Hu Zuoxiong, Chairman of the Board of Directors of Lingxiong Technology: Leading the DaaS industry and helping green development

Shenzhen Business Daily • Reading Client Reporter Liu E

In May this year, the release of the "Shenzhen Action Plan for Promoting the Trade-in of Consumer Goods" aroused strong responses. As a promoter and practitioner of green consumption and a leading enterprise in the DaaS field, Lingxiong Technology, the parent company of Xiaoxiong U Rental, has led the industry in market share for many years. At present, China's DaaS market is still in its infancy and highly fragmented, how does Lingxiong Technology establish its own industry barriers? What is the future of the DaaS industry? Focusing on these issues, a reporter from Shenzhen Business Daily recently interviewed Hu Zuoxiong, chairman of the board of directors of Lingxiong Technology, to deeply decode its development key.

Market performance: help tens of thousands of enterprises reduce costs and increase efficiency

Based on digitalization, Lingxiong Technology has innovated and created a digital closed-loop DaaS (equipment as a service) service model that provides enterprises with full-stack services including IT equipment leasing, IT technology services, SaaS-based equipment management services and IT equipment recycling through subscriptions, so as to solve the pain points of one-time purchase of IT equipment, such as financial pressure, slow response to technical support, poor flexibility of IT equipment management and low utilization rate of IT equipment. It has helped tens of thousands of enterprises to achieve cost reduction, efficiency increase and high-quality development. Because of its outstanding achievements, it has been rated as a national specialized and special new "little giant" enterprise, a national public service demonstration platform for small and medium-sized enterprises, etc., and is also a national high-tech enterprise.

Hu Zuoxiong highly appreciated Shenzhen's trade-in action plan, believing that the policy is favorable, which can guide enterprises to participate, enhance industry awareness and penetration, and promote the standardized development of the industry.

The "Shenzhen Action Plan for Promoting the Trade-in of Consumer Goods" mentions that it will improve the support policies for the disposal of waste electrical and electronic products, improve the electronic trading market for second-hand goods, promote the introduction of relevant standards and guidelines for the electronic trading industry of second-hand goods, and improve standards in the fields of safety, energy saving, environmental protection, and recycling. In Hu Zuoxiong's view, these are all major benefits. For Lingxiong Technology, the most representative is the digital closed-loop DaaS solution. Compared with the traditional one-time procurement model, based on digitalization, Lingxiong Technology has pioneered the equipment life cycle management business model covering equipment recycling business, equipment subscription (leasing) services, and IT technology subscription services, covering the whole life cycle management needs of small and medium-sized enterprises from equipment acquisition, equipment maintenance, equipment management to equipment elimination and recycling, and helping enterprises reduce costs and increase efficiency with a complete business closed-loop ecology, while extending the service life of equipment and maximizing the utilization rate of equipment through collaboration between businesses.

It is worth mentioning that Lingxiong Technology actively practices the concept of circular economy, green disposal of recycling equipment, and refurbishment and disposal of equipment can effectively extend the service life of equipment, thereby reducing social carbon emissions. In 2023, Lingxiong Technology extended the service life of 1.3 million refurbished equipment through continuous innovation in the equipment life cycle management business model, and contributed 15,720.6 tons of net carbon emission reduction to the society.

Industry barriers: unique business models and digital capabilities

Talking about Lingxiong's market share, Hu Zuoxiong said: "China's DaaS market is still in its infancy and highly fragmented, with very few companies with annual revenue exceeding 500 million. As the first stock in the industry, Lingxiong Technology, the parent company of Xiaoxiong U Rental, has an annual revenue of more than 1.7 billion, and is the first enterprise to establish a digital, multi-scenario and closed-loop equipment life cycle management business model. In 2021, it had a market share of approximately 3.9% in terms of revenue, leading the industry and far more than the other four players combined. In 2022 and 2023, revenue continues to lead. ”

Haitong International's rating report shows that Lingxiong Technology has expanded its business scale, improved operating efficiency, and increased market share, and is expected to continue to be profitable in the next few years. Total revenues are expected to be $2,027 million, $2,396 million and $2,958 million for 2024-2026, respectively, and adjusted EBITDA of $367 million, $502 million and $630 million, respectively. If the penetration rate of IT equipment subscriptions in China increases to 50%, Lingxiong Technology's market share will double, and there is huge room for growth.

As an industry leader, what is the secret of Lingxiong Technology's success? Hu Zuoxiong pointed out that the DaaS industry has a high threshold and requires high capital, operation and scale, and Lingxiong Technology's leading position is due to its unique business model and digital capabilities.

According to the Haitong International report, Lingxiong Technology's industry barriers include: strong closed-loop DaaS ecological synergy, long-term and short-term equipment subscription service customers can be converted to each other, and IT technology services enhance customer stickiness; Complete and strong recycling and refurbishment industry chain to support equipment subscription services; Intelligent risk control system to ensure low bad debt rate; Strategic shareholders such as JD.com, Tencent and Lenovo provide resource support.

In addition, China's DaaS industry is asset-heavy and operation-oriented, and Lingxiong Technology has deepened digital construction, built a full-process information management system, and independently developed multiple systems to improve operational efficiency. At the same time, we have established and improved the risk control and credit system, and the bad debt rate is low. The company also took the lead in launching a self-built and self-operated service system, set up branches in many cities, built a national service network, introduced AI technology to improve customer service quality, and obtained five-star after-sales service certification.

Industry trends: The market size will reach 138.2 billion yuan in 2026

Hu is optimistic about the development trend of the DaaS industry. The number of companies in mainland China continues to grow, and is expected to reach 80 million by 2026, laying the foundation for increased DaaS market penetration. As the economy recovers, enterprises focus on cost reduction, efficiency improvement, and digital transformation, and the scale of IT spending by small and medium-sized enterprises is expected to reach trillions of dollars by 2026. Many governments have introduced policies to encourage administrative institutions to adopt the equipment subscription model, which will accelerate the development of the market. The market size is expected to grow at a compound growth rate of 32% in the next few years and reach 138.2 billion yuan in 2026.

However, Hu Zuoxiong also pointed out that although the prospects are promising, there are still pain points in the industry, such as low market awareness, many misunderstandings, prominent contradictions between market fragmentation and rapid growth, obvious contradictions between insufficient policy support and strong market demand, and significant contradictions between the lack of standard systems and standardized development needs.

In order to promote the high-quality development of the industry, Hu Zuoxiong suggested: relevant ministries and commissions of the state should introduce support policies to encourage administrative institutions and central state-owned enterprises to take the lead in adopting the equipment subscription model; In terms of preferential industrial policies, banks should meet the capital needs of DaaS service providers and give preferential treatments, and local governments should issue service vouchers to allow leading enterprises to serve micro, small and medium-sized enterprises.

Lingxiong Technology set sail from Shenzhen to the whole country, Hu Zuoxiong believes that thanks to Shenzhen's two major conditions: first, first, a first-class business environment, Shenzhen optimizes the business environment and provides high-quality services for enterprises; Second, there is a good talent environment, and many universities and research institutions have created conditions for cultivating and attracting talents.

Talking about the future development, Hu Zuoxiong said that Lingxiong Technology will further comply with the trend of circular economy and green development, continuously improve the equipment operation capacity, especially the equipment maintenance and disposal capacity and remanufacturing capacity, improve the utilization rate of equipment, and maximize the residual value of equipment. At the same time, we will increase investment in science and technology, based on digitalization, to provide enterprise users with higher-quality DaaS services for all categories and life cycles, and at the same time, promote the innovation, transformation and upgrading of the second-hand recycling industry model, and contribute to green consumption and economic growth.