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Megvii’s Computer Vision AI Technology in 2G, 2B and 2C Segments
Megvii’s Computer Vision AI Technology in 2G, 2B and 2C Segments
Surveillance camera. PHOTO: Credit to Kyle Glenn from Unsplash
Associated Company
Megvii Megvii

In today’s AI revolution, we believe the core technology comes down to Natural Language Processing (NLP), “the interpretation of human languages”, and Computer Vision, “the identification on images”. NLP is seeing broad adoption in both consumer and enterprise fronts, including Amazon’s smart speaker Alexa and Netflix’s superior recommendation systems. In China, tech giants Baidu, Tencent, and Alibaba (BAT) has been aggressively making acquisitions to roll out new innovations in the NLP field, such as Baidu’s DuerOS and Alibaba’s AliReader. Different from NLP, the Computer Vision sector in China, however, is around 70% dominated by four startups: SenseTime (商汤), Yitu (依图), Megvii (旷视), and CloudWalk (云从), according to IDC.

Among more than 5,000 AI companies in China, almost 90% of them are simply using the “AI concept” without creating value-added solutions to clients. Some startups did gain world’s leading technologies in image and video recognitions after years of research and development, but merely selling SDK makes their monetization plans look weak, and eventually, did not survive from the competition. SenseTime, Yitu, Megvvi, and CloudWalk, on the contrary, have become unicorns with billion-dollar valuation, a result not only because of their technological advantages, but also driven by the end-to-end vertical solutions they can provide to businesses and governments.

Megvii is an early mover with globally recognized technology

As early as 2011, YIN Qi (印奇) was researching the topic of AI at Tsinghua University. He founded the company Face++ with his two college friends, focusing on facial recognition. While the move was ahead of BAT and its three competitors (SenseTime, Yitu, and CloudWalk), the founding team was stuck with the next step on offering meaningful real-world applications, so they made their API public. Shortly after, many companies including Meitu, a photo editing app, and Jiayuan.com, a marriage matchmaking agency, connected to the API, giving ideas to the Face++ founding team. A more crucial inflection point occurred in 2014, when Alibaba searched for a facial recognition provider and finally selected Face++ to implement the “pay-with-your-face” feature in its Alipay product. Now, Face++ is widely recognized internationally and has repeatedly defeated Google, Facebook, and Microsoft in the global AI competitions. It has ranked No. 1 on 17 technology evaluations worldwide and has made to MIT Technology Review three times.

Transforming traditional industries with Computer Vision

Today, Computer Vision technologies has extended to multiple industry verticals: mobility (autonomous driving), healthcare (medical scans reading and disease detection), retail (facial recognition to implement personalized advertising), financials (anti-fraud, identification verification), logistics (production line monitoring), and national security (anti-terrorism, video surveillance), etc.

Face++ will focus on three major sectors in the next 3 to 5 years: Smart City, Supply Chain, and Lifestyle. We believe the company is very strategic in choosing industry verticals that can be empowered by Computer Vision technology. The company changed its name to “Megvii” which means mega vision, a dedicated act to transit from a technology platform to a vertical solution provider which reshapes traditional industries with AIoT (AI + Internet of Things).

Servicing governments - “Smart City AIoT”

Evolution: Before the concept of “Smart City” kicked in, Megvii tapped in the national security industry in 2014, as facial recognition was likely the “must-have” technology to the sector: security departments often need to verify people’s identification without their cooperation. Traditional surveillance systems used to be cumbersome to install and deliver low visibility at a slow speed. Therefore, when the four Computer Vision unicorns offered high-resolution cloud-based video surveillance systems with intelligent analytical capabilities, an increasing number of police departments have become their clients. According to the company, Megvii secured contracts with police departments in 32 cities in China and has assisted over 5,000 arrests of wanted criminals in two years. Financially, the smart surveillance business contributed around 70% of total revenues and grew nearly 50 times YOY in 2018.

National security industry: The Chinese government has plans to build a closed-circuit television (CCTV) surveillance network for national security purpose, with 170 million security cameras in use and 400 million underway. While the controversy on potential privacy invasion is not the scope of this report, we believe the government decisions make China the largest market in video surveillance. Compared to the US market at USD 2.9 billion growing at 0.7% per year, the market size in China reached USD 6.4 billion in 2016 with an annual growth rate of 12.4%, per IHS Markit. Since traditional surveillance producers still take over 90% market share, we evaluate the growth opportunity to be unlimited for Megvii.

