China became the largest market globally for smart speakers earlier this year with some 10.6 million units shipped in the first quarter. In fact, three of the world’s five leading smart speaker vendors in the third quarter were Chinese, according to market research firm Canalys.
The top Chinese players are household names: e-commerce giant Alibaba, search operator Baidu, and handset maker Xiaomi. They all rely on a little-known startup called SoundAI for critical voice interaction technology.
The backstory: The Beijing-based startup makes voice recognition and artificial intelligence (AI) software, helping smart speakers from leading manufacturers to listen to and process users’ requests.
- The company’s products include Azero, a voice interaction kit that runs on smart speakers, connected cars, and wearables; Babel, a voice recognition software; and Cimon, an audio processing tool.
- SoundAI raised RMB 200 million ($28.6 million) in its most recent funding round (Series B) in December 2018. It valued the company at RMB 1 billion (around $143 million).
- Chen Xiaoliang, a researcher at the Institute of Acoustics under the Chinese Academy of Sciences, founded the firm in May 2016.
Unique selling point: SoundAI’s technology is found in more than 20 million products, ranging from smart speakers and conference systems to robots and connected cars. It also runs a strong research and development (R&D) arm with more than 1,000 patents secured so far, according to its website.
“Voice is the most natural way of communication, and smart speakers will see great demand in the near future. Our voice technology has been used in the smart speaker offerings from top players including Baidu, Alibaba, Tencent, Huawei, and Xiaomi. Our cooperation with these firms is not easy to replace.”
—Chen Xiaoliang, founder and CEO of SoundAI, in an interview with TechNode
The investors: The company has closed four rounds of investment to date, bringing in investors such as Baidu, FreesFund, Qihoo 360, Aplus Capital, and the Bank of Beijing.
- Qihoo 360, better known as a cybersecurity firm, and Baidu both make smart speakers. Baidu was the third-largest smart speaker vendor globally in the third quarter.
Present condition: The company has a team of around 200 employees, mainly from top Chinese universities such as Tsinghua and Peking University, as well as tech companies including Google, Broadcom, Tencent, and Baidu.
- The company works with 150 companies in sectors ranging from smart home and education to healthcare and manufacturing, according to Chen.
- Current information on the company’s profitability was unavailable at the time of writing.
The landscape: Global smart speaker shipments grew by more than half year on year to hit 34.9 million units in the third quarter, according to market research firm Strategy Analytics. China accounted for 36% of global shipments.
- In the two years since their emergence in the Chinese market, smart speakers have evolved from niche gadgets into one of the most sought after devices in Chinese households.
- Smart speakers are a key item for controlling intelligent home platforms, a booming sector.
- The device’s popularity in China is partly due to a price war waged between the country’s tech heavyweights, with average prices slashed to under $20 from about $100 in 2017.
- Another Strategy Analytics report predicts global consumer spending on smart home-related hardware, services, and installations to reach $103 billion in 2019 and $157 billion in 2023.
- As a voice recognition technology provider, SoundAI shares the market with smart home solution provider Tuya Smart and Unisound, a Qualcomm-backed voice-to-text software maker, among others.
Prospects: The company is likely to maintain growth as the smart speaker becomes a fixture in the “vast majority” of Chinese households. Baidu’s recent move to pull out of the price war by cutting subsidies indicates organic demand is increasing.
- SoundAI is on a list of 100 tech companies that Chinese business news platform Sina Finance expects to go public on the STAR Market, the country’s Nasdaq-style tech board on the Shanghai Stock Exchange.