RECAP Conference Sessions and Industry Movers: Key Takeaways

May 30, 2015

• The car Is the largest mobile device • Intel is as much a communications company as it is a computing company • IBM wants to be the architect of the IoT data infrastructure • IoT issues and bottlenecks include security and data scientists • Companies need to be on Twitter to connect with the digital audience • In the future, humane robots will take over our daily tasks • The world of retail will shift to a pay-per-use business model • Indiegogo is a great, global go-to-market solution for “makers” (do-it-yourselfers who design and build their own technologies and products)

DEBORAH WEINSWIG Executive Director—Head of Global Retail & Technology Fung Business Intelligence Centre [email protected] New York: 646.839.7017

May 30, 2015

It’s a Wrap We attended the inaugural CES Asia 2015 event, which took place in Shanghai, China, from May 25 to May 27. CES Asia focused on three major themes: connectivity, innovation and the Internet of Things (IoT). More than 200 exhibitors from 16 countries represented 14 product categories —3-D printing, automotive, content and online, green technologies, health, home entertainment, lifestyle, mobile, robotics, smart home, sports and fitness, video/4K Ultra HD, video gaming and wearables. Over the three days, more than 20,000 attendees and 1,200 members of the media attended the event, which showcased some of the latest innovations and technologies entering the Asian marketplace. The conference also included a packed schedule of speakers from leading Chinese and global brands in consumer electronics, data analytics, advertising and technology.

The industry leaders and technologists in attendance shared views that were overwhelmingly optimistic about a future in which connected devices will make our lives easier. The convergence of the cloud, IoT (sensing devices) and Big Data analytics will allow companies to provide customized services based on a customer’s profile and context. We’ll have connected homes—powered by artificial intelligence (AI)—that turn on the AC just in time to accommodate our arrival back from work and smart cars that will turn commuting time into free time. Even though both of these technology areas have yet to face the user adoption test, the prevailing opinion is that we’re not too far away from the connected future. Some of the devices showcased at CES Asia 2015 proved this point. At the end of this report, we highlight some of the companies whose exhibition booths we visited during the show, as well as the devices that won the show’s innovation awards. Conference Sessions and Industry Movers: Key Takeaways • The car Is the largest mobile device • Intel is as much a communications company as it is a computing company • IBM wants to be the architect of the IoT data infrastructure • IoT issues and bottlenecks include security and data scientists • Companies need to be on Twitter to connect with the digital audience • In the future, humane robots will take over our daily tasks • The world of retail will shift to a pay-per-use business model • Indiegogo is a great, global go-to-market solution for “makers” (do-it-yourselfers who design and build their own technologies and products)

May 30, 2015

The Car Is the Largest Mobile Device One thing that stands out when looking at the exhibitor list and keynote lineup of CES Asia is the considerable focus on car companies. Audi, Cadillac, Ford, Lincoln, Mercedes-Benz and Volkswagen all showcased technological innovations at the event, while the pre-event opening keynote was delivered by Rupert Stadler, CEO of Audi. Stadler’s presentation clearly explained why the conference has such a heavy focus on cars. He said that we’ll live in a connected world and that it’s up to us to decide whether we want to get changed by it or drive the change ourselves. He then revealed that in 2017, Audi will release the first car available to the public with piloted driving, the Audi A8. That means we’re only two years away from seeing self-driving cars on the roads and that cars will become a lot more than just transportation vehicles. As Stadler said, “The car will be the largest mobile device.”

