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IFLYTEK released its annual report for 2018 on April 19, showing that the company's operating income for the whole of 2018 was 7.917 billion yuan, an increase of 45.41 percent over the same period last year. The net profit belonging to shareholders of listed companies was 542 million yuan, up 24.71 percent from the same period last year. The picture is from Oriental IC.

IFLYTEK released its annual report for 2018 on April 19, showing that the company's operating income for the whole of 2018 was 7.917 billion yuan, an increase of 45.41 percent over the same period last year. The net profit belonging to shareholders of listed companies was 542 million yuan, up 24.71 percent from the same period last year.

Not long ago, Liu Qingfeng, chairman of iFLYTEK, said that the 30 per cent annual growth of the technology industry has always been regarded as rapid growth, and artificial intelligence is a new explosive period, so we have set a target of 40 per cent. Obviously, iFLYTEK has achieved its goal, but what does 7.917 billion yuan in revenue mean? What kind of thinking can the series of data behind it make us think?

"platform + track", iFLYTEK has a better chance of winning when it turns to artificial intelligence.

According to the annual report, development platform and consumer business account for 30.50% of the revenue of nearly 8 billion yuan. On the vertical track, education and teaching accounted for 27.08%, smart city 21.42%, and government affairs 13.08%. IFLYTEK continues to promote the "platform + track" artificial intelligence strategy, the driving force has been shown.

On the "platform", the iFLYTEK open platform has realized the transition from an intelligent voice platform to an artificial intelligence integrated platform. Today, the iFLYTEK artificial intelligence open platform has gathered various technologies such as speech recognition, image recognition and reading comprehension, continuously providing artificial intelligence development and service capabilities for the vast number of entrepreneurial developers and users of mobile Internet and intelligent hardware, and actively building the industrial ecology around the artificial intelligence open platform. According to the annual report, iFLYTEK's iFLYTEK open platform has opened up 171 AI capabilities and scenarios, with 920000 developers, and business revenue on the open platform has increased by 124.61% over the same period last year.

On the "track", iFLYTEK has chosen to continue to make efforts in education, government affairs, health care, smart cities, smart services, smart cars and other industries, and continue to expand the scale of landing applications. In 2018, education, politics and law became the strongest voice on the iFLYTEK track. Of this total, revenue from educational products and services increased by 45 per cent to 2.015 billion yuan compared with the same period last year, while revenue from political and legal business increased by 86 per cent to 1.036 billion yuan.

In 2010, iFLYTEK, which has been ploughing voice technology for more than a decade, began to build a self-centered artificial intelligence industry ecology. In addition to the layout of smart cities, smart education, intelligent speakers and other applications, iFLYTEK is also involved in investing in artificial intelligence company Shangtang Technology, intelligent robot company Youbixuan, and artificial intelligence chip company Cambrian. IFLYTEK is moving positively towards artificial intelligence.

Voice is a very important way of interaction, so intelligent voice will be an important entrance to artificial intelligence now and in the future, and a consensus has been formed. From this point of view, iFLYTEK has a certain "first-mover advantage". However, because of this, there are more and more players on the intelligent voice track, BAT, Google, Apple and other giants have carried out in-depth layout around the intelligent voice ecology. Start-ups around the development and application of intelligent voice technology, such as Yun Zhisheng, Spice, and going out to ask, also emerge one after another.

The key to the success of iFLYTEK's shift to artificial intelligence lies in the size of the track of voice-based artificial intelligence and whether iFLYTEK can maintain an absolute advantage on this track. In the field of intelligent voice, in recent years, due to the rapid development of science and technology, coupled with the support of all parties, the advantage of iFLYTEK is gradually being leveled out. For an artificial intelligence company, the application scenario is very important, because the product directly reaches the consumer, a successful product will become a huge traffic portal. As a result, Internet giants often choose to develop their own research and development, even if their own technology is not as good as iFLYTEK. Among them, Tencent's attitude is very representative, that is, "both cooperation and competition". Tencent adopted iFLYTEK's technology on QQ, but later used its own voice technology on Wechat, which later exploded with 1 billion users. In fact, for users, whether the speech recognition rate is 99.99% or 96%, there is not much difference in the experience, and it will not affect the use of the product. This also provides a certain amount of time for Internet giants with rich financial strength to catch up.

