Why can't SenseTime's technology be profitable?
As the largest AI software supplier in Asia and the largest computer vision software supplier in China, SenseTime's technology has a wide range of applications and high recognition in the market. However, although its revenue has continued to grow in recent years, such as reaching 1.853 billion, 3.027 billion, 3.446 billion yuan, and 1.652 billion yuan from 2018 to the first half of 2021, respectively, and its revenue increased by 91.81% in the first half of the year, it still faces profitability problems.
SenseTime's technology is not profitable for several reasons:
First, R&D investment is too high
From 2018 to the first half of 2021, SenseTime's R&D investment accounted for 45.9%, 63.3%, 71.3%, and 107.3% respectively, and R&D expenses were higher than revenue, which is also the reason why the company has been losing money.
The core problem is that AI algorithms and models are the core products of SenseTime, but these algorithms themselves cannot directly make profits. In order to achieve commercialization, SenseTime needs to apply these technologies to various industries, such as finance, security, smart cities, etc., to create value. This transformation process requires a lot of R&D investment, marketing and partnership building, which may also be one of the reasons for the company's long-term losses.
Second, the customer concentration is high
Although SenseTime has 2,400 software customers, of which 250 are Fortune 500 companies, most of them do not contribute profits, and the top five customers contribute 59.3% of the company's revenue, and the customer concentration is very high.
Third, the product is not standardized enough
SenseTime's core product solutions are not yet standardized and still need to be delivered individually, and once they cannot be replicated on a large scale and the team is stuck in a state of project delivery, it may be difficult for a company with high R&D costs like SenseTime to make a profit.
However, SenseTime has already laid out in the four major sectors of smart business, smart city, smart life and smart car, and the possibility of future profitability still exists. It's worth noting that SenseTime isn't the only company facing this problem. Judging from the financial performance of the "AI Four Tigers", none of them have achieved profitability so far: SenseTime Technology has lost more than 24 billion yuan in three and a half years, Megvii Technology has lost 14.6 billion yuan in three and a half years, and YITU Technology has lost 6.1 billion yuan in two and a half years from 2018 to the first half of 2020. This shows that the profit model of the AI industry is still in the exploration stage, and enterprises and industries need to work together to find a more sustainable and efficient profit path. What do you think about this, welcome to follow my entrepreneur Li Meng and communicate with me.