LeEco is a scam! VR is a scam! Now smart speakers are trying to hurt me again!

When the number of solution providers in Nanshan District of Shenzhen surged to hundreds, gold diggers with a keen sense of smell realized that startups had become supporting roles in the story.

Yes, BATJ, Xiaomi, and Lenovo have all arrived, with great fanfare, and press conferences one after another, which is quite lively. As a traffic entrance, building an ecological platform, and becoming a home terminal, smart speakers are expected to be popular.

In the consumer market, it is bound to be a game of competition among many players. So, Lao Wang, who started a business of smart speakers three years ago, led his team to transform into a technology solutions company.

On the supply chain side, OEMs are scrambling for a tiny profit from orders, and are even willing to pay millions of yuan to make a loss. "In the end, I'm working for big companies for nothing. Anyway, I've decided to give up this wave," said Lao Zhou, who has been working in the Shenzhen supply chain market for five years and is unwilling to wade into this muddy water.

"There are differences in user habits at home and abroad, and domestic market demand is not rigid. I am pessimistic about the domestic market," said Zhao Nan, executive director of Xiangfeng Investment, indifferent when talking about smart speakers. This is also a typical response from investors.

Based on the tracking survey of online Taobao (including Tmall) sales data, the overall monthly sales of smart speakers are less than 20,000 units. The investment market that does not believe in pie-in-the-sky sales says, "Market data speaks for itself, and paper talk is meaningless."

Big players are pouring in, the capital market is cooling down, the supply chain is in a passive position, entrepreneurs are looking for other ways out, and sales data is bleak. Who will finally decide the outcome of this "speaker dream" accelerated by artificial intelligence?

Three years ago, Amazon released its smart speaker Echo, and the market for smart speakers with integrated voice assistant system Alexa began to ferment. Until last year, Echo's sales data began to make a qualitative leap, exceeding 5 million units in one fell swoop, becoming the best-selling small home speaker in the United States.

A year ago, Google launched a similar product, Google Home. In May this year, Apple released HomePod at WWDC. At the same time, a large number of Internet companies, including Xiaomi, Lenovo, Alibaba, Baidu, and Tencent, were not to be outdone and enthusiastically launched smart speakers that looked almost the same.

In addition, peripheral players such as Himalaya, Kugou, and Cheetah have entered the market in different ways; home appliance brands such as Haier and Midea are in urgent need of trying out new technologies in small-sized home appliances; and there are more than 20 entrepreneurial teams.

The official rise of the domestic smart speaker market began in the second half of 2016, which was the ripple effect brought about by the sharp increase in sales of Amazon Echo.

△ Echo sales data trend in 2015

According to Slice Intelligence online statistics, Echo sales experienced a blowout starting in October 2015 and reached a climax in November.

Of course, the speaker form factor is not the key. What attracts many players, especially big players, is that Amazon has opened up the intelligent voice system. In half a year, it has connected with 7,000 manufacturers and has been almost omnipresent at the CES booth in the United States. So far, Alexa has more than 15,000 skills. The emergence of successful precedents shows that the platform imagination behind smart speakers is huge.

The entry of giants and the rush of small and medium-sized manufacturers have increased the possibility of the smart speaker market becoming a hot spot.

100,000 units, this is the overall sales volume of Dingdong smart speakers in 2016. The data comes from the "2016 Annual Report of iFlytek Co., Ltd."

Linglong Technology, the company that owns Dingdong Speaker, was jointly funded by iFlytek and JD.com. Whether it is the voice technology support behind it or the ability to divert traffic to the e-commerce platform, Dingdong Speaker is a rare combination of advantages among domestic smart speakers.

According to the marketing staff of Ding Dong Speaker, by the end of June this year, the sales of Ding Dong Speaker had increased by 130% year-on-year compared with 2016. However, based on the annual sales of 100,000 units, this figure is still not ideal.

On JD.com, when searching for "smart speakers", 13 of the top 15 models in terms of sales volume are Dingdong speakers, and 2 of them are Kugou speakers. This result is not actually of reference value, but only shows that "100,000 units" and "130% growth" are not easy to come by.

According to Taobao (including Tmall) e-commerce platform, with "smart speakers" as the search category, a 30-day sales data survey found that there were more than 21 stores with monthly sales of more than 100 units, covering a total of 15 brands (excluding OEM manufacturers), with a total sales of 17,645 units.

△ Smart speaker online sales ranking

1) In terms of sales ranking, the top-ranked Xiaomi Internet Speaker, Chiguan S1 Bluetooth Speaker, and Kugou Pandora Speaker are all priced in the 150-400 yuan range; the fourth-ranked music flower pot is mostly OEM, priced below 150 yuan, and wins with its unique shape and function.

2) In terms of product intelligence, it mainly refers to the realization of voice interaction function. Among the 15 brands with monthly sales of more than 100 units, only two Xiaomi Internet speakers, Philips aw6005/Xiaofei Ali smart speakers, have realized voice interaction function, and it is only used when switching songs in certain scenarios.

To some extent, this also proves the uselessness of current voice interaction functions.

3) It is not difficult to see from the price point of view that SONOS PLay5 and SONOS PLay1 occupy the head space, and their main functions are still focused on sound quality and experience.

△ Online market share of smart speakers

4) Based on the monthly sales data of Taobao (including Tmall) e-commerce platform, the total number is 17,645 units, which is used as the base to obtain the sales market share of each brand. Xiaomi's Internet sales accounted for 26%, and the overall share of the top three exceeded half. The market participation of other brands is relatively low.

