Chinese voice recognition firm iFlytek gets $407m from state investors

IFlytek, China’s national champion in voice recognition, has raised 2.8 billion yuan (US$407 million) via a private placement that brought in money from a state-backed industry fund and several provincial government funds.

Photo credit: Jonathan Gross

The Shenzhen-listed company will use the proceeds to bankroll research in open platforms for smart speech, so-called next-generation cognitive technology, and service robots, it said in a stock exchange filing on Wednesday.

The placement has pulled in investors including Anhui Development Investment Company, Anhui Railway Development Fund, Anhui Smart Voice and Artificial Intelligence Venture Capital, as well as an investment fund for state-owned companies under government-controlled investment vehicle China Reform Holdings.

Founded in 1999 and headquartered in Hefei, the capital of the eastern Chinese province of Anhui, iFlytek has established itself as the country’s foremost developer of advanced speech recognition, speech evaluation, and natural language processing technologies.

In 2017, the company was handpicked by the Chinese government to spearhead the country’s development in voice intelligence and take the lead in building an “open innovation platform.”

The firm’s AI speech open platform is expected to be the biggest beneficiary of the new funds as iFlytek intends to invest 2.05 billion yuan (US$297 million) in that project, with 1.18 billion yuan (US$171 million) the amount coming from proceeds of the private placement.

IFlytek’s focus on AI technology and its state support have put the company at the forefront of the tech war being waged between the US and China, with Washington deliberating whether to add iFlytek to a blacklist that would bar it from purchasing US components or software without US government approval, Bloomberg reported in May, citing a person familiar with the matter.

“Huawei and iFlytek are very similar in DNA. Both are the kind of companies persistent enough to take 10 years to sharpen one sword,” Hu Yu, who takes the title of rotating president of iFlytek, said at a public event in May.

Huawei Technologies, China’s national telecom champion, was put on the blacklist in May, although US President Donald Trump softened that stance after talks with Chinese President Xi Jinping at the G20 summit in June.

China Asset Management and Harvest Fund Management, the country’s two top mutual funds, also backed the iFlytek offering, according to the filing. The new investors have a one-year lock-up period and cannot sell their shares until July 18 next year.

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Currency converted from Chinese yuan to US dollars: US$1 = 6.88 yuan.