The “first Stock Of Humanoid Robots” Is Coming. Does UBTECH Have Potential?

There's good news for the humanoid robot industry.

On December 1, Shenzhen UBTECH Technology Co., Ltd. (referred to as "UBTECH") passed the hearing and is preparing to be listed on the Hong Kong Stock Exchange.

As early as January this year, UBTECH had submitted its prospectus. This updated prospectus has impacted the capital market, indicating that it is one step closer to becoming the "first humanoid robot stock".

Humanoid robots are not a new concept. It has been 50 years since the first humanoid robot, WABOT-1, was launched. Half a century has passed. With the improvement of technology, humanoid robots have attracted more and more attention from the market and attracted the participation of technology giants.

In October 2022, Tesla's first humanoid robot Optimus made its debut. At that time, Tesla CEO Musk predicted that people would be able to buy an Optimus robot in the next three to five years. The addition of Tesla has ignited enthusiasm in the market, and technology giants such as Amazon and Samsung have also increased their investment in humanoid robots.

On October 23 this year, Amazon tested the humanoid robot "Digit" developed by the startup Agility Robotics in its fulfillment center. Digit was responsible for recycling Amazon's yellow boxes.

The addition of giants has made the humanoid robot industry more lively. If UBTECH is successfully listed this time, it will be an important node for UBTECH and the investors behind it, and it will also provide a reference sample for the humanoid robot industry.

The biggest feature of so-called humanoid robots is that they look like humans. This characteristic determines that humanoid robots need to have extremely high interactive form and extremely strong response speed, which places high demands on the company's technical level and cost investment. Judging from the current performance of UBTECH, the industry is still facing the dilemma of high investment and difficulty in making profits.

As ChatGPT leads the wave of large models, the interactivity and understanding of large model training AI are very suitable for humanoid robots. If we can catch the trend of large models, the humanoid robot industry will also usher in an inflection point.

This is an uneven road, but one with promising prospects. Going public is only the first step for UBTECH. How to maintain an advantage in the competition with giants and find better business models to increase valuation is the key to the next stage of UBTECH.

How does UBTECH make money from humanoid robots?

In 2023, with the advancement of AI technology, people's imagination of humanoid robots is getting bigger and bigger, and the market of humanoid robots has also attracted much attention.

As a leading start-up company, UBTECH has tried to go public twice this year. Now that it has passed the hearing on the Hong Kong stock market, it means that UBTECH is just one step away from going public.

Like all companies, UBTECH needs to accept the test of the capital market before going public. The most important thing is to answer the question of how to make money.

Through the prospectus, UBTECH also put the real operating conditions on the table.

The prospectus shows that from 2020 to the first half of 2023, UBTECH's revenue was 740 million yuan, 817 million yuan, 1.008 billion yuan, and 261 million yuan respectively.

Broken down, UBTECH's revenue comes from enterprise-level intelligent service robots and intelligent service robot solutions, consumer-level robots and other hardware equipment, and the other three parts.

In other words, UBTECH chooses to walk on two legs: To B and To C business.

Among them, educational intelligent robots account for half of Youbi's revenue. Prospectus data shows that between 2020 and the first half of 2023, UBTECH's educational intelligent robot products and solutions revenue accounted for 82.7%, 56.5%, 51.2% and 29% of total revenue respectively.

Wukong educational robot, picture source Youbi official website

However, as UBTECH stated in its prospectus, educational intelligent robot products have a long service life, and educational institutions are unlikely to make repeated purchases in the short term, which is likely to affect UBTECH's revenue.

On this basis, in order to reduce its dependence on the education field, UBTECH has developed revenue channels such as logistics and customization in other industries in recent years.

The revenue share of educational robots has declined year by year from 2020 to 2022, which also proves this point. In contrast, from 2020 to the first half of 2023, the revenue proportions of UBTECH logistics intelligent robots were 1.7%, 23.3%, 26.1%, and 29.4 respectively; the revenue proportions of customized robots in other industries were 5.2%, 11%, and 11%, respectively. 8.2%, 8.5%.

One fact is that although UBTECH has developed two major businesses, To B and To C, and diversified its revenue segments, humanoid robots still face commercialization problems. This is reflected in Ubiselect's two years of losses.

The prospectus shows that between 2020 and the first half of 2023, Youbixuan's losses were 707 million yuan, 917.5 million yuan, 987.4 million yuan and 547.9 million yuan.

