How price cuts will push firms to embrace AI, digitalization

Having been a tech reporter for nearly 10 years, I relish the task of staying abreast of the latest developments and trends in the fast-changing high-tech sector. The meteoric rise of generative artificial intelligence technology has grabbed global attention and is spearheading a new industrial revolution since the launch of US startup OpenAI's ChatGPT in late 2022.

The tech industry is trying to come to grips with questions like how to bolster the application of generative AI technology in various industries, lower the adoption threshold of large language models for more enterprises and developers, and let them reap the technological dividends.

Major LLM products recently saw steep price cuts announced by Chinese tech majors. The cuts are widely perceived as a significant way to speed up the commercial use and popularization of generative AI, reduce the costs of leveraging LLMs and attract a new breed of users.

Tech whizzes said the continuous increase in LLM users and expansion of application scenarios will improve the performance of LLMs, boost the rapid growth of the LLM sector and motivate companies to beef up innovation efforts to roll out more LLMs.

In May, Alibaba Cloud, the cloud computing unit of Alibaba Group, slashed the price of its Qwen-Long LLM by a staggering 97 percent. In terms of performance, the LLM is said to be in the same league as OpenAI's GPT-4 model.

The Qwen-Long model, which supports up to 10 million tokens of long text input, costs only about one-400th of GPT-4. A token is the smallest unit into which text data can be broken down for an AI model to process. The steep price cuts cover nine of Alibaba's self-developed LLMs known as Tongyi Qianwen.

Baidu said its LLMs, including Ernie Speed and Ernie Lite, both launched earlier this year, are available free of charge for all enterprise users. ByteDance announced the main model of its Doubao LLMs will be priced 99.3 percent lower than the industry average for business users.

Chinese AI firm iFlytek also announced some versions of its SparkDesk LLM are free, or five times cheaper than similar products from competitors.

Wang Peng, a researcher at the Beijing Academy of Social Sciences, said Chinese LLM companies have made great progress in optimizing algorithms and improving computing power, and are able to provide AI-powered LLM services at a lower cost.

Wang said the substantial LLM price reductions will not only lower the threshold for enterprises to adopt AI technology, but also promote their digital transformation, adding the application of AI technology will help enterprises improve operational efficiency and reduce costs, and further enrich the ecosystem of AI applications.

Foreign AI model developers are also reducing their LLM prices. OpenAI has slashed prices of its products four times since the beginning of 2023, and its latest LLM GPT-4o is 50 percent cheaper than the GPT-4 Turbo.

Zou Debao, deputy general manager of AI and big data research at market research firm CCID Consulting, said the price wars will likely squeeze profit margins of some LLM startups, while large Chinese LLM developers will further consolidate their dominant positions, expand market share and grab more clients amid increasingly fierce competition.