China to Become the Next AI Giant

Google got into a bit of controversy last week.

During their Google I/O conference, they launched Google Duplex.

Duplex is an artificial intelligent (AI) voice system. It is part of Google Assistant, an intelligent virtual assistant. If you are not familiar with virtual assistants, they are computer systems that can execute tasks that usually require human intelligence.

Google designed Duplex to make phone calls for you on your behalf. That is, it can do all the tedious stuff like make dinner reservations, hair dresser appointments, travel bookings, etc.

In the sample conversation that Google showed during their presentation, Duplex makes an appointment for a client at a hair salon.

What’s so different about Duplex is that it doesn’t seem precise.

Let me explain.

When we think about AI or technology, we tend to think of it as accurate.

Yet in the presentation you can hear Duplex speaking with the receptionist with a lot of ‘ums’ and ‘ohs’.

That is, we hear Duplex doubt…which makes it sound more human. And that’s exactly the effect Google was going for, to have Duplex interact with people as if it were a real person.

It doubts, it can answer questions, and even has an accent.

The hair salon receptionist had no idea she was speaking with a computer. Which, of course, has prompted the debate. Should AI voices even sound human? And should we know when we are speaking to a machine?

Wherever you stand on the debate, Duplex is the latest step in the virtual assistant and voice command race…and in the battle for getting into your home.

You see, for these virtual assistants to catch on, smart speaker adoption is key. And we are seeing a lot of fast improvements in this space.

At this point, the main market leaders are Amazon’s Alexa and Google’s Google Home.

Amazon is winning, but Google is gaining market share, as you can see in the graph below.

Smart Speaker Shipments 14-05-2018

Source: Business Insider
[Click to enlarge]

As you can see also, consumer adoption has risen since last year too, which means that consumers are increasingly open to voice interaction devices.

Yet, as Business Insider reports, it is not only US companies competing in this space.

Overseas competitors are gaining, too. Chinese e-commerce giant Alibaba captured 2.6% of the market in Q4 after only entering the space in the prior quarter. 

‘While this is a small share of total shipments, the potential of Chinese smart speaker vendors shouldn’t be underrated; North America currently dominates sales of smart speakers — the region captured nearly 75% global share of smart speaker shipments in Q3 — likely because North American consumers largely purchased their smart speakers from US tech giants. As Chinese vendors increasingly launch devices that target Asian-Pacific consumers, adoption of smart speakers will likely grow, as these devices are better suited for consumers in the region.’ 

China has been investing heavily in artificial intelligence

According to CBI insights, China’s AI start-ups accounted for 48% of global AI funding last year, passing the US for the first time (38%).

In fact, China announced last summer that it wants to become a global leader in AI in the next 10 years.

As you can see below, it is planning to spend big on smart cars, robotics and big data this year.

China state funded AI projects 14-05-2018

Source: South China Morning Post
[Click to enlarge]

As the South China Morning Post (SCMP) reports, China is looking to increase the AI industry from 150 billion yuan in 2020 to 1 trillion yuan in 2030.

It’s looking to accomplish this through government investment and its big tech companies.

As SCMP continued:

China’s Ministry of Science and Technology in November 2017 appointed four of its biggest technology companies – Baidu, Alibaba Group, Tencent Holdings and iFlyTek – as so-called national champions to lead the development of AI innovation for self-driving cars, smart cities, computer optics for medical diagnosis and voice intelligence, respectively.

A recent survey by PwC showed that the ‘outlook for AI devices is promising’.

While only 10% of all respondents said they currently own AI devices like personal assistants, 32% are looking to buy an AI device in the future.

And, many of them are in Asia, as you can see in the graph below.

AI ownership - Top 10 countries 14-05-2018

Source: PwC Global Consumer Insights Survey 2018
[Click to enlarge]

In China, one in five respondents already have an AI device and over half are planning to buy one. We see similar numbers in neighbouring Vietnam and Indonesia.

Yet numbers are lower in developed countries like the US, UK and France.

We could see a lot of growth on AI and voice command interaction in Asia in years to come.


Selva Freigedo,
Editor, Markets & Money

PS: China is looking at becoming an AI giant in the next 10 years. Technology and innovation will play an important role for China in the future. That’s why Harje has launched Wealth Eruption, a service that looks at companies that could boom based on China’s growth. If you want to learn more, click here.

Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.

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