By Sherry Qin
China's iFlytek developed one of the country's first homegrown artificial-intelligence models despite restricted access to foreign technology. Now it needs to figure out how to make money from it.
The Hefei-based company backed by Chinese tech giant Huawei is bumping up against a problem faced by others in the industry: how to monetize its AI to recoup the massive investment needed to stay in the game as competition intensifies.
Concerns about stretched valuations in the AI sector and a lack of returns are starting to weigh on investors' minds, leading to a market selloff earlier this week in the U.S. that spilled over into Asia.
In the first half of the year, iFlytek's R&D spending led to heavy losses. Though it swung to profit in the third quarter, that was largely due to a Chinese government subsidy.
The company has rolled out enterprise AI products and bagged lucrative government contracts, but its consumer tech that could be the real cash cow, a top executive says.
State contracts have long payment cycles that weigh on cashflow, and while many businesses are eager to adopt AI, they are struggling to figure out how.
The consumer segment doesn't have that problem, said Kun Zhong, vice president overseeing AI integration and consumer tech hardware at iFlytek.
The monetization issue isn't unique to iFlytek.
A report by DigitalRoute found that while AI adoption is surging, only 29% of the firms surveyed have a working monetization model in place.
"All the AI model providers are unprofitable, whether it's OpenAI or Google's Gemini," Zhong said in a recent interview.
iFlytek's consumer hardware, like AI tablets and learning machines, could offer a faster way for it to book profit from its AI models, he said.
The consumer segment was the company's top cashflow generator in the first half, delivering a 38% rise in revenue.
AI-powered consumer hardware is ready to take off, said Zhong, expecting global sales of iFlytek's AI notebooks to hit the 1-million-unit mark soon. Its AI educational tablets have an addressable market of 200 million students in China.
While the bulk are sold in China, Zhong expects "exponential" growth in notebook sales overseas.
The latest edition of the notebooks iFlytek sells abroad come equipped with a new model powered by OpenAI's ChatGPT 5. The ones it markets in China have the AI model iFlytek made using chips supplied by Huawei, with which it has a close partnership.
iFlytek has said that its large-language model is on par with those built by DeepSeek--the startup that sparked China's AI gold rush--and OpenAI.
Shenzhen-listed iFlytek expects that self-reliance to give it an edge over its peers, especially amid uncertainty around access to foreign-made tech.
According to Zhong, iFlytek will deploy Huawei's next-generation chips to train and inference its AI model to further improve it.
Huawei in September unveiled the roadmap for its new generation of AI chips, seen as a potential challenger to Nvidia's offerings in China.
Write to Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
November 05, 2025 22:35 ET (03:35 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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