The growth rate of the global smartphone market is slowing down. Can visual artificial intelligence technology + mobile phone camera drive a new wave of growth?
It is considered to be “China’s Nasdaq”. Since the official transaction, the science and technology board has received much attention from all. Today, the official transaction of the science and technology board has been full moon. Some people think that in the past month, this is a new wealth-producing and distributing center. On the first day, it was “born” 125 billionaires; some people think that this is a test field for innovation in China’s securities market. It is exerting a subtle influence on startup companies, VCs, and PE institutions in the primary market.
But there is no doubt that in the long run, it is more likely to be the touchstone of the value of hard technology companies. Therefore, at this time node, we launched the “Overview of the Board” series, hoping to bring readers to quickly understand the company.
This article will take you to a simple understanding of “ArcSoft Technology.”
Hongsoft Technology Co., Ltd. (hereinafter referred to as ArcSoft Technology) was listed on July 22, 2019. It is considered to be the first visual artificial intelligence listed company of Science and Technology Board, so it is also concerned by the secondary market funds.
As of 11:07 on August 28, 2019, ArcSoft Technology’s share price was 63.34 yuan / share.
Introduction to ArcSoft Technology from the company’s business profile and growth history, the company’s financial data and the risks faced by the company, the company’s fundraising needs, and the company’s competition.
Company Profile and Growth History
Hongsoft Technology is committed to the development and application of visual artificial intelligence technology. By combining the company’s research and development advantages in digital imaging and computer vision for more than 20 years, it provides the world with visual artificial intelligence solutions based on its original technology. The main areas of focus include: smart phones, smart cars, Internet of Things (IOT) and other smart devices.
The company’s business entity was formerly ArcSoft US (founded on May 19, 1994) in California, USA. ArcSoft US specializes in the development of algorithms and application software for image and imaging. In February 2003, ArcSoft US established Rainbowsoft’s predecessor, Hongsoft Limited, in Hangzhou, China. In 2018, the overall change of ArcSoft Limited was ArcSoft Technology Co., Ltd. Since 2004, the company has noticed the potential of the mobile photography market, focusing on the image processing and shooting technology of mobile photography, becoming one of the first traditional influential software companies in the world to enter the mobile field. With the rise of artificial intelligence technology, the company will shift its focus to research and development.
The company’s main business is to provide visual artificial intelligence solutions for the smart phone industry. The main customers include: Huawei, Samsung, OPPO, VIVO, Xiaomi, Sony, LG, and other well-known mobile phone manufacturers. At the same time, the company also to smart cars, smart homes, smart retailOther areas expand the business, and continue to explore new application scenarios in visual artificial intelligence technology. At present, depending on the application scenario, the main solutions provided by ArcSoft are divided into three types: smart phone vision solutions, smart driving vision solutions, and other IOT smart device vision solutions.
Smartphone Vision Solution
This solution is mainly used to improve consumer demand for mobile phone photography and to provide photography optimization solutions for customers in the field of smart phones. Current customers include: Huawei, Samsung, OPPO, VIVO, Xiaomi, Sony, LG, and other well-known mobile phone manufacturers. In 2016-2018, revenue from smartphone vision solutions was 170 million yuan. 3.1 billion yuan, 430 million yuan, accounting for the proportion of total revenue rose to more than 90% after 2017.
Occupancy revenue share
Smart Driving Vision Solution
With the development of the autonomous driving market, intelligent driving puts higher demands on the vehicle’s ability to detect, identify and act on the surrounding environment. This poses a huge challenge to the hardware and algorithms related to intelligent driving vision. By providing intelligent driving vision solutions, Soft Rainbow Technology provides effective technical support for vehicles to detect internal and external environments, detect vehicle personnel status, identification, and driving warning. This part of the business is presented on the product mainly for ADAS products. At present, most companies in the industry are still in the research and development stage, and there are no mature products. Therefore, the company currently has lower income for this type of business.
IOT Smart Device Vision Solution
Visual artificial intelligence technology can intelligently transform smart devices equipped with cameras to solve complex problems in specific application scenarios. At present, Softhong Technology has proposed a targeted and implementable solution for smart refrigerators, intelligent unmanned retail, and other IOT smart devices and smart insurance. Similar to the development of smart driving vision solutions. At present, there are no mature products on the market, and ArcSoft’s products are also in the research and development stage, which accounts for a low share of revenue.
Company financial data analysis, the company facesRisk
The company relies on its own technology accumulation in the field of visual artificial intelligence, as well as business development in the fields of smart phones, smart devices, IOT, etc., to achieve revenue growth.
ArcSoft Technology Revenue
In 2016-2018, the company’s revenue was 260 million yuan, 340 million yuan, and 450 million yuan. In 2017 and 2018, the company’s revenue increased by more than 32% from the previous year. Among them, the proportion of revenue from the main business (smartphone field) remained above 90% after 2017. In 2016-2018, the company’s net profit was 0.7 billion yuan, 0.7 billion yuan, and 150 million yuan.
The main contribution of ArcSoft’s revenue growth is the revenue from its growing main business. China Industrial Information Network data show that in 2016-2018, the global dual (multi) camera smartphone market penetration rate is 5%, 15% and 30%, respectively, IDC predicts that global smartphone shipments in the next few years will be compared to 2018 It will show a year-on-year growth trend, which provides a basis for ArcSoft to maintain its main business growth.
