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August 11, 2017

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IFlytek’s profit slumps 60 percent in H1

IFLYTEK Co, the flagship AI firm in the domestic stock market, yesterday posted a nearly 60 percent slump in net profit in the first half.

The Shenzhen-listed company, the biggest voice recognition service provider in China, blamed the net profit drop to huge investment on research in AI, or artificial intelligence, and expanding sales channels.

In the first six months, IFlytek’s net profit was 149 million yuan (US$21.9 million), a 58.1 percent tumble from a year ago. Revenue was 2.1 billion yuan, up 43.8 percent year on year. The company’s research cost and sales spending both jumped over 60 percent annually.

Industry insiders said the profit fall means it may be time to cool AI investment, which now appears overheated in the country.

AI seems to be a little “overheated” in China because it becomes a target rather than a tool to solve problems, said Alibaba recently.

Economist Li Daokui said AI had hit a “bubble” because many AI investments can’t get their expected returns.

AI has become the hottest word in the industry to attract investment and business expansion, covering firms like Baidu, Alibaba, Tencent, China Mobile, IFlytek and many startups.

China’s blueprint envisages the value of the country’s core AI industries to exceed 150 billion yuan by 2020 and 400 billion yuan by 2025, the State Council said recently.

IFlyteck focused more on revenue increase rather than profit, launching more AI-featured products like smart speakers, “in-vehicle assistants” and translation machines.

IFlyteck’s share price fell 0.46 percent to 48 yuan, against a 0.61 percent loss for the Shenzhen Stock index yesterday.


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