Intel Is as Much a Communications Company as It Is a Computing Company Following Stadler’s opening keynote, Intel’s Kirk Skaugen showcased some of the company’s technology that will serve as the backbone of the IoT world. According to Skaugen, by 2020 there will be 50 billion connected devices and more data than there are stars in the Milky Way. Three main drivers underpin this trend: • Further advances in personal computing, which will make computing power faster, cheaper and smaller; • The need for new experiences, such as immersive, 360-degree video in 4K, wireless charging and wireless display, and computing without passwords; and • The proliferation of sensory wearable devices that connect and compute. Skaugen showcased multiple Intel-powered devices that illustrate these drivers in action. For example, in the personal computing category, he displayed an all-in-one device (TV, laptop, tablet) and a 2-in-1 device (laptop, tablet) that incorporate substantial computing power with slick design. He also showed multiple examples of technologies that provide new user experiences, including a magnetic resonance wireless charging device and an eye recognition technology developed by Intel and EyeSmart. In terms of Intel-powered wearables, Skaugen highlighted the Curie and the Edison, tiny computers that can go into practically any wearable device. The Edison-powered intelligent Spider Dress lifts its mechanical limbs up to an attack position if someone approaches the wearer too aggressively. The second keynote of the first day was delivered by IBM’s D.C. Chien and Scott Burnett. The presentation served to fill in the remaining part of the IoT picture that was left blank after Intel’s keynote. In the connected world, data will be captured at the device level from devices with significant sensor and computing capability. Then, the data will be uploaded to the cloud, where it will be processed by Big Data analytics in order to be turned into actionable insights that enhance the user experience.

May 30, 2015

Naturally, Burnett focused on the data analytics component and highlighted IBM’s capabilities in the field. He also discussed a study that IBM conducted on 1,000 businesses. The study defines Generation D enterprises as companies that are data rich and driven by predictive/prescriptive analytics. The study predicts that Generation D companies are the ones that will be winning in tomorrow’s market.

Source: IBM

IoT Issues and Bottlenecks: Security and Data Scientists Deborah Kan of The Wall Street Journal moderated a panel discussion on “The Impact of the Internet of Things,” featuring experts from IBM and Accenture and input from WiWide, a Chinese company that provides wireless Internet solutions. Here are some of the key points the panel made: • Every major customer of Accenture is exploring IoT. • Every CEO must have an IoT strategy and every industry will need one. • IoT will optimize after-sale services; it will allow consumer electronics companies to really understand how appliances are used by each customer. • Security is the one issue everyone is nervous about. • The bottleneck for the technology is going to be the people analyzing the data. • The real winner in the world of IoT is the consumer.

May 30, 2015

Companies Need to Be on Twitter to Connect with the Digital Audience The first Industry Mover presentation on the second day of CES Asia was from Twitter’s VP of Asia Pacific, Latin America & Emerging Markets, Shailesh Rao. Rao opened an engaging talk by highlighting China’s increasing relevance in the digital world. He pointed out that almost half of the world’s Internet users are located in China and that the country accounts for 37% of social media users globally. Furthermore, he noted that these numbers are expected to increase as China’s economy and middle class continue to expand at a rapid pace. Rao then described the new digital world and how governments and companies can use Twitter as a platform to connect with their audiences in a new way. He elaborated that digital messaging on Twitter has to be: • Relevant—live communication of something that’s important in this moment • Public—communication that is conversational in nature and open to anyone to respond to • Creative—communication that is engaging When it possesses these three characteristics, communication on Twitter becomes the digital equivalent of word-of-mouth advertising, as users retweet to their networks content they like, approve of, or find interesting and relevant. Content on Twitter is also global in nature, which is why companies can use the platform to connect with people beyond the geographies where they’re doing business. Rao pointed out that companies can further leverage Twitter to understand what customers want and need in real time. As evidence, he stated that last year there were 53.9 million tweets starting with the phrase “I want” or “I need,” an indication of consumers’ unmet desires and preferences. In the Future, Humane Robots Will Take over Our Daily Tasks The second event we attended that day was a panel discussion moderated by JD.com’s Chief Technical Advisor, Dennis Weng. The panel brought together executives from Microsoft, Intel, iFLYTEK and EyeSmart, and investors from venture capital funds active in China, who shared their perspectives on the smart home trend and the future of the IoT. We’ve broken down our insights from the discussion into three categories:

The Smart Home Today • Smart home products are entering a stable development phase. • AI is essential to the smart home, and we’re looking at a future where one AI-powered companion will manage all the devices in the home. • Haier will integrate Microsoft’s AI engine, Xiaobing, with its consumer devices by the end of this year. • Successful smart home devices that hit the market soon will be functional and aesthetically pleasing, and have a good user interface. • Security remains the primary concern for users of smart home technologies. • There is a need for standardization, as there is no common standard for connecting devices; manufacturers use different platforms.