Current challenges: While the system recognizes real-time unlawful activities, it cannot make timely actions to stop such activities, making the AI technology less “intelligent” than it is expected to be. Moreover, since there are only two engineers with more than 10 years of experience in the national security field at Megvii, the company is still in need of industry expertise at this point.

Going beyond defense: In addition to helping with criminal investigation, Megvii eyes on the opportunity to build “City Brain”, acquiring larger data sets and empowering the entire cities with the Computer Vision technology, specifically regarding urban planning, traffic, and large-scale events. The company produces hardware including the smart portrait capture machine MegEye-C3S, the face recognition terminal MegBox B1R, portable devices, and card readers, to capture not only individuals, but also roads, automobiles, buildings, etc. Its software then extracts actionable information from the images/videos and delivers analytical results. Currently, the company is solving issues of displaced bicycles in Luohu District, Shenzhen and providing AI solutions to the World Internet Conference held in Wuzhen annually. Global expansion is also down the road: In 2018, the company sold its Smart City solutions to over 20 countries in four continents and undertook multiple projects in the Middle East countries.

Servicing businesses - “Supply Chain AIoT”

Compared to the smart surveillance business, the supply chain AioT is still in an early development phase in which Megvii is testing and creating market demands. In 2018, the company launched its Supply Chain solutions and claimed it as the primary focus.

Linking logistics with Computer Vision: Though logistics seems irrelevant to Computer Vision, Megvii hopes to transform the sector with its Robotic Network Operating System, Hetu, to automate most logistics work. For example, it has helped Tmall Supermarket’s warehouses boost efficiency by almost 40% and keep the duration from receiving orders to making goods ready to deliver below one hour. Last year, it acquired Ares Robot (艾瑞思机器人), a company produces robots that replace human on picking and sorting packages in factories as well as offers cloud-based warehouse management system.

Moving downstream to retail: With solutions to optimize the supply chains, it is natural for Megvii to move a little downstream to the retail sector. Currently, KFC, Tao Café, Raffles City (来福士), EATOWN (怡食) and other retail businesses are using Megvii’s retail solutions to digitalize their offline stores and transform themselves to New Retail. When the consumer walks in the store, Megvii’s smart terminal will identify consumer’s ages, genders, and other dimensions and the shelf sensing terminal will then track their purchasing behaviors. Combined with existing ERP/CRM, Megvii’s retail solutions allow store owners to understand what goods should be purchased, when to put them on the shelves and help them design precision marketing. Such solutions have already made impacts on Good Neighbor, a well-known supermarket chain in China, by increasing its inventory turnover by around 110% and weekly repurchase rate by around 100%.

Servicing consumers - “Lifestyle AIoT”

Megvii’s facial technology is already common in consumers’ lives, from social media to mobile payments. For instance, it offers face unlocking, image beatifying, location optimization, and other services to Xiaomi, Oppo and Vivo as well as the secured payments and remote account opening services to CITIC Bank and Ant Financial.

Valuing at USD 4 billion ahead of its upcoming IPO

Last week, Megvii announced that it has closed USD 750 million from its D series founding, giving the company a valuation of USD 4 billion. Likely due to the sensitive nature of its business, the majority of investors are state-owned organizations like Bank of China Group Investment, ICBC Asset Management Co., and a subsidiary of Abu Dhabi Investment Authority. Other investors included Macquarie Group and Alibaba. The company is planning to list its shares on the Hong Kong Stock Exchange later this year.  Looking forward, we are optimistic on the company’s potential to reshape multiple industries in China, given its advanced technologies, clear commercialization path, and top tier management team with vision and execution.

Enterprise Information

Megvii Technology operates a face detection, recognition, and analysis platform for Websites, mobile applications, and smart televisions.
CATEGORIES: AI
Last Funding Type
Series D
Number of Employees
150-300
Number of Funding Rounds
6
Total Funding Amount
1.18B

Enterprise Information

Megvii
Megvii Technology operates a face detection, recognition, and analysis platform for Websites, mobile applications, and smart televisions.
CATEGORIES: AI
Last Funding Type
Series D
Number of Employees
150-300
Number of Funding Rounds
6
Total Funding Amount
1.18B

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