iFlytek’s expenses swell in the first quarter of 2019

Artificial intelligence (AI) company iFlytek’s first quarter revenue dropped by 25% from the end of last year, while research and development (R&D) spending rose and financial expenses ballooned.

iFlytek’s first-quarter revenue reached nearly RMB 2 billion (around $300 million), down from RMB 2.6 billion in the fourth quarter of 2018, but up 40% year on year, according to its latest financial results, released this week.

At the same time, the company published its annual report, with 2018 revenue of RMB 8 billion, up 45% compared to 2017. Net profits for 2018 rose 25% year on year.

iFlytek said its financial expenses swelled by more than 400% during the quarter, mainly due to a decrease in interest income and an increase in interest expenses. Meanwhile, the company’s spending on R&D nearly doubled, reaching RMB 250 million.

Listed in the southern Chinese city of Shenzhen, iFlytek is one of China’s five “AI champions,” along with Baidu, Tencent, Alibaba, and Sensetime. The company focuses on natural language processing, speech evaluation, speech recognition,  and claims to have more than 70% market share in China.

The development of AI is a top priority for Chinese authorities. The State Council, China’s cabinet, has laid out plans to become a world leader in the technology and create a domestic industry worth $150 billion by 2030.

iFlytek provides several consumer-facing services, including translation, but also offers its voice recognition platforms to Chinese healthcare and education providers, as well as to the country’s judiciary.

The company has been developing AI systems to assist in China’s courtrooms. iFlytek aims to help judges determine whether evidence could support a criminal sentence, and which laws and regulations can be used for judgment. In January, a court in Shanghai adopted the 206 System, created by iFlytek and Chinese judicial, public security, and procuratorial organs. The system can transcribe speech while identifying speakers, and accept voice commands.

However, iFlytek has not been immune to controversy. The company was accused by an interpreter at a conference in Shanghai last year of passing off his translation as one by the company’s AI. The incident went viral on Zhihu, China’s answer to question-and-answer platform Quora. Iflytek dismissed the claims.