In addition, compared with the emerging Internet technology companies, iFLYTEK is more like an unworldly "science and technology research man". With the entry of competitors, the competition between channels and brands becomes more and more important. Obviously, for iFLYTEK, the two are not their strong points, and their original advantages are further depressed because it is difficult to keep up with the "competition rules" of the times.

However, with the development of intelligent translator, input method and voice translation business, iFLYTEK, which used to be dominated by To B business revenue, has also begun to contribute to consumer performance. Last year, iFLYTEK's To C business grew rapidly. According to the annual report, its To C business achieved operating income of 2.517 billion, an increase of 96.54% over the same period last year, and a gross profit of 1.296 billion, an increase of 70.77% over the same period last year. TOC business accounted for 31.80% of the total revenue, and gross profit accounted for 32.72%.

It is inconclusive whether iFLYTEK's shift to artificial intelligence can be successful. However, a major difficulty faced by iFLYTEK is also in front of many AI enterprises.

Behind the Government subsidy: the artificial Intelligence Business Cash system needs to be improved

With the disclosure of the 2018 annual report, iFLYTEK's high-profile government subsidies have once again become the focus of attention. Over the past decade, government subsidies accounted for between 25% of iFLYTEK's profits and 30% of its profits, and the total amount of subsidies included in profit and loss reached 285 million yuan in 2018, accounting for 52.58% of net profit, a record high.

IFLYTEK responded to the issue of government subsidies in October 2018, saying that in the 10 years since listing, government subsidies accounted for 3.89% of business income after deducting tax rebate income, 1.42% in 2017 and 2.74% in the first half of 2018, respectively. there is no dependence on government subsidies for performance. In February this year, Liu Qingfeng said at the iFLYTEK Summary Plan Conference that in 2018, iFLYTEK's tax payment was much higher than the subsidy provided by the government. The government provided us with part of our scientific research funding in accordance with the regulations, but we fed back more to the government and made greater contributions to society.

However, not everyone will buy it, and iFLYTEK is even wearing the hat of a "giant baby who doesn't grow up". However, when it comes to government subsidies, it may be biased to make assertions based solely on financial statements. On the other hand, it depends on whether the government subsidy is worth it.

Taking the political and legal business which is closely related to the government as an example, the application of artificial intelligence technology in the field of politics and law can alleviate the work pressure of judicial organs to a great extent and improve the efficiency and accuracy of handling cases. IFLYTEK's annual report shows that the speech recognition rate of its intelligent trial system is more than 95 per cent, the trial time of cases is saved by more than 25 per cent, the integrity of trial transcripts is 100 per cent, and complex trial time is shortened by more than 50 per cent. In fact, the efficiency and accuracy of handling cases can prevent a series of unjust and wrong cases caused by human error, no matter from the perspective of direct value or indirect value, it is of great significance that can not be ignored. At present, iFLYTEK's wisdom politics and law has covered 31 provinces, municipalities and autonomous regions, and 1500 political and legal units and governments. The intelligent political and legal system may not get the income return that matches the socio-economic value it creates.

When iFLYTEK turns to artificial intelligence, it has to overcome not only its own problems, but also the common problems faced by AI enterprises.

According to the 2018 White Paper on Innovation Evaluation of artificial Intelligence Industry jointly issued by the Chinese Society of artificial Intelligence and the National Center for Industrial and Information Security, the integration of artificial intelligence and various industries is still in its early stage in terms of the degree of integration of application scenarios, and there are still some difficulties. This point is further clarified in the 2018 China artificial Intelligence Business Landing Research report released by Yiou think tank: in 2017, more than 90% of AI enterprises are at a loss stage, and commercial landing has become a pain point for the development of many artificial intelligence enterprises.

