China’s AI firms scaled up on open-source models. The next phase may be different
SCMP Tech / 4/17/2026
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Key Points
- Chinese AI firms have leveraged open-source foundation models to accelerate development and achieve early market traction through lower barriers to entry.
- That open-source-driven growth is now colliding with thin profit margins, pressuring companies to rethink how they monetize model capabilities.
- The article argues the next competitive phase may differ from prior open-source scaling, with greater use of hybrid business strategies rather than relying primarily on “free” model availability.
- The shift implies changing go-to-market and product design choices across the AI industry, even for firms that started by adapting open-source models.
- Overall, open-source remains a key technical lever, but business sustainability will increasingly determine which firms scale.
In China’s hyper-competitive and lucrative tech industry, releasing cutting-edge artificial intelligence models for free may seem counter-intuitive – but it has become a core business strategy.
At the University of Hong Kong last November, Alibaba Group Holding chairman Joe Tsai was asked why the tech giant open-sourced its AI models. Addressing a room full of students, Tsai said he believed open-source AI would bring global benefits by lowering costs, making it a natural fit for talent- and...
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