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Chen Wei: Technological Innovation Based on the FIT Model via 5G And IoT


A few days ago, Chen Wei, Chairman of Guomai Technology, spoke with Guosheng Securities. In his speech, Chen shared the explorations and developments of Guomai in the past 20 years of technological innovation, centering the theme around technological innovation based on the FIT model via 5G and IoT.

Guomai Technology is a low-profile and pragmatic company, and for that reason we rarely make public appearances. This lends itself to unique advantages and disadvantages. For instance of the disadvantages, some people still believe Guomai is solely a provider of network maintenance and optimization services. My hope is that by the end of this speech, the public will have a more thorough understanding of Guomai Technology. 

How would we even attempt to encompass Guomai’s key technology in one sentence? At our core, we are a data analysis driven technological innovation enterprise, yet we leverage the advantages of data analysis in combination with cutting-edge technology in unique specific fields to create more data points and consequentially business opportunities.

1. The course of development of Guomai’s technology

Guomai developed through a gradual integration of front-end technologies (IT, CT, ICT) and back-end technology (DAT).

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Guomai Science Park

From the 1990s to the 2000s, telecommunication sector have many different types of systems. Guomai were able to manage different devices, manufactured by companies such as Lucent, Nortel and Motorola, thus enabling unified management as well as smooth and stable communication between different devices through technological measures. It was a process of integrating data analysis technology (DAT), information technology (IT) and communications technology (CT) that ultimately resulted in information and communications technology (ICT). Guomai has consequentially become the first listed company in China’s A share market that specialized in communication services.

In 2009, we tried integrating ICT and industry technology (ITind), creating Internet of Things (IoT). We started by exploring the automobile industry. Judging by the technology threshold, the aerospace industry and military industry was the most difficult to enter, and auto came second. Further down the list are industrial products and consumer products. If we could do well in the auto industry, we would achieve the same success with consumer products. In retrospect, our logic was sound. During this period, we established Flaircomm Microelectronics, Inc., which is now a leading company in the Vehicle to Everything (V2X) field.

In 2016, there was a marked improvement in our algorithm and data analysis abilities. A group of mathematicians and scientists joined us, and provided lots of help in both our modeling work and our integration of IT with biotechnology (BT). In doing so, we made great progress on the data analysis technology (DAT) front.

In 2018, on the basis of previous achievements, we further integrated IoT and DAT to create the artificial intelligence application technology which were then applied to the healthcare field. Why do we reiterate the term “application technology”? We’ve never believed in introducing new jargon so as to sound overly pretentious without actually delivering real results. What we want is to utilize these technologies to solve critical problems for our society.

The main reason why Guomai has continually succeeded in upgrading and integrating technologies is that a university, Fuzhou Institute of Technology (FIT), is behind it. Guomai holds 100% of the shares of FIT, so it is able to pair each of its projects and each industry with each FIT department for integration, thereby ensuring the sustainability of research investments and industry development simultaneously.

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Main gate of FIT

Some might ask, why would you work on these technologies if your focus is on 5G and IoT? In fact, the application scenarios of 5G and IoT are fragmented, and the current expected demand for them is not clear. Hence, we have to deeply integrate them with traditional industries. This is not a task that can be completed with a simple communication module or sensor. This requires a system. We need these technologies to attain fullest integration.

2. The development strategy of Guomai

When it comes to company business, Guomai has always stressed three sequential steps: subtraction, addition, and then multiplication. The company has steadily placed its focus on 5G and IoT since 2018. Last year, we completed a painful yet meaningful task. We got rid of all the minor, low-profit and unpromising business. It was difficult, but the result was worth the efforts. The gross margin has increased from 20%+ to 58%. Projects requiring too much money were cut off, enhancing the managing efficiency and lowering our financial risks. The number of our industry-related papers, patents and projects increased to about 300 as more attention was given to scientific research. Speaking from the perspective of a scholar, I think it is a remarkable number for a private enterprise. 

