Baidu Builds Partnership with Neusoft, Ramping up its Efforts in Healthcare
Baidu has announced that it will invest over CNY 1.4 Bn (the equivalent of around USD 200 Mn) in Neusoft Holdings, building a strategic partnership with a concentration on health tech and smart city infrastructure.
China’s search engine behemoth Baidu (BIDU: NASDAQ) has announced a strategic partnership with a software-focused investment company, Neusoft Holdings, and appointed Baidu CTO Wang Haifeng (王海峰) as the general director of Neusoft. The strategic move represents Baidu’s efforts to catch up with Alibaba and Tencent in data-driven healthcare services market.
Baidu has long been keen to cooperate with Neusoft. In March of this year, Baidu had injected CNY 22.5 million into Neusoft’s Medical Systems subsidiary. Founded in 2011, Neusoft is a smart city, healthcare and cloud-computing focused investment group. In February 2019, Baidu acquired yet another Chinese health tech company Kangfuzi Health Technology (康夫子), which targets a medical AI health-related big data.
Baidu is not an ultimate early-mover in healthcare technologies when compared to China’s internet giants, Alibaba and Tencent.
Alibaba’s healthcare subsidiary, Ali Health, (00241: HK) has long been indicating what healthcare services will be like for China’s rising middle class in the second half of the 21st century. Ali Health is currently generating its income from both online clinic and pharmacy businesses. Through its subsidiary, Alibaba has been increasing its influence via private equities; Ali Health bought around 15% of stakes of another health tech company, Jkom Cloud, on May 2017, investing approximately CNY 330 million.
Tencent, on the other hand, has a slightly different strategy in healthcare – yet the company has also been playing big. Tencent Trusted Doctors, an ‘online to offline’ healthcare services platform, was initiated in 2018 following a merger of Tencent’s medical unit Doctorwork and Shanghai-based healthcare startup, Trusted Doctors. Tencent Trusted Doctors reportedly raised USD 250 million in April 2019; after which it sets its targets high by declaring a goal of operating with over 500 ‘medical institutions’ by 2020.
What cooperating with Neusof would bring for Baidu in healthcare may materialize in the long term. By the end of 2018, Neusoft Group had nearly 500 tertiary hospitals and more than 2,500 medical institutions, according to IDC. This massive medical institution network might facilitate Baidu’s medical data collection process, thus empowering its AI division. Notably, medical data collection is one of the most critical indicators in deciding the precision rate of any medical AI-driven diagnosis product.
A researcher at Baidu’s AI division said that "Baidu’s cooperation with Neusoft will be beyond healthcare, covering other fields as well." Indeed, Neusoft possesses a network in the residential market as well, leading to the possinbility of pulling out useful data via smart city infrastructures for Baidu.
Baidu has long been regarded as the most powerful Internet company in China by the market. However, its market cap has been surpassed by the new retail and delivery companies such as Pinduoduo (PDD: NASDAQ), JD.com (JD: NASDAQ) and Meituan Dianping (3690: HK) in 2019. If the company is to make a comeback, it has to diversify into other fields, such as healthcare. That is set to be a USD 1 trillion market by 2020 in China.