IFlytek profits tumble almost 60 percent

IFlytek Co, the flagship AI firm in the domestic stock market, posted on Thursday a net profit fall of almost 60 percent in the first half. 

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

Industry insiders said the news means it may be a signal to cool down the wave of AI investment, which now appears overheated in the country after China issued a national strategy to develop AI.

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

The national 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.

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 start-ups.

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

AI-featured speakers, the eyeball-catching product in the industry, can be replaced by an iPhone with Siri and meets “niche” market demand, according to the research firm Canalys.

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

For IFlyteck, the company focused more on revenue increase rather than profit, kicking off more AI-featured products like smart speakers, "in-vehicle assistants" and translation machines.

IFlyteck's share price dropped 0.46 percent to close at 48 yuan, compared with a 0.61 percent decline across the Shenzhen Stock index on Thursday.