In 2019, we will further develop our major business, 5G, especially in our “traditional services” - communications planning and design, which is currently one of the most lucrative business in telecommunications sector with a gross margin of as high as 90%. Moreover, we plan to boost our revenue and generate more profit by integrating IoT with conventional industries for more diversified IoT application scenarios. In doing so, the future income of Guomai will not solely depend on telecom carriers. Guomai will also expand its scope of business from specialized technical services to a much broader spectrum of public services.

What model will we use to operate the complex system of future IoT?

Each of Guomai’s projects corresponds with a department of FIT. A few examples are as follows. The communication engineering department pairs with our communications planning and design institute, IoT department with Flaircomm Microelectronics, and computational biology department with Guomai Biotech. Such a model provides our company with continual research and development (R&D) and talent support. When new technology spreads to traditional sectors, relevant academic departments must be established in correspondence so as to attain true integration. For instance, when we applied IoT to the elderly care field, the Department of Nursing and Rehabilitation was chosen to match up with the field. The establishment of this department not only provides research backing for our proposed case solutions, but also supplies personnel support to the industry.

Through such pairings, we can truly extend our technologies and solutions to multiple areas while maintaining our unique and competitive edges. 

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FIT Library

3. Guomai’s key advantages

What are these advantages?

(1)Talent advantage provided by the FIT model

Guomai boasts a distinctive model, the “engineers + lecturers + technical shareholders” model. The company looks for industry leaders from around the world and recruits them. We are aware that a high salary is not all that’s needed to recruit scholars and researchers. Therefore, we invest in state of the art research facilities while also providing our researchers with precise industry research guidance as well as other incentives for onboarding. On top of that, our researchers are able to contribute the most relevant use cases to our academic curriculum design, thereby conveniently fostering a talented pool of individuals who can ultimately contribute back to our system of innovation. Such a model can attract, cultivate and keep talents, while also providing them with appropriate opportunities.

Guomai boasts a distinctive model, the “engineers + lecturers + technical shareholders” model. The company looks for industry leaders from around the world and recruits them. We are aware that a high salary is not all that’s needed to recruit scholars and researchers. Therefore, we invest in state of the art research facilities while also providing our researchers with precise industry research guidance as well as other incentives for onboarding. On top of that, our researchers are able to contribute the most relevant use cases to our academic curriculum design, thereby conveniently fostering a talented pool of individuals who can ultimately contribute back to our system of innovation. Such a model can attract, cultivate and keep talents, while also providing them with appropriate opportunities.

What help does this model bring when it comes to our financial report forms?

Take, for example, 5G planning and design, which is an industry with periodic features. When the industry is experiencing a downswing, some design institutes will resort to downsizing the staff. When things are on the upswing, they hire people back. Hence, flexibility in this industry is limited to some extent. 

What would Guomai do to cope with the situation? When there is a downturn, our engineers can work at FIT, designing curriculum and teaching students. When they are needed in our company, they will take up their jobs. As a result, our business model has greater flexibility in face of industry fluctuations. Our labs in FIT have the same 4G equipment as the equipment you can find in everyday life. The students come into contact with the newest real equipment, enabling them to jump straight into their senior year internships. This is the reason why Guomai has always maintained its gross margin at around 90%, the highest in the industry. As a great co-benefit, these high margins a healthy insurance for our employees against the fear of being made redundant. It’s fair to say that Guomai is the Whampoa Military Academy (a very famous and significant military academy in 20thcentury China, which fostered many military commanders and important political figures at that time) in the field of communications planning and design. While we many of our engineers have been poached in the past, we are not intimidated. We have built up a whole pool of talented students for our business. In conjunction with the certainty that we provide our senior engineers with some of the best benefits in the field, we’re confident in our future success. 

Most importantly, our model can be replicated in our targeted companies within a short time. Take Heilongjiang Communications Planning and Design Institute as an example. Guomai acquired the institute and applied this current model, consequentially turning the institute around and doubling its gross profits. This year we aim to strengthen our business in this field. 

