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Artificial intelligence
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New AI battle adopts old price war strategy as Chinese tech giants keep start-ups at bay behind the Great Firewall

  • The price of AI services in China plummeted in May after ByteDance kicked off a price war by pricing access to its LLMs at 99.8 per cent below GPT-4
  • Industry insiders fear the harm could be fatal for many start-ups, but app developers are enjoying cheaper access to the tech powering their services

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A price war in China’s artificial intelligence industry, initiated by the country’s tech giants, threatens start-ups trying to grow in the highly competitive market. Illustration: Henry Wong
Ben Jiangin BeijingandKelly Le

In the 18 months since Microsoft-backed OpenAI launched ChatGPT, Chinese tech firms large and small have rallied around a singular goal – besting the San Francisco-based start-up with their own Chinese-language chatbots.

The results have been mixed, with some tech giants claiming to have better results than GPT-4, OpenAI’s most advanced model, with Chinese queries. But with a deluge of more than 200 Chinese large language models (LLMs) – the tech powering these chatbots – from a slew of companies all jostling for market share, China’s AI firms can claim at least one other clear, albeit less boastworthy, advantage over their US counterparts: price.

In recent weeks, TikTok owner ByteDance, internet search giant Baidu, e-commerce conglomerate Alibaba Group Holding and social media behemoth Tencent Holdings have all drastically slashed prices on their LLM services, with some offering a variety of services for free. One premium offering from ByteDance’s Doubao Pro costs as low as 0.0008 yuan (0.011 US cents) per 1,000-token prompt, 99.8 per cent less than what OpenAI charges for GPT-4 access.

“It’s like the bad money is driving out good money,” said You Yang, a computer science professor at the National University of Singapore (NUS).

The price war indicates a lack of competitiveness based on the merits of the models themselves, according to You, making them incapable of attracting customers at previous market prices.

In the US, tech giants like Google owner Alphabet, Facebook owner Meta Platforms, Amazon.com and Microsoft have also been competing in AI by following the “blitzscaling” playbook that has become commonplace in Silicon Valley: acquiring users as quickly as possible, at the expense of revenue, to corner a market.
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