Overall, the online data of smart speakers based on the domestic market is not optimistic. At least, the stock market with monthly sales of less than 20,000 units and annual sales of less than one million units is difficult to support the large-scale investment mentioned above.

If it were two years ago, the data of the smart speaker market might be even more tragic. It is not difficult for us to understand the situation of Lao Wang Company, which entered the market at the end of 2015, and why it later switched to become a technology solution provider.

At that time, Lao Wang and his team were on stage describing the smart speaker as a robot and a smart home control unit, their faces full of confidence and enthusiasm.

"In the past few years until now, smart speakers have not really taken off in the consumer market," Lao Wang said frankly. He estimated that the current stock market is less than one million units, and the real growth may not come until the next year or two.

"For this market to undergo substantial changes, scale is an important indicator. In China, it must reach at least several million to tens of millions to prove that the market is recognized, and it also needs to maintain a high level of activity," said AISpeech, which has provided voice interaction solutions to many large companies.

"There are 112 companies engaged in voice intelligence within one kilometer of Nanshan District in Shenzhen." This is how Li Haibo, general manager and vice president of Himalaya Hardware, describes the supply chain situation.

"But this is a solution that can be accepted by factories with backgrounds and only care about beautiful production lines." However, Lao Zhou said that he does not want to catch up with the smart speaker trend this year.

"I've been cheated by Internet companies many times in the past few years! I was cheated by LeTV before, and I was cheated by Baofeng in VR last year." Lao Zhou has long seen through the "routines" of the Internet trends that change every year, and has become much calmer and more cautious.

When the trend arrives, orders come in one after another, but once the market cools down, the large amount of overcapacity and assembly line resources invested in the early stage can only be absorbed by the supply chain itself in the end.

According to Lao Zhou, since major Internet companies have already made arrangements, all domestic OEM factories of a certain scale have received tasks. However, compared with the production capacity of OEM factories, "it is still a business with too many people and too little meat, and in the end it is the ordinary manufacturing and processing companies that are pitted."

The core of the problem is that the supply chain has been in a passive state for a long time because it is tied to large companies. "The gross profit margin is low, and it is even a loss-making business. Most factories with backgrounds only need beautiful flow of goods."

In this process, supply chain prices are suppressed and slow capital recovery often occurs.

Xiao Yang, from the marketing department of a mature solution manufacturer, told Sina Technology, "The competition in the smart speaker solution market is already quite fierce. Because the solutions are relatively mature, the market has begun to sell in large quantities at low prices, and some customers mainly look at price when making comparisons."

According to Xiao Yang, it is common for big customers to delay payment, which results in a slow return of funds for the company. "Generally speaking, we need to advance 70% of the order amount, and the customer prepays 30%. When the order volume is greater than 10K, the advance payment exceeds one million." This is one of the reasons why Lao Zhou is unwilling to "play" with big companies.

"If Alibaba places an order for a smart speaker with a monthly MOQ (minimum order quantity) of 100k, a payment period of 6 months, and no advance payment, do you think anyone will take it?" Lao Zhou asked himself and answered, "Of course there will be! But we can't take it. In fact, the payment period is not a problem, and a third party will advance the payment. But the key is that the product has no profit. Basically, it's just working for nothing in the end."

This is the frustration of the OEM factory. But it does not mean that the brand side is free of risks. "Amazon Echo and Tmall Genie in China can adjust the price at will. Do you know how much shock it will cause to the solution providers?"

In May this year, Amazon Echo experienced a price cut across the board, including Echo, Echo Dot, and Echo Tap, all of which were reduced by US$30-40, as well as the 499 yuan Tmall Genie released this month. These have had a significant impact on OEM factories, meaning that plans with higher costs will be overturned.

As mentioned above, the current domestic market stock of less than one million units cannot support the influx of giants and entrepreneurs. If this bubble bursts, who will pay for it? What are the stop-loss models?

"With a large influx of new products now, there will definitely be many cases of failure in the future. But for large companies, the amortized R&D investment in making a speaker is not large; small companies are not recommended to build a platform, as the front-end microphone array and back-end semantics are both good entry points," Liu Weiwei, partner of Galaxy Internet, told Sina Technology.

There is no demand for voice interaction in Chinese people’s living habits. “This is the biggest market barrier.” The investors interviewed maintained a consistent view on the market barrier or the prerequisite for universality. “The domestic market does not have rigid demand.”

Regarding whether the entry of Internet traffic players can improve the current market situation, Paul from Thundersoft said that it will not. The improvement of the ecosystem is indeed inseparable from Internet manufacturers. However, looking at the hardware development history of BAT, without exception, none of them has achieved scale.

"The main reason is that Internet companies lack hardware genes, supply chain capabilities, hardware design capabilities, and sales channel capabilities for consumer electronics."

As for existing players, Alibaba and Tencent, which have complete ecosystems, are favored, especially those waiting to see the opening of the WeChat portal. "But they don't necessarily appear as hardware brand manufacturers. We are more optimistic about branded speakers and consumer electronics manufacturers."

In addition, the improvement of supply chain capabilities is also an important condition. "The supply capacity of chip ready and memory will be sufficient to support the sales explosion in 2018."

In front of Gartner's technology maturity curve, the ups and downs have already determined the final fate and trend of the industry. But despite this, every turn and rise still touches people's hearts.

In fact, in addition to following the trend and facing capital turmoil, practitioners still have a sense of persistence and determination in their hearts.

As Lao Zhou said, this road is suitable for slow walking.

(At the request of the interviewees, Lao Zhou, Lao Wang, and Xiao Yang mentioned in this article are all pseudonyms.)