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textbooks that Guomai helped edit

(2)R&D edge provided by the FIT model

The cooperation between enterprises and schools in China hasn’t been done very well. One of the reasons is that institutions of higher learning don’t know how to cooperate with companies. These institutions will achieve higher efficiency if their basic research direction can be guided by enterprises. At the same time, they can make up for the weakness of enterprises. It’s difficult for a single company to make breakthroughs in a technical field, but universities and colleges can score great success in many fields. This cooperation pattern is suited for IoT, as the IoT application scenarios are fragmented and require specially designated module, equipment and solutions. To build various IoT application scenarios is extremely difficult for a company. However, it’s doable with the help of a university.

The fundamental reason for the difficulty of school-enterprise cooperation in China is the lack of clarity on intellectual property rights. Most intellectual properties created by the joint effort of universities and enterprises are co-owned by professors, universities, and enterprises, so the intellectual property dispute between them can be complicated. However, Guomai doesn’t need to worry about such disputes, because it fully owns FIT. This is an upgraded version of “Silicon Valley + Stanford” model. 

What are the results of the model?

So far, FIT has built 64 industry-education integration labs, including quite a few provincial key labs and R&D platforms. From optical communication, data communication, to 4G and 5G wireless communication, all major communication devices in the world can be found in our labs. If you wish to study the history of communication, you are welcome to visit FIT where devices from different stages sit. Another example is our two vehicle-regulation-level production lines at FIT. In the daytime, the two lines make modules for domestic automobile factories, and are used by students and teachers to carry out experiments at night. This is true industry-education integration.

In 2018, FIT published 79 papers that are relevant to Guomai’s business, an increase of 84% year on year, and carried out 76 projects, an increase of 29% year on year.

Flaircomm Microelectronics, our subsidiary, gradually upgraded its vehicle-regulation-level communication modules priced at 30-200 yuan to Electronic Control Unit (ECU) products (TBOX, BT PEPS, and so forth) priced at 500-2000 yuan. This year, Flaircomm launched its Domain Control Unit whose price rose to more than 5000 yuan. While many enterprises are just now beginning to launch their TBOX products, as lead experts in the field, we were able to launch our first product way back in 2009. Our next step is to develop vehicle computers which will bring up the product value to over 10,000 yuan.

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T-BOX

Flaircomm Microelectronics is the industry leader in making vehicle-regulation-level WIFI & Bluetooth modules. Its T-BOX sales top all other competitors. It’s the first company in China that introduced 4G TCU and used it in China’s first internet car. Last year, it finished the world’s biggest Firmware Over-the-Air (FOTA). In 2019, it launched the first IoT intelligent system based on domain architecture. It is now in preparation for its public listing on the Science and Technology Innovation Board of China.

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Another iconic project of ours is Guomai Biotech. China’s R&D investment in 2017 was 1760 billion yuan, equivalently 60% of the R&D investments in US during the same period. The money spent on basic and applied researches respectively accounts for 5.5% and 10.55% of the total investment. The remaining 84% is used in development, illustrating that the bulk of China’s R&D investments goes to user experience improvement and efficiency innovation. To transition from technological innovation to advanced technological innovation, the research-development ratio must be changed.

Guomai Biotech is the first project for which Guomai has shifted its focus to basic researches and increased the research investment while lowering the development investment. This is a very successful case. By making technological breakthroughs, the cost of building a database is lowered, rendering it possible to research on hard-to-treat diseases.

Regional governments now have collected a large quantity of residents’ phenotype data (personal features, medical cases, and so on), which haven’t been properly collected for a long time. Though governments hope to carry out their own public health plans to fix problems like regional hard-to-treat diseases, progress is undeniably slow.

We are now in cooperation with a municipal government and will build a genotype database of millions of people using the phenotype database. Then we will build a database of regionally hard-to-treat disease through correlation analysis of phenotype and genotype data. After that, we will be able to help solve public medical problems by precisely predicting, preventing and treating diseases.

A phenotype database plus a genotype database for just one city has hopes of being bigger than the world’s current largest database. Promoting this model to other places would spur lots of new applications and solutions. One can only imagine how bright the development prospect will be in the future.