However, companies still face risks in maintaining revenue growth. These risks are mainly reflected in: technology upgrade iteration risk, new business development and expansion risks, and major customer purchase volume reduction risks. The details are as follows:
Technical iteration risk:
The technology in the field of visual artificial intelligence in which the company is located is iteratively rapid, especially in the main business smartphone market, which has high requirements for product upgrading. With the use and popularity of 5G networks, visual artificial intelligence technology will be widely used in various scenarios. In wisdomIn the mobile phone market, the relevant technology iteration cycle is about 1-2 years, which is a huge challenge to the company’s research and development capabilities and iteration speed. In the field of visual artificial intelligence technology, in addition to the strong rivals such as Shang Tang and Yu Shi, ArcSoft Technology also comes from Yun Cong Technology (the accuracy of face recognition algorithm is up to 99%, B+ wheel), and Etu Technology (computer vision technology) R&D service providers, a new round of strategic financing in May 2019, and Glings (a developer of computer vision and deep learning technology, a $5 million strategic financing in March 2019) challenged. If ArcSoft cannot grasp the industry demand and technology development trends in a timely manner, and invest sufficient R&D strength, it may not be able to continue to maintain the company’s industry leading position, thus posing risks to the company’s operations.
New business development and expansion risks
In addition to using smartphones as its main business, ArcSoft is also expanding into smart cars, smart homes, smart retail, and smart healthcare. These new fields have high requirements for deep camera, artificial intelligence, virtual reality and other technologies. The company’s development of new business is affected by both industry development and market demand, as well as the company’s own understanding and grasp of the industry and market. Therefore, the company’s development and expansion of new business may be unpredictable.
Main customer purchase volume reduction risk
Because the company’s main business is in the smart phone field, the company’s top five customers (Samsung, Huawei, Xiaomi, OPPO, VIVO) currently account for about 50% of total revenue, although the revenue of the top five customers Still growing, but with the slowdown in global smartphone shipments, there may be a decline in shipments in the future leading to a major customer business development strategy adjustment, the company’s visual artificial intelligence solutions may reduce procurement demand, thereby affecting revenue .
The company’s fundraising needs
According to the status quo of such a company, ArcSoft Technology also raised funds in the Science and Technology Board, hoping to improve its own visual artificial intelligence technology.
According to the prospectus, the fundraising needs of ArcSoft Technology are shown in the figure below. Among them, the smart phone AI vision solution capacity improvement project and the IOT field AI vision solution industrialization project fundraising were 330 million yuan and 380 million respectively, accounting for 63% of the total fundraising demand; optical screen fingerprint solution development The fundraising of industrialization projects and R&D center construction projects was 220 million yuan and 180 million yuan respectively.
Fundraising needs
Smartphone AI Vision Solution Capacity Improvement Project
This project will be used for the company’s R&D and upgrade of technologies related to visual artificial intelligence solutions in the field of smart phones, and expand the application scenarios of the technology, thereby promoting the company’s service capabilities in this field and further enabling for the future. Large-scale application of 5G, AR / VR to make technical reserves.
IoT vision AI vision solution industrialization project
This project aims to improve the company’s existing visual artificial intelligence algorithm technology, design a comprehensive test development platform integrating development, verification, testing and integration, and provide integrated solutions for artificial intelligence for target customers in various IOT fields. . The current target downstream market is the IOT field of smart cars, smart retail, smart elevators and so on.
Image development and industrialization project under optical screen
This project is intended to develop visual algorithms and application solutions related to fingerprint technology under optical screens, which will be used in a variety of digital screens with light sources or active projection sources. This project focuses on the research of cutting-edge optical screen fingerprint technology, which is suitable for high-end and low-end smartphones. In the future, there is also room for development in smart door locks and smart cars.
R&D Center Construction Project
With the expansion of visual artificial intelligence technology in the field of industrial applications, related algorithm technologies still face many needs and challenges. This project is intended to promote the company’s visual artificial intelligence technology and industry applications to maintain the company’s leading edge in the industry. Therefore, the company established a research and development center in Hangzhou to recruit teams to promote the company’s business development.
Other companies on the track
As the first computer vision on the science and technology board, ArcSoft has also enjoyed a premium in valuation. At this stage, the company’s PE and PS multiples are 132.97 and 10.72 respectively. But at the same time, more track competing products are also seeking capital action. For example, in the near future, Vision Technology submitted a prospectus in Hong Kong, and Shang Tang Technology was also rumored to be listed soon. According to the prospectus of Vision Technology, the revenues of contempt for science and technology in 2016-2018 were 67 million yuan, 313.2 million yuan, and 1.426 billion yuan, with a compound annual growth rate of 358.8%. In the first half of 2019, the income was 949 million yuan. Earnings come mainly from three business revenues – personal Internet of Things solutions, urban Internet of Things solutions, and supply chain IoT solutions. However, Geshi Technology is still at a loss, and the prospectus shows that the company lost RMB 428 million in 2016-2018.758.80 million and 3,351.6 million, a loss of 5.202 billion yuan in the first half of 2019. The official explanation for the loss was due to changes in the fair value of preferred stocks and continued R&D investment.
After listing, the two companies are likely to have a certain impact on the stock price of ArcSoft, which is worthy of attention.