Parallel to successive years of losses is the decline in UBTECH's gross profit margin. In the first half of 2020-2023, its gross profit margin was 44.7%, 31.3%, 29.2% and 20.2% respectively.

In this regard, UBTECH's explanation is that "mainly due to the gross profit margin of educational hardware products and services and software, which decreased from 62.3% in the first half of 2022 to 6.6% in the first half of 2023. Due to the sales of Alpha "Due to the decrease in revenue from Mini Wukong (education) and uKIT building robots and building block (education) accessories."

It is worth noting that the current manufacturing cost of the humanoid robot industry is still high.

In the first half of 2020-2023, UBTECH's R&D expenses were 428.8 million yuan, 517.1 million yuan, 428.3 million yuan, and 224.3 million yuan respectively, accounting for 57.9%, 63.3%, 42.3%, and 85.9% of total revenue in the same period.

Judging from key indicators, the R&D costs incurred by UBTECH over the years have not yet improved its profitability. But this is a common problem in the industry, and it takes time and the joint efforts of players.

Standing under the tumult, UBTECH will be re-examined by capital with a more rigorous eye. On the way to the capital market, it is very important to find more commercial solutions. How to find a balance between investment and income will test the future of Youbi.

Is UBTECH a potential stock?

UBTECH first came into public view at the CCTV Spring Festival Gala in 2016. At that time, 540 Alpha 1S robots developed by UBTECH were dancing together on the stage. In addition to dancing, the Alpha 1S robots could also box and perform Tai Chi.

The robot, which has a sense of technology and is "human-like", dazzled the audience and attracted the attention of well-known capital.

Alpha 1S in the 2016 CCTV Spring Festival Gala, picture source Youbi official website

Half a year later, in July 2016, UBTECH received US$100 million in financing from CDH Capital, iFlytek and other companies, with a post-investment valuation of US$1 billion; in May 2018, UBTECH completed a US$820 million C A round of financing, it has received investment from more than 20 institutions including Tencent and Easyhome, and the company's valuation has reached US$5 billion.

Since its establishment in 2012, UBTECH has completed multiple rounds of financing, with participating investment institutions including Tencent, Qiming Chuangming, Industrial and Commercial Bank of China, CDH Investments, iFlytek, Thailand CP, Haier, Telstra, Easyhome, Many well-known enterprises and investment institutions, including Minsheng Securities, CITIC Goldstone, CMBC International, China Guangdong Nuclear Power Corporation, and Songhe Capital.

Tencent Holdings holds 6.48% of UBTECH's shares and is the largest institutional shareholder. Xia Zuoquan, co-founder of BYD and chairman of Zhengxuan Investment, invested in Youbixuan as an angel investor and is still one of the company's major shareholders and directors, holding 5.78% of the shares. He is the largest individual shareholder other than the founder.

It is worth mentioning that Tencent is currently its largest institutional shareholder, holding 6.48% of the shares.

On the one hand, there is a slow business process, and on the other hand, there are high research and development costs. Ubtech must find an investment institution that can continuously inject blood into it. The reason why investment institutions bet on Youbicho is because they see the potential contained in Youbicho.

Before becoming the "first stock of humanoid robots", UBTECH's most imaginative product was the humanoid robot.

In 2016, UBTECH invested in the development of the large-scale humanoid robot Walker. So far, Walker has gone through 4 iterations. The latest prospectus shows that UBTECH has sold 10 Walkers since fiscal 2021.

Walker-X, picture source Youbi official website

According to UBTECH CBO Tan Min shared at the 36 Krypton WISE conference, during the 6 months of working at the China Pavilion at the 2020 Dubai World Expo, Walker provided more than 1,200 hours of service, creating the largest humanoid robot in public service places so far. The record is also the first case of commercial service of humanoid robots.

At the same time, UBTECH is also the first company in the world to reduce the cost of a bipedal life-size humanoid robot to less than $100,000. Fu Chunjiang, vice president of UBTECH Technology, once said that it is expected that around 2025, the cost of humanoid robots can be reduced to US$50,000, or slightly higher.

Such achievements are inseparable from UBTECH's deep research and development efforts over the years. The prospectus shows that as of June 30, 2023, UBTECH's full-stack technology has 1,800 patents related to robots and artificial intelligence, of which more than 380 are overseas patents.

Behind the results is UBTECH's continuous high-intensity investment of real money. The prospectus shows that during the reporting period, UBTECH invested nearly 1.6 billion yuan in total R&D, with average R&D expenses accounting for 56.5% of total revenue.

