ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintTitle ChevronIcon Twitter
China tech

Earnings hit stings China's iFlytek in wake of US blacklisting

Voice recognition specialist first to reveal cost of sanctions for alleged abuses

TOKYO -- Chinese artificial intelligence powerhouse iFlytek has revealed a $13 million hit to earnings after it was sanctioned by the U.S. over its treatment of Uighur Muslims and other ethnic minorities.

The Shenzhen-listed company disclosed the "expense in dealing with the U.S. entity list" on Tuesday night for the first time since it was blacklisted by Washington last October.

According to the company's 2019 full year and 2020 first quarter earnings filings -- disclosed to the stock exchange simultaneously -- the full expense added up to 89. 538 million yuan ($12.7 million) and was listed under non-recurring losses.

The company said it had "proactively responded and made adjustments," in order to comply with relevant disclosure guidelines set by local regulators in 2008, and to properly reveal the cost of being directly accused by Washington.

Backed by China Mobile, iFlytek has not responded questions regarding its alleged rights abuses, which were raised as early as 2017 by Human Rights Watch.

In an open letter addressed to Chairman Liu Qingfeng, the New York-based non-government organisation questioned whether the company had been supplying voiceprint technology to China's Ministry of Public Security and its provincial counterparts.

The U.S. Commerce Department placed 28 Chinese public security bureaus and companies -- including Anhui-based iFlytek and seven other companies -- on a U.S. trade blacklist in October over Beijing's treatment of Uighur Muslims and other Muslim ethnic minorities in the Xinjiang Uighur Autonomous Region.

Being added to the so-called "Entity List" bars companies or other entities from buying parts and components from U.S. companies without U.S. government approval.

Other companies added to the list include some of China's leading artificial intelligence firms such as SenseTime Group, and Megvii Technology, which is backed by Alibaba Group Holding, as well as Hikvision, Hytera Communications, Dahua Technology and Xiamen Meiya Pico Information.

iFlytek is the only company so far to reveal the cost of being added to the Commerce Department list which also includes telecommunications equipment manufacturer ZTE and Huawei Technologies.

While iFlytek did not itemise the various costs of being added to the blacklist, the company reported a 27% rise in revenue in 2019 compared to the year before, while net profit jumped by 51% to 819.17 million yuan.

However, for the three months to the end of March, revenue slid by 28% year-on-year to 1.408 billion yuan, with the company reporting a net loss of 131.44 million yuan. The company recorded a net profit of 101.88 million yuan the year before.

In a brief statement, iFlytek attributed its first quarter loss to the coronavirus pandemic.

"The novel coronavirus outbreak had postponed the speed of execution, delivery, and checking upon delivery on projects during the first quarter," the company said.

In addition to the decline in revenues, the company said its bottom line was further affected by various voluntary offerings to help fight COVID-19, such as creating AI platforms for online learning for students as well for medical purposes without charge.

With U.S. sanctions likely to remain in place for the time being, iFlytek vowed to "bear the weight of the heavy national responsibility as the open platforms of smart voice and artificial intelligence, and also bear the weight as the only national key laboratory on cognition intelligence" with regard to its core research and development plans for this year.

The company also stressed that "all the core technology came from our own research and development, and we possess our own intellectual properties."

iFlytek said its technology was not "controlled by anyone," and added that after being placed on the entity list it had "rapidly switched" to a non-American supply chain sourced mainly from domestic suppliers.

"The trade dispute will further stimulate China to speed up its steps on independent innovations," the company said.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more