ChinAI #135: Et tu, Yitu?

Who will be the "first AI vision stock?"

Greetings from a world where…

vision is always peripheral

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Feature Translations: Does anybody want to be China’s first computer vision stock?

Come, gather around the fire, and allow me to spin you a tale of China’s “Four Computer Vision Dragons” — CloudWalk, Megvii, Sensetime, and Yitu — and their quest to become China’s first computer vision stock (AI视觉第一股).

Our story begins with Megvii, founded back in 2011 in Beijing. Enduring AI’s cold winter in its early years, Megvii filed an IPO prospectus in August 2019 to be listed on the Hong Kong exchange, with an expectation of raising USD$500m-$1bn. By then, Megvii claimed the largest share of the Chinese market in cloud-based identity authentication solutions enabled by facial recognition.

Two months later, the U.S. government blacklisted Megvii (along with Sensetime, Yitu, and other companies) for its alleged involvement with human rights abuses in Xinjiang. In February of 2020, Megvii let its IPO application lapse. Last week, Megvii filed for an IPO on the Shanghai Stock Exchange’s STAR market (China’s NASDA-esque index aimed to encourage domestic investment in Chinese tech companies). See Shen Lu’s excellent protocol piece for more on Megvii’s updated IPO documents.

The giant in the room, Sensetime, was founded much later in 2014 in Hong Kong, and has earned the label of “The World’s Most Valuable AI Startup.” In 2017, SenseTime’s founder told Reuters that it would consider a US, Hong Kong, or mainland listing, but now it is mulling a dual listing in Hong Kong and on China’s STAR market.

Next up is CloudWalk, founded in 2015 and headquartered in Guangzhou. Curiously, the U.S. government did not list CloudWalk in the initial entity list in October 2019, though CloudWalk was added later in May 2020. I’ve previously highlighted that CloudWalk is unlike the other three dragons because of its financing from Chinese government funds, making it closest to a “purely domestically funded enterprise” (纯内资) . In December 2020, CloudWalk also filed for an IPO on the STAR Market.


Et tu, Yitu? What about the remaining dragon? Founded in Shanghai in 2012, Yitu has been around for a while. Some of its early work included work with the Suzhou Public Security Bureau to identify cars with fake license plates. In November 2020, it also filed for an IPO — guess where? — on the STAR Market, aiming to raise more than 7.5 billion RMB, and to become the first of China’s AI unicorns to go public. But then, Yitu suspended its IPO application last Thursday, March 11. Why? Our tale continues with the help of two articles by AI科技评论(aitechtalk), which provides in-depth reports on developments in the AI industry and academia, and 全景财经 (quanjing caijing), a company that analyzes China’s capital market.

According to aitechtalk, Yitu’s filing “provoked controversy”: the STAR market raised a total of 47 issues in its initial comments on the prospectus, including questions about Yitu’s family trust and special voting rights structure. Aitechtalk digs deeper into the prospectus:

  • Yitu claims 800 government and corporate end customers across basically all Chinese provinces and more than 10 overseas countries and regions.

  • As one would expect of a tech-driven company, R&D expenses accounted for 147%, 96%, 92% and 100% of revenue for the previous four reporting periods.

  • What really surprised me was Yitu’s commitment to System on Chip (SoC) projects. Here’s how one Equalocean analysis described Yitu’s pivot from software-based solutions to compute-based solutions like its Questcore chip: “With the AI chip launch, Yitu's revenue structure soon changed. The once-dominant software business was squeezed while the integrated solutions (software and hardware combined) saw an increasing weight.”

This week’s second article, from quanjing caijing, provides a more panoramic view. Yitu is one of 37 companies that have suspended their IPO applications in the Shenzhen and Shanghai stock markets. A total of 152 companies have terminated their IPO status. Hesai Technology, for instance, presumed to be the "first Lidar stock" also withdrew its IPO application from STAR this week. The China Securities Regulatory Commission is tightening up rules and scrutiny for startups aiming to go public on the STAR Market. The article calls it a tide of listing withdrawals (撤单潮).

As for which one of the dragons will ride/fly out the tide, that’s a story for another day.

ChinAI Links (Four to Forward)

Must-read: You’re Doing It Wrong — Notes on Criticism and Technology Hype

Lee Vinsel, a professor in science, technology, and society at Virginia Tech, published a Medium post last month that is really really worth your time. In the piece he calls out criti-hype:

Recently, however, I’ve become increasingly aware of critical writing that is parasitic upon and even inflates hype. The media landscape is full of dramatic claims — many of which come from entrepreneurs, startup PR offices, and other boosters — about how technologies, such as “AI,” self-driving cars, genetic engineering, the “sharing economy,” blockchain, and cryptocurrencies, will lead to massive societal shifts in the near-future. These boosters — Elon Musk comes to mind — naturally tend to accentuate positive benefits. The kinds of critics that I am talking about invert boosters’ messages — they retain the picture of extraordinary change but focus instead on negative problems and risks. It’s as if they take press releases from startups and cover them with hellscapes.

At their most ridiculous, hype-filled criticisms become what historian David C. Brock calls “wishful worries,” that is, “problems that it would be nice to have, in contrast to the actual agonies of the present.” . . . Part of Brock’s point is that wishful worries are a kind of entertainment. We are, after all, a people that regularly feasts upon dystopian science fiction. Imaginary fears can be fun.

The rest of the piece argues that Shoshana Zuboff’s book, The Age of Surveillance Capitalism, overstates the abilities of social media firms to directly influence our thoughts, and also supplies “a preliminary history of how criti-hype became an academic business model by taking a look at the examples of the Human Genome Project, nanotechnology, ‘AI,’ and a few others.”

Must-read: The US Is Building Walls Around Science, and We’re All Poorer for It

Yangyang Cheng’s essential writing for Vice on the case of Gang Chen, a MIT professor accused of failing to disclose contracts and appointments from Chinese entities. It’s the first piece I’ve read on Gang’s case and the DOJ’s misguided China Initiative that actually treats Gang like a human being. But it also does so much more: expertly deconstructs the Justice Department’s misleading use of an email excerpt, provides important historical context, and reminds us that the Biden administration has not ended the China Initiative and has kept on Trump-appointed FBI Director Christopher Wray, who once declared China a threat that requires a “whole-of-society” response.

Should-read: Understanding Chinese Government Guidance Funds

A really impressive CSET analysis on government guidance funds (GGFs) by Ngor Luong, Zachary Arnold, and Ben Murphy. What really stands out is the appendix from page 33-63 which provides key translated excerpts from all the Chinese-language sources the report is based on. Two main findings:

  • GGFs “fail to live up to their ambitions, weakened by unrealistic goals, bureaucratic constraints, incompetent management, risk aversion, and a lack of market discipline.”

  • However, “guidance funds still have advantages over China’s traditional industrial policy mechanisms. And today, a subset of disciplined, market-oriented guidance funds is successfully raising money and investing in projects.”

Should-read: How Standard Setting Can Help Taiwan Grow Its Global Role

For the Carnegie Endowment for International Peace, Evan A. Feigenbaum and Michael Nelson tackle the important question of Taiwan’s approach to setting international technical standards for strategic technologies.

Thank you for reading and engaging.

These are Jeff Ding's (sometimes) weekly translations of Chinese-language musings on AI and related topics. Jeff is a PhD candidate in International Relations at the University of Oxford and a researcher at the Center for the Governance of AI at Oxford’s Future of Humanity Institute.

Check out the archive of all past issues here & please subscribe here to support ChinAI under a Guardian/Wikipedia-style tipping model (everyone gets the same content but those who can pay for a subscription will support access for all).

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