As UBTECH mentioned in its prospectus, UBTECH R&D focuses on the core technologies of humanoid robots, and has always focused its research and development efforts on advancing the core technologies used in humanoid robots, such as computer vision, voice interaction, servo drives, motion planning and Integration and combination of control and positioning navigation.

However, due to the nascent stage of the humanoid robot industry and limited technological maturity, it is still too early to talk about commercialization. UBTECH also pointed out in its prospectus that UBTECH's advanced level compared with its humanoid counterparts is limited. The global humanoid robot and robotic solutions industry is still in the early stages of technological exploration and development, with limited market participants and large-scale commercialization of humanoid robots yet to be achieved.

At present, in the entire intelligent service robot market, the share of humanoid robots is not high. Frost & Sullivan data shows that the market size of China's humanoid robots and robot solutions is expected to be approximately 9.9 billion yuan in 2028, accounting for approximately 5.4% of the market size of China's intelligent service robots and intelligent service robot solutions industry.

This means there are plenty of opportunities for players on the field. As the first representative to enter the capital market, UBTECH may still focus on humanoid robots in the future, which is also the focus of investors' attention. At the same time, as one of the few humanoid robot companies that has commercialized cases, the development and financial status of Youbi will continue to attract attention.

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Entering 2023, under the east wind of large AI models, the climax of the humanoid robot industry has quietly arrived.

In the past few decades, humanoid robots have rarely made real breakthroughs due to technological constraints. In essence, humanoid robots have relied on algorithms to achieve a certain degree of intelligence in the past, but they have only stayed at the primary level and have stagnated on the road to being infinitely close to "people".

For example, humanoid robots can perform behaviors such as dancing, warehousing and transportation. In terms of the most complex human language logic ability and dialogue understanding ability, it is difficult for humanoid robots in the past to reach the "human-like" level.

This year, large AI models represented by ChatGPT emerged, breathing new life into humanoid robots.

One conceivable scenario is that with the help of generative AI large model technology, humanoid robots may evolve into robots with dialogue understanding capabilities that can imitate human language logic, talk to humans, and empower all walks of life.

In short, the integration of large AI models and humanoid robots may allow humanoid robots to truly "grow a brain" and become robots as smart as humans. This is also seen as one of the future implementation scenarios of large AI models.

From this perspective, it is crucial for humanoid robot companies to be able to catch the fast train of large AI models.

According to Tan Min, CBO of UBTECH, UBTECH is trying to realize the combination of large models + humanoid robots and practice it in different application scenarios. In the future, UBTECH's humanoid robots will focus on three major scenarios: industrial manufacturing, commercial services, and family companionship, redefining workers in the artificial intelligence era and liberating humans from repetitive labor. Commercial service scenarios are the fastest application market for humanoid robots, while home implementation scenarios are the most promising application market for humanoid robots.

According to Wired Insight, UBTECH has launched a "humanoid robot multi-modal embodied intelligence system" based on the transformer framework. UBTECH's R&D team has laid out plans for large models and other related technologies in 2020. As the relevant technology further develops and matures, starting in 2022, the team will begin to invest in the research and development of this intelligent system. At present, many departments, including UBTECH Research Institute and the Humanoid Robot Division, are jointly engaged in the research and development and iteration process of "Humanoid Robot Multi-modal Embodied Intelligent System".

Before AI big models pushed the industry to a climax, the humanoid robot industry had already attracted many technology giants to join.

The most representative one is Tesla. Tesla CEO Musk has repeatedly emphasized that humanoid robots have become Tesla's most important product research and development project, and over time, this business may become more important than electric vehicles.

At Tesla "AI Day" in 2022, Tesla's humanoid robot "Optimus" appeared. It is about 1.72 meters tall, weighs about 57 kilograms, can walk 8 kilometers per hour, and can carry 20 kilograms of items. According to Tesla, Optimus uses Tesla's most advanced AI technologies, such as visual nervous system, self-developed chips and FSD hardware.

Optimus, picture source Tesla official website Weibo

Judging from the development of Optimus, Tesla's goal is to make technological breakthroughs while designing a humanoid robot that can be implemented and mass-produced. Musk said the first version of Optimus is expected to go into production in 2023, with a price tag of around $20,000 and mass production within 3-5 years.

In addition, giants such as Amazon, Dyson, and Xiaomi are also developing humanoid robots in their respective fields to empower all walks of life.

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