May 30, 2015

The Smart Home in the Future • The focus is on developing human AI technology based on new breakthroughs in understanding the human brain’s function. • The next step is developing qualitative intelligence systems that function like neurosystems: devices will have multiple connectivity versus the single connectivity they have today. • We’re looking at moving into an “easy living” economy, as devices and computers will take over many of our tasks. For example, the smart home will know a person is driving home based on data from his wearable device, and it will unlock the front door, open the garage and turn on the AC just in time to accommodate his arrival. The Smart Home from an Investor Perspective • The smart home trend has strengthened over the past three years. • Many innovations in the smart home area are coming from China. • It’s unclear which products will enjoy the fastest adoption. • The present investment strategy focuses on products that have cool designs and solve fundamental consumer needs in a simplistic way. The World of Retail Will Shift to a Pay-per-Use Business Model We also attended a keynote delivered by Sun Weimin from the Suning Commerce Group. Weimin discussed market trends for connected home devices and shared his perspective on the impact of the IoT on the traditional retail business model. First, he reiterated the common thinking shared by other industry leaders: the future lies in the convergence of Internet-based services (the cloud), IoT (sensing devices) and Big Data analytics, which will allow companies to provide customized services based on a customer’s profile and context. Second, he pointed out that this will lead to a change in the philosophy behind the traditional consumption model. Consumers will no longer pay for devices, but rather for the utility they receive from them. An example he provided was that the customer will no longer want an AC; rather, she’ll want hot or cold air based on the environment she’s in. This will shift the business model to a pay- for-performance or pay-for-use model, even for traditional device manufacturers. Lastly, Weimin said that as smart devices proliferate, there will be a complete blending of the online and offline channels and that consumers will want companies to deliver on their expectations at all times. Indiegogo Is a Great Go-to-Market Solution for Makers Globally During the final day of CES Asia, the program had a substantial component on the China “maker movement,” including a presentation from crowdfunding platform Indiegogo. The platform is well positioned to serve as a go-to-market tool for makers (do-it-yourselfers who design and make their own products) who have innovative ideas. Funding aside, on Indiegogo, makers can get real-time feedback from the market to validate their concepts. They can also sell directly to customers across geographies, which is valuable for small businesses with limited resources. The value proposition of Indiegogo is built on the premise that, sometimes, there’s an idea that people all over the world can be passionate about, such as the Flow series of innovative beehives, which raised over $12 million on the platform. Large companies have also made use of the platform. Philips launched its Innovation Fellows Competition on Indiegogo in 2013. The competition’s goal is to crowdsource the next meaningful innovation in health and well-being, which Philips can then bring to market. The presentation served as an apt conclusion for CES Asia, as it offered a tool that makers and businesses can use to experiment with innovation. The Show Floor: Innovators and Followers During CES Asia 2015, we spent some time talking with companies exhibiting on the floor. With 200+ exhibitors, there was plenty to see, even though, in our opinion, we did not come across that many truly innovative concepts coming from companies in the region. That’s an area we think CES Asia can build on in the future. Here are some companies whose exhibits we visited:

May 30, 2015

Moley Robotics The Moley robotic kitchen, “which features a dexterous robot integrated into a kitchen that cooks with the skill and flair of a master chef” won the Best of the Best award at CES Asia. The robotic kitchen made its public debut at the Shanghai event and gathered large audiences through the run of the show.

Neuro:on Neuro:on is an intelligent sleep mask that is supposed to be the ultimate solution for jet lag. The product works by measuring sleep waves, eye movement, muscle tension, heart rate and blood saturation. The mask then analyzes this data to wake up the user at the ultimate time, resulting in increased feelings of restedness and energy through the day. Neuro:on will be released in the third quarter of 2015 and has already raised over $430,000 on Kickstarter. The team developing the product is based in Poland.

