Chinese Search Engine Sogou Is Becoming An AI-Powered Smart Hardware Company

Wang Xiaochuan, CEO and founder of Sogou Inc.

Sogou Inc., China’s second largest search engine after Baidu Inc., is becoming a smart hardware company powered by its artificial intelligence capabilities. That may be something Sogou founder Wang Xiaochuan would never have foreseen eight years ago when he founded the Internet company in Beijing.

During the first quarter of this year, New York Stock Exchange-listed Sogou reported other revenues of US$28 million, a 38% increase year-over-year. The growth was primarily contributed to increased revenues from sales of Sogou’s smart hardware products and Internet value-added services, according to its earnings report.

Even though the US$28 million was only 11% of the company’s quarter revenues and dwarfed by the US$220.4 million search and search-related revenues, this could soon change.

In January, Sogou released two smart hardware products, a Sogou Travel Translator and Sogou Recording Translator. In an interview with China Money Network earlier this month, Sogou founder Wang Xiaochuan said that the company is launching four more smart device products based on its core voice recognition technologies.

"I feel we should be among the top three players in the smart hardware sector outside of smartphones and smart TVs," Wang told China Money Network during the RISE Hong Kong 2018 conference. He declined to review what type of smart devices Sogou will be launching.

Sogou, the second largest search engine after Baidu with an 18% market share and also the largest Chinese language input method, entered the smart devices market as early as in 2014. That year, Sogou launched its Teemo children smart watch and has sold over one million unites as of June 2017, according to Teemo’s official website.

The Sogou Travel Translator and Sogou Recording Translator, priced at RMB1,498 (US$222) and RMB398 (US$59) respectively, could contributed to Sogou’s bottom lines much more if these product can reach similar sales volume as the children smart watch. With four more smart hardware to be launched at year end, Sogou – like many artificial intelligence companies in China – is walking further down the path of pursuing hardware businesses to monetize its AI capabilities.

Here is a Q&A with Wang Xiaochuan, CEO and founder of Sogou. It has been edited for clarity.

Q: How do you view China’s AI sector? Where is it strong, and where is it weak?

A: China’s Internet sector is one of the most vibrant industries in the country, with great innovation and massive user base. With this fundamental background, there are a lot of advantages (for Chinese companies) to develop AI capabilities. There are vast amount of data and readily available capital, in addition to an excellent talent pool. Many world-leading Chinese scientists and engineers are returning to China.

But in terms of fundamental research, China is still weak. However, the good thing about today’s global knowledge sharing system is that we can access the latest and most advanced research papers the moment they are published. We can then study and try to learn and convert that new knowledge to generate better productivity.

On the other hand, as Chinese tech companies become more powerful, they will spend more capital on research to support fundamental research. China’s own education reform will also strengthen research in the long term. The current skirmishes between the U.S. and China in intellectual property and trade is also accelerating China’s own development in research and development. So overall, I’m very optimistic about China’s AI development.

Q: The recent public outcry over China’s reliance on imported chips has driven investors and companies toward building up China’s own AI chip capabilities. Will China be able to build a self-reliant chip capabilities?

A: This will need time. AI chips are not like the Internet, where a big breakthrough could take place in six month to a year. But we have seen two positive changes. One is that Chinese venture capitalists are pouring capital into AI chips, while government funding was the main source of capital before. VC money is driven by the market and is more efficient.

Secondly, Chinese companies have built up a deep and complete ecosystem surrounding Internet applications, which can stimulate the development of establishing China’s own operating systems. We can better develop China’s own chip industry upon our own operating systems.

For AI chips that focus on certain functions such as voice recognition and image recognition, Chinese companies can make rapid advancements. But for core AI chips such as CPU and GPU, it will take much longer time.

Q: Will Sogou develop its own AI chips?

A: We will first focus on applications. In terms of chips, we will partner with Chinese and American companies, instead of allocating lots of capital and resources on developing our own chips. Our focus right now is still building up consumer-facing products.

Q: What are your thoughts on how should Sogou make money from its AI capabilities?

A: We have three main sources of revenues. One is from our search engine services, which has 18% of market share in China and brings in around RMB6 billion in annual income. Another is Sogou input method to help Chinese users input Chinese language digitally. Finally, we have launched some smart devices since last year. One is Sogou Travel Translator and the other is Sogou recorder/transcriber.

AI can improve search so that precise answers can be provided to users, rather than a list of web pages. This interaction is much more convenient for the users and can bring additional value to search, which could lead to higher revenues. This kind of precision answers in search can be used in our consumer smart devices as well. Our input method is also improving how man and machines communicate. All of our products have AI as the underlying driver.

At the end of this year, we will also launch four more smart device products based on voice interactions.

Q: Are you launching your own smart speakers? This market is already very crowded?

A: Wait until the end of the year, and you will see. I feel we should be among the top three players in the smart hardware sector outside of smartphones and smart TVs.

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Nina Xiang is the co-founder and managing editor overseeing editorial content and product development at CMN. Before founding CMN in 2011, Nina worked at BusinessWeek magazine in Beijing and Institutional Investor magazine in New York, writing about business and financial services. While in New York, she also served as part-time correspondent for Shanghai's financial television channel, China Business Network, as well as China Radio International, China's national English-language radio network.