Three years ago, Tang Xiao’ou joked with an audience at the Massachusetts Institute of Technology that it was his business, SenseTime, rather than Google, that immediately comes to mind when people talk about artificial intelligence.
SenseTime, one of China’s brightest hopes in its plan to lead the world in AI, prepares for $ 2 billion public listing in Hong Kong which may come before the end of the year.
Known for its face recognition expertise, SenseTime has raised more than $ 3 billion from investors, including SoftBank, Alibaba, Tiger Global and Silver Lake, making it one of the four most sophisticated AIs with its peers Megvii, Yitu and CloudWalk. companies in China. .
All four have grown rapidly with the support of Beijing, which has enabled them to gather and process information about the country’s large population, is now trying to make a list and has ambitions to expand overseas.
But all four companies were also concerned about the use of their technology and were affected by it. sanctions of the US for allegedly aiding and abetting human rights violations in the western part of Xinjiang, a charge denied by the companies.
Since then, the enterprises have had to tread a cautious path to maintain good relations with their most visible and most important customer: the Chinese government.
SenseTime is ‘in a mystery’, says Jeffrey Ding, a postdoctoral fellow at Stanford’s Center for International Security and Cooperation. ‘Western investors may want to be more open[ethnic profiling]. . . but it would lose their business in China. ”
Documents submitted at the start of the IPO show the extent of his confidence in Beijing. Its Smart City business, which includes face recognition and predictive policing, contributed 40 percent of its sales last year. Its five largest clients, which accounted for nearly a third of Rmb3.4 billion ($ 525 million) in sales, are mostly what SenseTime calls ‘system integrators’, serving city administrators.
Since 2008, at least 500 Chinese cities have been trying to install the so-called Smart City technology, in collaboration with private companies such as SenseTime, Alibaba, Hikvision and Huawei to find digital solutions to urban problems.
SenseTime’s software has been deployed in 119 cities, the vast majority of which are in China. In one city, its systems are used to track down people who are not wearing seat belts in cars, with an alleged accuracy of 94 percent. It can also detect drivers using cell phones with an accuracy of 86 to 96 percent.
In another top city in southern China with 17 million people, SenseTime’s traffic management system recorded traffic violations by people on mopeds. Police have detected 50,000 such incidents, and the decline in monthly moth abuse has dropped by more than half in a matter of months. The number of drivers choosing to wear a helmet, meanwhile, has risen from less than half to 94 percent.
Megvii, the oldest of the four AI companies, also counts the government as its biggest customer. The company, backed by Alibaba and Ant Group, last year derived 64 percent of its revenue from smart-city technology. The face recognition technology company was forced to abandon its listing in Hong Kong when Washington blacklisted the company in February last year.
But international expansion is hampered by concerns about Chinese influence. For example, British intelligence agencies were striving for boundaries about whether local authorities can buy the software, for fear that it may be used for espionage or surveillance.
SenseTime has added offices and clients over the past few years Southeast Asia, North Asia and the Middle East, where reservations about oversight are also less pronounced.
But it does not give much detail about how many foreign transactions it did, especially after the blacklist in 2019.
A long-discussed project to detect fraud and deception in casinos with the leisure group Genting, which operates the casino from Singapore on the island of Sentosa, has not yet resulted in any concrete public information. A research center in Abu Dhabi to provide ‘AI capabilities’ to local businesses has not been widely publicized trade since it was founded in 2019.
Meanwhile, other Chinese technology companies are investing in their own AI capabilities, in a possible attack on the SenseTime company’s “Smart business”.
“Unicorns and the other big tech companies are increasingly having their AI in-house,” said William Bao Bean, a general partner in Shanghai at global venture capital firm SOSV. “Most Chinese companies do not have the habit of paying for software, which is why many customers of companies like SenseTime are the government.”
One former SenseTime employee told the Financial Times that he had previously won tech clients, including ByteDance, the owner of TikTok, and Hikvision, which makes CCTV cameras.
But by 2019, ByteDance was ‘strongly detached’ from SenseTime in favor of building its own internal teams after working on AI face filters. “It’s faster because they had faster access to the data, and they do not have to pay SenseTime,” the person said.
A person close to the business admits it has lost business but has continued to expand its base of more than 2,400 customers.
SenseTime has tried to harness more hardware and offer a broader package to customers. It wants to spend a significant portion of the IPO’s proceeds on research and development, including a new AI supercomputer data center near Shanghai to be completed in 2022. It also develops AI chips, which are designed to process AI tasks faster and more efficiently.
Another area is software to support autonomous management – a phrase that is mentioned 68 times in its documents, compared to only six mentions of ‘facial information’.
Even here, SenseTime has tough competition, experts say, and currently the company’s automotive division contributes less than 5 percent of its sales.
‘Autonomous management is a crowded market and SenseTime is a late entry. Many dance tickets have been filled by people like Baidu, Pony.ai and WeRide, ”says Tu Le, founder of the consulting company Sino Auto Insights. “I do not think many would abandon the current partners for SenseTime dual source or.”
But many investors are encouraged by the support of the government through the enterprise. SenseTime received Rmb352.8 million in government grants in 2020, an increase of 37 percent over what it received in 2019.
Producing the latest technology and setting the agenda is the key to President Xi Jinping’s stated goal that China should be an AI leader by 2030. The AI sector has not received the degree of scrutiny from regulators that other Chinese internet businesses have this year.
As a mainland investor in Megvii said: ‘Is it a bad thing at the moment if you are the Chinese government investing your biggest client to make sure you do well? We do not think so. ”