Dlodlo Glass Dlodlo Technologies is a Shenzhen-based company that has developed the Dlodlo Glass virtual reality (VR) glasses. The company claims these are the lightest and thinnest VR glasses in the world, weighing only 120 grams (four times lighter than other VR products). The glasses can display 2K HD video, creating a 360-degree immersive experience.

Goggle 2 by Walkera The Goggle 2 glasses by Walkera function as a video receiver that allows users to consume video content in an immersive way. Walkera showcased the product as a way to connect to the video generated by the camera of a flying drone. The glasses allow the wearer to see what the drone sees, which makes it easier and cooler to fly a drone.

Tablift This is a simple device, a tablet stand that allows people to use a tablet hands-free on any surface. The stand works with any tablet on the market and folds up into a compact size when not in use. Even though this has no digital component, we think it’s a cool concept, and it costs only $59.95.

Emfit QS The Emfit QS is a contact-less sleep-tracking solution for athletes. The device has a sensor that’s placed under one’s mattress that detects heart-rate variability and REM/deep sleep cycles during sleep. The data is transmitted to an app that displays information on one’s overall health and sleeping patterns. This information is essential to athletes who aim to optimize recovery time after training sessions and competitions in order to improve performance.

May 30, 2015

iCareTech C+ The C+ band is a wearable tracker produced by Chengdu iCareTech Healthcare. Beyond more traditional fitness parameters, such as calorie consumption, steps taken and walking distance, the band measures heart rate, oxygen saturation levels and body temperature. This makes it suitable for medical use, and the exhibitor staff said the device is currently going through regulatory approval as a medical device.

The ONE Smart Piano

The ONE Smart Piano is a California-based startup that has built a piano which teaches users how to play. It combines a full-size piano with LED lights that light the keys one needs to play and a mobile app, which displays the song that is played. The showroom floor at CES Asia featured a few devices, and this one’s user experience seems intuitive and fun at the same time.

sellshou sellshou, the flagship brand of Baokai Technology, is based in Guangzhao and offers retail display solutions that enhance the customer experience. These include multitouch display screens that show additional product information and relevant advertising content, and smart shopping windows that display products and ads based on a customer’s gender, age and mood.

Perffun Wearable Thermometers Perffun is a Shanghai-based company offering intelligent thermometers for babies and adults. Two products on display at this year’s CES Asia were the iCcur baby wearable thermometer featuring a wearable sensor and an iOS app and the My Close Bestie basal body thermometer for women.

May 30, 2015

CES Asia 2015: Innovation Awards Following its tradition at the CES International conference, the CES organization presented innovation awards to the exhibitors at CES Asia. The Best of CES Asia Awards, presented by ZOL, focused on breakthrough products and technologies that encourage innovation and evolution across the product categories featured at the show. Here are the products that won the awards: • Best Automotive Electronics Product: Cadillac OnStar App • Best 3-D Printing Product: Tinkerine Ditto Pro 3-D Printer • Best Audio Product: AKG N90Q • Best Software/App: JIDE REMIX OS • Best Mobile Device: Garmin VIRB XE Action Camera • Best TV Product: Hisense XT910 ULED Curved TV • Best Smart Home Product: JD We Lian Smart Home Platform • Best of the Best: Moley Robotics Smart Kitchen Robot

Conclusion It was exciting to attend the first CES conference in Asia. We saw great presentations during the conference sessions and innovative concepts on the show floor. The attendance levels seemed high throughout the three-day run of the event, which indicates strong interest from consumers in the region. We believe the show will only grow in size and importance in the future as local companies become more innovative and global companies start looking more closely at the Chinese consumer electronics market.

May 30, 2015

Deborah Weinswig, CPA Executive Director—Head of Global Retail & Technology Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: +852 6119 1779 [email protected]

Cam Bolden [email protected]

Marie Driscoll, CFA [email protected]

John Harmon, CFA [email protected]

Aragorn Ho [email protected]

John Mercer [email protected]

Charlie Poon [email protected]

Kiril Popov [email protected]

Stephanie Reilly [email protected]

Lan Rosengard [email protected]

Jing Wang [email protected]