ChinAI #170: The First AI + Manufacturing Stock
Profiling AInnovation (创新奇智)
Greetings from a world where…
the first person to eat crabs (吃螃蟹) was indeed a very daring person
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Feature Translation: Analyzing the first AI + manufacturing stock
Context: Every now and then, I like to do a post on the theme of “most interesting Chinese AI company you’ve never heard of.” Previous editions featured DeepGlint (#147) and Douyu (#106). This week, let’s take a look at AInnovation (创新奇智), which recently filed an IPO prospectus for the Hong Kong Stock Exchange, staking its claim to be the first “AI+manufacturing” stock. Recall related discussion about who will be China’s “first AI vision stock?” Kai-Fu Lee serves as chairman of AInnovation, which has gone from launch (in 2018) to unicorn valuation and IPO prospectus in four years. This jiqizhineng (Synced) article helps us digest that prospectus.
Key Takeaways: Let’s start with some basic stats:
In terms of 2020 revenues, AInnovation is the 3rd largest AI technology-driven solution provider in China's enterprise AI solution market; it’s the largest in the manufacturing AI solutions segment. It ranks 5th in China’s overall computer vision market.
AInnovation specializes in AI+manufacturing, which accounted for 50% of its total revenues in 2021. Example areas include defect detection and smart molten metal transport. We covered the former in ChinAI #58. The latter refers to the automation and optimization of industrial processes involving ladles and cranes transferring molten metals between furnaces.
AInnovation differs from more familiar Chinese AI companies like Sensetime: “SenseTime is positioned as an AI software platform enterprise, while AInnovation is positioned as a provider of AI products and solutions, and its focus on manufacturing is a typical ‘scenario-heavy’ model.”
Unlike “light” AI application scenarios like smart security and retail, “heavy” application scenarios like industrial manufacturing require more hardware in the ultimate AI solution. To compete, you need “software and hardware integration” solutions, so that the manufacturing companies you’re working with don’t need to drastically overhaul their production lines.
Evidence for the above claim, from the article: “This is also why in the past few years, whether it is a large Internet company or a startup company, when it gets involved in the vertical field, ‘software and hardware integration’ almost always accompanies this move. Internet companies such as Baidu and Tencent have also launched industrial quality inspection equipment. It is in this way that AInnovation has built its own moat.”
Most AI companies go from platforms → empowering specific verticals. Taking a bottom-up approach, AInnovation started with specific solutions and then, in order to scale, standardized these solutions into modular products, and eventually established its own platform. Its ManuVision platform, for instance, has 282 categories for defect detection.
AInnovation also differs from other AI companies that prioritize government-facing business. Full translation has details about how that’s reflected in its shorter inventory turnover periods and accounts receivable cycles.
The big picture:
Intelligent manufacturing could be crucial for China to move toward more efficient and high-end manufacturing, paths which “manufacturing powers such as Japan and Germany have taken.” The article references China’s Five-Year Plan for the Development of Intelligent Manufacturing, issued at the end of 2021, which lays out ambitious benchmarks in this area.
It’s still very early days for AI+ manufacturing, and AInnovation faces a lot of competition. While it is China’s 3rd largest supplier of enterprise AI solutions, it accounts for only .3% of a very fragmented market of more than 1,500 players.
Read the FULL TRANSLATION: Analyzing the first AI + manufacturing stock
ChinAI Links (Four to Forward)
Must-read: Information Control and Public Support for Social Credit Systems in China
Forthcoming in Journal of Politics, Xu Xu, Genia Kostka, and Xun Cao present new evidence on China’s social credit system: “Critics see China’s social credit system (SCS) as a tool of surveillance and repression. Yet opinion surveys in China find considerable public support for the SCS. We explain this puzzle by focusing on citizens’ lack of knowledge regarding the repressive nature of digital surveillance in dictatorships, which can be attributed to (1) invisible and targeted repression associated with digital surveillance and (2) government propaganda and censorship further concealing its repressive potential. A field survey experiment on 750 college students in three Chinese regions shows that revealing the SCS’s repressive potential significantly reduces support for the system, but emphasizing its social-order-maintenance function does not increase support…Our findings highlight the role of information and framing in shaping public opinion on digital surveillance.”
Must-read: China’s New AI Governance Initiatives Shouldn’t Be Ignored
For Carnegie Endowment for International Peace, Matt Sheehan expertly breaks down various approaches to AI governance by the Cyberspace Administration of China (CAC), China Academy of Information and Communications Technology, and Ministry of Science and Technology. He argues the CAC’s approach has the upper hand based on regulatory trend. Plus: “The potential impact of these regulatory currents extends far beyond China. If the CAC follows through on certain requirements for algorithmic transparency and explainability, China will be running some of the world’s largest regulatory experiments on topics that European regulators have long debated.”
Should-read: Lillian Li’s reflections on an “exceptional and rough year for Chinese tech.”
For her newsletter “Chinese Characteristics,” which provides longform Chinese tech analysis, Li contextualizes the Chinese tech narratives of 2021 around the government’s directives on high-quality development.
Should-read: The Anxiety of Influencers
This article on TikTok influencers made me think the most this week.
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 postdoctoral fellow at Stanford's Center for International Security and Cooperation, sponsored by Stanford's Institute for Human-Centered Artificial Intelligence.
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