Why China’s Four Dragons of AI Vision in Vertical Fields Have Fallen Behind (AI Translation)
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文｜财新周刊 杜知航 余聪
By Caixin Weekly's Du Zhihang and Yu Cong
人工智能（AI）聊天机器人ChatGPT发布两年后，中国最大的AI视觉公司商汤科技（00020.HK），正在向大模型公司战略转型。
Two years after the release of the AI chatbot ChatGPT, China's largest AI vision company, SenseTime (00020.HK), is undergoing a strategic shift towards becoming a company focused on large models.
2024年12月初，商汤董事长兼CEO徐立宣布将公司业务架构变为“1+X”：“1”即生成式AI相关业务，包括提供算力的“大装置”、AI基础模型和应用；“X”是智能汽车“绝影”、家庭机器人“元萝卜”、智慧医疗、智慧零售等，这些业务将拆分并独立融资。
In early December 2024, Xu Li, Chairman and CEO of SenseTime, announced that the company would restructure its business into a "1+X" model. The "1" represents generative AI-related businesses, including the "big device" providing computing power, AI foundational models, and applications. The "X" involves businesses like intelligent vehicle "Jueying," household robot "Yuanluobo," smart healthcare, and smart retail, which will be separated and independently financed.
商汤曾经的支柱业务“智慧城市”已难觅踪影。智慧城市主要以计算机视觉功能（CV）支持城市安防、交通、城管和气象监测等应用场景，2021年占商汤总收入近半，但这部分业务在过去三年快速缩水，人员持续裁撤。“看看其他三家‘小龙’的下场，商汤早就该拆、该裁，拖到现在太晚了。”一名熟悉商汤投资业务的人士对财新说，商汤管理层在这波AI大模型风潮中反应太慢。
SenseTime's once-pillar business of "smart cities" has now all but disappeared. This segment primarily leveraged computer vision capabilities (CV) to support urban security, transportation, city management, and meteorological monitoring applications. In 2021, it accounted for nearly half of SenseTime's total revenue. However, over the past three years, this business has rapidly shrunk, with continuous staff layoffs. "Looking at the fate of the other three 'little dragons,' SenseTime should have dismantled and downsized earlier; waiting until now is too late," a person familiar with SenseTime's investment business told Caixin. This individual expressed that SenseTime's management has been too slow to react in the current wave of AI large models.
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- SenseTime shifts its strategy towards large AI models, restructuring its business into "1+X," focusing on generative AI and independently financed sectors like smart vehicles.
- The traditional "smart cities" segment, previously significant, has diminished, reflecting a decline in revenue and workforce.
- Financial struggles and market challenges persist, with concerns over accounts receivable and a competitive landscape affecting SenseTime and other "Four Little Dragons" companies.
In the years following the release of ChatGPT, China's AI sector has witnessed significant transformations. SenseTime, China's largest AI vision company, has embarked on a strategic shift towards large model development. In December 2024, Xu Li, the company's Chairman and CEO, announced a business restructuring into a "1+X" model. The "1" signifies generative AI-related businesses, while "X" includes businesses like intelligent vehicles and smart healthcare, which will be independently financed [para. 1]. SenseTime's transition was overdue due to the company's slow adaptation to the AI large-model wave [para. 3].
SenseTime, Megvii, Yitu Technology, and Cloudwalk Technology, collectively known as the "Four Little Dragons," were icons of the AI vision industry during the last AI boom. However, by 2019, they entered a challenging phase due to market saturation and diminishing capital investment, also known as the "valley of death" [para. 3][para. 4]. This phase saw them struggling with broad generalization and decreased government orders. The industry's shift to the "AI 2.0 era," characterized by generative AI capable of self-learning, marked a seminal technological leap powered by developments like OpenAI's ChatGPT [para. 4].
SenseTime is the only "Little Dragon" that has embraced the AI 2.0 strategy fully. However, it currently lacks the aggressive fundraising capabilities of startups and the cloud-computing ecosystems of vast internet firms. The fierce competition in traditional security sectors poses additional challenges [para. 5]. Competitors like Yitu Technology and CloudWalk remain focused on the security industry, facing challenges under a project-based commercial model [para. 6].
2024 marks significant changes for the "Four Little Dragons." Megvii saw a leadership reshuffle as co-founder Yin Qi left for Lifan Technology, steering towards new horizons like intelligent driving [para. 3]. SenseTime, after seeing a 21% increase in revenue and generative AI contributing over a billion yuan, still faces declining stock performance and mounting accounts receivables, making their financial landscape precarious [para. 9][para. 10].
The AI vision industry, including these firms, initially thrived on government projects encompassing smart city initiatives and surveillance. However, the slowdown in government projects post-COVID-19 hit revenue streams hard, leading to layoffs and strategic pivots [para. 11]. SenseTime's former CEO Tang Xiao'ou's unexpected death leaves a gap in leadership amidst ongoing financial and strategic adjustments [para. 13][para. 14]. Tang's wife, Yang Qiumei, inherited substantial shares, becoming the largest shareholder [para. 15].
The shift to generative AI is crucial for SenseTime, given its past struggles in visual technologies. SenseTime introduced its "SenseNova" model, aiding revenue reversal in 2024. The company launched consumer applications like "SenseChat" and "SenseMirage" [para. 18]. Meanwhile, talent attrition became an issue as the AI 2.0 paradigm drew executives away from the "Four Little Dragons" [para. 20].
