China is a leading player in artificial intelligence (AI), with several public companies such as Baidu, Hikvision, iFlytek, Tencent, and Alibaba.
It also has a strong AI start-up ecosystem, which is evident from the large number of AI unicorns (privately held start-up company valued at $1bn or more). China has the highest number of AI unicorns in the world, with a total of 19 in China as of 31 August 2021. These 19 unicorns are collectively valued at $43.5bn.
The Chinese AI dragons are getting bigger
SenseTime, Megvii, Cloudwalk, and Yitu Technology are collectively called China’s four “AI dragons”.
SenseTime specializes in image recognition software, computer vision, and deep learning technologies. Its solutions are used in autonomous vehicles, smart cities, edtech, and healthtech. Its technology is also useful in the emerging metaverse, which promises to mix reality and a virtual world.
It is currently the most valuable of all the AI unicorns, with a valuation of $12bn, having received total funding to date of $2.6bn. Key investors include Tiger Global Management, Softbank China Venture Capital, and Qualcomm Ventures.
Cloudwalk is a developer of facial recognition software for fintech, public security, and aviation sectors. It is valued at $3.3bn with total funding of $0.5bn. Its key investors include Haier Capital, Industrial and Commercial Bank of China, and Atlas Capital Group.
The two other Chinese AI dragons are Megvii and Yitu Technology. Megvii, a facial recognition software developer for smart cities, is valued at $4bn with total funding of $1.4bn. It is backed by investors such as Alibaba Group Holding, Foxconn Technology Group, and Boyu Capital Consultancy.
Yitu Technology offers an AI computing ecosystem, AI chips and AI algorithm software for smart cities, smart fintech, smart healthtech, and smart retail. It has achieved a valuation of $2.2bn and total funding of $0.4bn. Investors like Sequoia Capital, Hillhouse Capital Group, and Gaorong Capital backed the unicorn with funding.
Apart from these four, Horizon Robotics is another notable unicorn that provides edge AI platforms, AI chips, and AI-based face recognition cameras for smart vehicles, smart cities, and smart retail. It is valued at $5bn and has received a total funding of $3.1bn. Sequoia Capital, Citic Group, Hillhouse Capital Group, and Intel are some of its notable investors.
Expect four to go public soon – despite regulatory challenges
CloudWalk, Yitu Technology, Megvii, and SenseTime were put on the US entity list by the US government over allegations that they had violated human rights and posed a threat to US national security.
SenseTime has filed for an initial public offering (IPO) in Hong Kong in 2021. It did not disclose the size of the deal but is pushing ahead with the planned listing. It plans to invest 60% of the amount raised in IPO to improve research and development (R&D).
Cloudwalk has also filed for an IPO of $0.5bn in the Shanghai Stock Exchange which is now confirmed and is expected to go public soon.
Megvii is also in the IPO pipeline for the Shanghai Stock Exchange’s STAR Market. Approval was given for a $0.9bn IPO on the Shanghai Stock Exchange and expects to go public soon. Their first attempt to list was in February 2020, when it’s Hong Kong IPO filing lapsed because of the impact of the coronavirus pandemic.
Yitu Technology is also considering IPO in Hong Kong after failing to win regulatory approval in Shanghai and seeks a valuation of about $4bn in Hong Kong. Like other AI unicorns, Yitu Technology will invest the capital raised from the IPO in R&D and for market expansion.
The Chinese AI ecosystem will become even stronger as these companies list and are able to invest the significant amounts of new capital raised. This will further boost the broader AI start-up ecosystem in China.