In the field of artificial intelligence, it is not surprising that high investment and low return, and it is very common for landing products to lack commercial liquidity. For Internet companies with other sizeable sources of revenue, the return ratio is "reasonable". And enterprises that do not have strong financial strength, high investment needs more external support.

Prior to the analysis of people in the industry, the technology giants continue to make efforts to grasp the initiative in the future development of the voice market through mergers and acquisitions, gathering talents, and R & D of core technologies. In such an environment, iFLYTEK must constantly strengthen its own technological strength in order to compete with its competitors. As a matter of fact, not only the technical strength, the landing of products, and how to well cut into the consumer market also need to do enough homework.

If we return to rationality and go into deep ploughing, the accumulation of technology will show great benefits.

According to the annual report, iFLYTEK invested 1.773 billion yuan in R & D in 2018, an increase of 54.78% over the same period last year, accounting for 22.39% of revenue. This year, iFLYTEK also continued to win the top spot in various international competitions. Especially in the field of artificial intelligence in the field of high-profile machine reading comprehension technology, iFLYTEK won the global top of the Machine Reading comprehension Challenge SQuAD for the third time in January 2018; in November, it once again broke the world record with a significant lead in the Machine Reading comprehension Challenge SQuAD2.0 task; in December, it won the first place in the conversational Machine Reading comprehension Challenge CoQA.

Such achievements are undoubtedly closely related to iFLYTEK's continued increase in R & D investment. And a series of achievements in machine reading comprehension technology will further establish a certain degree of technical barriers and leading advantages for business applications such as machine intelligence scoring in iFLYTEK education, intelligent assisted case handling in political and legal field, intelligent assisted diagnosis and treatment in medical field, and so on.

Next, iFLYTEK's plan in core technology research is to continuously increase investment in core technology and promote and expand the "iFLYTEK Superbrain" program. Continue to deepen and lead in the direction, and carry out prospective research through combined technological innovation to increase technological thickness, strengthen technological moat, supervise technology and other "no man's land", to lay a solid case for the medium-and long-term breakthrough in the core technology of artificial intelligence, upgrade and lead the company in education, judicial, medical, vehicle, smart city, intelligent service and other industries and rapid development based on human products. To provide a solid technical guarantee for the realization of "building a better world with artificial intelligence". It is believed that iFLYTEK's R & D investment will further increase significantly.

The period from 2015 to 2018 is the era of iFLYTEK's artificial intelligence strategy, that is, the period of strategic expansion: rapid exploration, application demonstration, and pre-emptive opportunities. This year, iFLYTEK's artificial intelligence strategy has entered a 2.0 era: deep ploughing of scale, control of the track, scale of application and take-off of benefits.

On the basis of the three major tasks of "keeping international leadership in core technology, rapid growth of revenue margin and rapid growth of user scale", Strategy 2.0 adds a key task-- improvement of per capita efficiency: starting with strategic focus, taking team struggle as the foundation, and "strategic focus, task integration, departmental coordination, resource reuse, purchasing cost reduction, team struggle, AI+IT". Comprehensively promote incremental performance management and improve business efficiency.

In the past few years, it is not only a period of rapid exploration and pre-emptive opportunities for HKUST, but also for all AI enterprises, this process will inevitably lead to bubbles and capital madness. But now, artificial intelligence is gradually returning to "rationality". After exploration and exploration, many directions will be clear and firm, and then continuous ploughing. Under such circumstances, it is not difficult to imagine that the accumulation of technology in the past will usher in a high increase in efficiency. For iFLYTEK, if we want to continue on the road of artificial intelligence, we should not only increase investment in research and development, but also use technology to do deeper vertical integration in more industries.

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