Additionally, SenseTime and Megvii have ventured into the competitive smart automotive market. SenseTime initiated smart cockpit features and intelligent driving collaborations, but their competitiveness remains unproven [para. 26]. As the smart automotive field evolves, challenges like intense price competition and the need for strategic partnerships are evident. In the quest for market leadership, only a few AI companies specializing in intelligent driving may survive [para. 32].
- SenseTime
商汤科技 - SenseTime is pivoting its strategy to focus on generative AI, with its business structure split into "1+X": the "1" representing AI-related ventures like AI foundational models and applications, while "X" includes businesses like smart vehicles and robotics. It has faced challenges with shrinking traditional revenue sources, notably from its smart cities segment, and high receivables. Despite recent gains in generative AI, SenseTime confronts competition and financial pressures in the market.
- Megvii
旷视 - Megvii, one of the "AI Vision Four Little Dragons," ended its five-year listing process in November 2024. Co-founder and CEO Yin Qi left to join Geely's subsidiary Lifan Technology, focusing on developing new technologies, including smart driving. After personnel layoffs, Megvii concentrated on logistics robots and automotive businesses, with older businesses like public cloud and mobile becoming profitable.
- Yitu Technology
依图 - Yitu Technology, part of China's "AI Vision Four Little Dragons," previously focused on AI medical services but abandoned this effort. It encountered challenges due to its Cayman Islands holding structure and non-cooperation from some foreign investors, leading to early staff reductions and a halted IPO process in 2021. Yitu has since streamlined operations and achieved profitability, shifting its focus to adapting existing vision models under new technological paradigms.
- CloudWalk Technology
云从科技 - CloudWalk Technology, one of China's "AI Vision Four Little Dragons," remains entrenched in the security sector, having abandoned its AI healthcare ambitions. Despite unveiling the "Cong Rong" large model in 2023, its transformation efforts have shown little financial or business success. In Q3 2024, revenue dropped by 41.84% to 1.05 billion yuan. Regulatory challenges have hindered its fundraising efforts, impacting its transition into the large model space.
- Alibaba
阿里 - The article mentions that in May 2024, Alibaba open-sourced its visual understanding model Qwen-VL. This indicates Alibaba's involvement in the development and competition within the visual understanding model space, competing against other companies like OpenAI, Indominds, Starwhale, and MiniMax.
- Lifan Technology
力帆科技 - Lifan Technology, affiliated with Geely, previously faced near-bankruptcy in late 2019. It was restructured with investments from Geely and the Chongqing government by the end of 2020. Recently, Yin Qi, co-founder of Megvii, has taken a significant role at Lifan Technology, focusing on developing new technologies like intelligent driving.
- Geely Auto
吉利汽车 - Geely Auto is mentioned in the context of its affiliation with Lifan Technology, which had faced bankruptcy but was restructured with support from Geely and the Chongqing government. Geely's involvement led to Lifan's transformation into a battery swapping mobility brand. Additionally, Megvii's automotive spinoff, Mici, collaborates with "Geely-affiliated" car companies, highlighting Geely's influence in the automotive sector amid the AI industry's shifts.
- WM Motor
威马汽车 - WM Motor faced a crisis and entered bankruptcy restructuring by October 2023. It had previously launched its first mass-produced car, the EX5, with features provided by SenseTime, such as facial recognition and driver fatigue reminders.
- Xiaomi
小米 - The article mentions that in the context of SenseTime's "Phenex" smart automotive business, its in-cabin AI model has been integrated into Xiaomi's SU7 and other models from SAIC IM.
- SAIC IM Motors
上汽智己 - SAIC IM Motors is one of the automakers that has collaborated with SenseTime's "Shadow" on intelligent cabin features, incorporating SenseTime's technology into several car models.
- GAC Group
广汽集团 - The article mentions that SenseTime's "Jueying" smart automotive business achieved mass production, with GAC Group listed as one of the three production delivery customers, alongside Nezha Automobile and FAW Group. This collaboration involves SenseTime's AI-driven solutions being integrated into GAC’s vehicles, indicating a partnership in developing intelligent driving technologies.
- Neta Auto
哪吒汽车 - The article mentions that SenseTime's "Jueying" smart auto business has achieved mass production delivery for three clients, including Neta Auto, along with GAC Group and FAW Group.
- FAW Group
一汽集团 - The article mentions that SenseTime, one of the AI vision "Four Little Dragons," has partnered with FAW Group for mass production delivery in the smart automotive sector. SenseTime's "Shadow" intelligent automobile business has achieved commercial production implementation with FAW Group, among others, in its intelligent cockpit and driving solutions.
- Chery Automobile
奇瑞汽车 - Chery Automobile has partnered with Sensetime's "Jueying" intelligent driving division. The collaboration focuses on software algorithm development, as Chery's autonomous driving company, Dazhuo Intelligent, lacks strong algorithm capabilities. This partnership complements both companies, with Sensetime providing software expertise and Dazhuo contributing in other areas of the collaboration.
- June 30, 2022：
- Restrictions on SenseTime's Hong Kong-listed shares were lifted, and the stock price dropped nearly 50%
- End of 2022：
- OpenAI launched ChatGPT, marking the beginning of the "AI 2.0 era"
- Late January 2023：
- Cloudwalk announced advancements in domestic large-scale model products, spiking its stock price
- Spring Festival 2023：
- ChatGPT caused a sensation in China
- April 2023：
- SenseTime introduced its large-scale model series "SenseNova"
- May 2023：
- Cloudwalk released the "Cong Rong" large-scale model
- August 2023：
- SenseTime conducted massive layoffs
- November 2023：
- SenseTime was targeted by Grizzly Research in a critical report about relying heavily on government contracts
- December 2023：
- SenseTime's founder Tang Xiao'ou passed away
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