokesman said, adding AWS would continue to own the intellectual property for AWS services worldwide. ‎

AWS did not sell its business in China and remains fully committed to ensuring Chinese customers continue to receive AWS's industry leading cloud services, the spokesman added.

Taking information security into consideration, all foreign companies must partner with domestic enterprise with IDC licenses to operate cloud services.

In July, 2016, Sinnet obtained AWS authorization and became the service operator and provider for AWS China (Beijing) region using AWS cloud technologies required to support AWS information technology services in China.

However, Sinnet has not won operating licenses so far. In January, the Ministry of Industry and Information Technology said cloud service operators without a license cannot continue their business from January 1, 2018.

The deal will remove obstacles for Sinnet to get such licenses, the Wall Street Journal said quoting analysts from Citic Securities Tuesday.

AWS is a global leading cloud computing services provider. However, in China, local cloud enterprises perform well.

According to International Data Corp, Alibaba's cloud unit held 47.3 percent of the country's cloud infrastructure-as-a-service market during the first half of this year, followed by Tencent's cloud unit (9.6 percent) and KSYUN (6.5 percent). AWS had a 3.8 percent share.

Sinnet, which has suspended its shares since Nov 7, reported a revenue of 1.09 billion yuan in the third quarter, up 73.25 percent year-on-year, while net profit stood at 120 million yuan, up 44.73 percent from a year earlier.