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The potential of the C-side of "AI + education" may be better than that of the B-side
B-side: The space for improving the coverage of education informatization may be relatively limited, and the channel dependence is strong
Educational AI is mainly used in the construction of school teaching activities informatization on the B side, and the relevant funds mainly come from the steadily growing financial budget of education informatization. According to the Ministry of Finance, from 2012 to 2021, the state invested a total of 33.5 trillion yuan in sex education, with an average annual increase of 8%. According to the Ten-Year Development Plan for Education Informatization (2011-2020) issued by the Ministry of Education in June 2011, governments at all levels shall allocate no less than 8% of their financial education funds for education informatization. Based on this, we estimate that the mainland's investment in education informatization will increase from RMB195.9 billion to RMB366.7 billion from 2013 to 2021, with a compound annual growth rate of about 7.9%. Considering that fiscal education expenditure in 2012-2020 accounted for about 80% of the total national education expenditure, we estimate that the overall market size of education informatization in mainland China will increase from 242.9 billion yuan to 453.2 billion yuan in 2013-2021, and will reach 552.4 billion yuan in 2024.
In the era of education informatization 2.0, the room for improvement of B-side coverage is relatively limited. After the infrastructure construction of "school-school communication" and "three links and two platforms" in the era of education informatization 1.0 from 2000 to 2018, most primary and secondary schools in the mainland have basically completed the construction of computer networks and the popularization of teaching hardware. According to iResearch, the average number of multimedia classrooms in mainland schools accounted for 96.1% of the total number of classrooms in 2020, and the future incremental space mainly comes from the improvement of equipment ownership and equipment replacement of existing classrooms.
The B-end business is highly dependent on channels, and the current market presents a highly regional and extremely fragmented competitive pattern. Since the budget allocation and procurement arrangement of education informatization are mainly determined by local education authorities, it is difficult for enterprises to expand customers across regions, so the current competition pattern in the industry is characterized by regional powerhouses and strong but the overall highly scattered. According to our statistics, the total revenue of the education business of the major A-share education informatization companies in 2022 will be about 20 billion yuan, with a total market share of about 4%, and the vast majority of market participants in the industry are small.
C-side: Intelligent hardware represented by AI learning machines may have greater growth potential
Intelligent learning hardware is the main scenario for educational AI landing on the C-end, and the market size is expected to exceed 70 billion yuan in 26 years. The application scenarios of educational AI in C-end focus on the new intelligent learning hardware represented by learning machines, through the intelligent upgrade of traditional learning hardware, the use of big data and AI technology, tailor-made accurate and personalized learning solutions for students, so as to improve the efficiency and experience of students' independent learning. According to Frost & Sullivan's prediction cited in the prospectus of Reading Lang, the total size of the domestic C-end intelligent learning hardware market in 2022 will be about 39.7 billion yuan, of which the learning machine market size will be about 14.8 billion yuan, which is expected to increase to 74.1 billion yuan/26.1 billion yuan in 2026, and the CAGR of 23E-26E is 16.9%/15.2%, respectively.
Learning machine is the most mainstream product type of C-end education intelligent hardware. Learning machine (also known as student tablet) usually covers the whole subject learning content from primary school to junior high school and even high school, with a long user life cycle, high unit price (more than 1,000 yuan), and equipped with relatively rich software and learning resources, users have a strong willingness to pay for value-added services, and are currently the most mainstream education intelligent hardware products. According to iResearch, learning machines account for more than 30% of the overall market share of educational intelligent hardware (as of September 22), and nearly seventy percent of parents who have purchased educational intelligent hardware products choose to buy student tablets, which is much higher than the proportion of parents who choose other categories. We have observed that most traditional education hardware manufacturers and education and training transformation companies have launched AI learning machine products, in addition, some companies also have layouts in the second echelon products (reading pens, children's smart watches, scanning pens, smart work lights).
Education enterprises accelerate the deployment of vertical AIGC applications, or take the lead in applying them to intelligent hardware such as learning machines. Recently, many education companies such as Good Future, Youdao, and iFLYTEK have successively revealed the latest progress in the application of AIGC technology:
(1) Good Future: On May 5, the official public account of Good Future posted that Xueersi is conducting the research and development of the self-developed mathematical large model, named MathGPT, for global mathematics enthusiasts and scientific research institutions, with the problem solving and problem solving algorithms in the field of mathematics as the core, and has achieved phased results, and will launch product-level applications based on the self-developed large model within this year. On May 11, the "AI Assistant" internal test was launched on the learning machine, covering composition assistant, speaking assistant, reading assistant, mathematics assistant, etc.
(2) Youdao: On May 5, Youdao's official WeChat video account released a spoiler video of an AI oral teacher developed based on the self-developed "Ziyue" large model; On May 17, the company said at the shareholders' meeting that Youdao has many years of accumulation in AI technology, and has adjusted to the current mainstream Transformer architecture in the three main technical routes of image processing, speech processing and language processing, and is expected to explore the application of large model technology in six subdivided learning scenarios in the future, including oral coaching, composition and reading coaching, Q&A of practice problems in various subjects, Q&A of programming learning, dialogue assistant, and knowledge work assistant.
(3) iFLYTEK: On May 6, iFLYTEK released the Spark cognitive big model, which has been applied to its T20 series AI learning machine, which can provide three major services: Chinese and English composition correction, mathematics interactive supplement, and English population dialogue.
We believe that C-end intelligent learning hardware is oriented to a wide audience, has high interaction frequency, large amount of data, and the product technical threshold and AI accuracy requirements are lower than the standards of large-scale industrial-grade products, so AIGC technology is relatively easy to land on hardware products such as learning machines. From the perspective of the three commercialization stages of technology-product-order, iFLYTEK, Good Future and Youdao have actual orders for C-end intelligent education hardware products, and the order volume has maintained rapid growth: iFLYTEK's 22-year learning machine revenue increased by 53% year-on-year, and the company expects faster growth in 23 years; Since its launch in February, Hao Future's learning machine has sold more than 10,000 per month; Youdao's 22-year smart hardware business revenue increased by 28% year-on-year, dictionary pens occupied the first place in sales of Tmall and JD.com's "Double 11" category, and the AI learning machine X10 launched in October 22 sold more than 10,000 units in the first month, and is expected to further climb with channel expansion in the future.
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