The big price cuts taken by Alibaba Cloud, the digital technology arm of e-commerce giant Alibaba Group Holding, are likely to help it cut off a larger chunk of the country’s cloud computing services market, but analysts say it could also start a price war.

Alibaba Cloud announced on Wednesday that it would cut prices on its core products and services in China by 50 per cent from 7 May.

The move comes after Alibaba, which remains the industry leader, saw its market share fall to 32.6 per cent in the second half of 2022 from 34.5 per cent in the first half, according to a report released this week by research firm IDC.

The price cuts could be a good way for Alibaba Cloud to regain lost market share as it prepares to become one of six divisions to be spun off as part of a major reorganisation of parent company Alibaba announced last month.

The domestic market has become increasingly important for Alibaba and other Chinese cloud service providers amid growing geopolitical headwinds.

Chinese cloud service providers such as Huawei Technologies and Alibaba Cloud could pose a threat to national security. It has promised to consider a request to put these companies on its export control list.

While Alibaba still leads the cloud market, followed by Huawei Technologies Co and Tencent Holdings, growth is becoming increasingly difficult.