Skyworth, Baidu strategic partnership

Skyworth Group and Baidu have established a strategic partnership, whereby Baidu will make a strategic investment in Skyworth’s Internet TV brand, Shenzhen Coocaa Network Technology Company Limited (Coocaa). Baidu’s conversational artificial intelligence (AI) system DuerOS will be fully integrated with Coocaa’s system. The two parties plan to cooperate in the field of AI, to jointly provide consumers with entry-level smart-home products and service.

Baidu’s founder, Chairman and CEO Robin Li, as well as Skyworth Group’s founder Huang Hongsheng and board Chairman Lai Weide attended the signing ceremony.

The partnership focuses on two strategies:

Access to capital

Skyworth Digital Holdings Limited (00751.HK) announced on March 16 that Baidu’s wholly-owned subsidiary Dagze Bairuixiang Venture Investment Management Co plans to invest 1.01 billion yuan (approx. US$159.7 million) in Coocaa, Skyworth’s majority-owned subsidiary, becoming the second largest shareholder of Coocaa as a result of the transaction. According to available data, Coocaa received a strategic investment from Baidu’s iQiyi in September 2016, followed by a similar investment from Tencent in June 2017. Upon completion of the new round of investment from Baidu, Coocaa’s market valuation will be near 10 billion yuan (approx. US$1.6 billion). Currently, Coocaa has more than 28 million active users, with daily active users exceeding 12 million. Coocaa is among the top players in its industry, in terms of both number of users and market valuation.

Business synergy

In terms of product, Skyworth plans to launch the AI TV series, including Q5, Q6 and Q7, which are equipped with both the firm’s proprietary operating system CoocaaOS and Baidu’s conversational AI system DuerOS. And previous smart TV models that are equipped with the Coocaa system will be gradually upgraded to the dual set up later this year as well. The two companies also plan to launch entry-level smart-home products, and integrate them into the control terminal for smart home solutions. In terms of technology, DuerOS will be fully integrated with Coocaa’s system, embedding Baidu’s leading-edge technical capabilities such as face and image recognition into Coocaa’s system. In addition, Baidu and Skyworth plan to jointly research and develop more forward-looking technological solutions on smart home filed.

The final area in which Skyworth and Baidu plan to cooperate is the smart home. The partnership enables perfect integration of both firms’ respective strategies. The tie-up will allow Skyworth to fully enter the field of AI, combining the internet with AI chip technologies to upgrade TV and other products and services that enables Skyworth to achieve its goal of reaching a valuation of 100 billion yuan. As Baidu’s AI capabilities already has access to a broad range of hardware, the deal will facilitate the search engine’s ability to leverage its advantages in software, algorithms, content and service in the home.

The crossover cooperation enables both parties to complement their respective leadership positions in software and hardware.

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