The industry-education integration model enables us to continually upgrade our industry and products, spurring the birth of small but excellent companies like Flaircomm Microelectronics and Guomai Biotech, which provide us with endless technological and model innovation.

(3)Application scenario advantageprovided by the FIT model

The application of technology is human-oriented. FIT, which provides services like IoT and healthcare with an experimental application scenario of nearly 10,000 people, will at once help the company to build a fast and efficient feedback system to optimize current solutions, and also yield a mature application model for others to duplicate and promote.

One example of the application scenarios is our University-supported Elderly Care with Artificial Intelligence (AI) project launched in February, 2019. We made full use of Guomai’s new technologies in this meaningful and novel project.

Currently the elderly care industry has three major problems, huge investment, high cost, and the lack of tenderness. 

We located our nursing home on FIT campus, so the elderly in the nursing home can use school facilities, such as the canteen, the classroom, the playground, and so on. We also refurbished the school clinic, changing it into a nursing and rehabilitation hospital without constructing a new building. The first problem is hereby resolved.

In solving the second problem, we used IoT to build two mathematic models for every elder people - the life pattern model and the physiology pattern model respectively. We were thus able to enhance our nursing ability and lowered our cost by adopting an AI nursing application with data analysis.

User interaction with the system is designed to be warm and personable. The system can imitate the voices and display the faces of the patient’s children via 3D imaging to improve the experience of interaction. Apart from what has been mentioned, the system can even tell the elderly things about their children’s daily life at regular intervals and chat with them.

We hope that this system can reduce elder people’s reliance on their children or nursing staff and relieve the nursing staff from repeated work. It is an invisible and intelligent system that enables senior citizens to grow old in a comfortable way without needing to learn new things. 

Most importantly, we bring humanistic care to senior people through elder-youngster interaction. FIT students can earn academic credits or offset their accommodation fees by doing voluntary work for senior citizens, and the elderly can gain nursing care credits by giving lessons to the students. According to our survey, more than 40% of the people living in high-end nursing homes are college professors or senior doctors. This year, FIT has established a nursing and rehabilitation department, whose student recruitment will start next year. Our industry-education integration in high quality nursing and rehabilitation sees great prospect in the future.

The model can also be duplicated. In our nursing community, we have four major scenarios, nursing institutions, nursing communities, nursing at home, and nursing and rehabilitation hospitals. We will show you how to improve operation efficiency with IoT, AI, and data analysis, and then promote our example nationwide. In our current project alone, we can handle 10,000 people. If our technologies, management model and solutions can be spread to existing nursing institutions or elderly people’s households, the number of application scenarios will surge and our market will expand considerably.

Such application scenarios will keep mushrooming with our industry-education integration.

4. The safety bounds of Guomai

I’ll talk about Guomai’s safety bounds in a few words. We have to hold sustainable key technologies for our sound strategic development in the future, while reserving excellent and stable strategic resources and abundant money. At present, our net asset is about 3.2billion yuan, over half of which is in cash. The rest is 2 colleges, 1telecommunication planning and designinstitute with first-class qualifications, buildings with a total floor area of around 500,000 m2, and more than 330 acres land in the provincial capital city. Our assets are of high quality and stable.

We are cautious in investing in other companies. The companies we invested in all have high investment thresholds, such as Heilongjiang Planning and Design Institute, Xingyin Fund, Xiamen International Bank, Guomai Biotech, and so forth.

Our financial report is very positive. The interest-bearing liabilities only account for 17% of total debts, and we have smooth fund-raising channels. We are one of the 100 “headquarter to headquarter” clients of Industrial and Commercial Bank of China (ICBC), and have strategic partnership with Bank of Communication (BOCOM) Fujian branch.

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After optimizing our business structure, our gross profit rose from 20% to 58 %. In my opinion, we should have a high gross profit since we have positioned our company as a high-tech company. Our record gross profit is 75%, which is our next goal. After this year’s business restructuring, Guomai’s net profit increased 10 times quarter on quarter in Q1 2019. With 5G on the way, Guomai is sure to scale new heights.

To conclude, what’s the ultimate goal of Guomai? We hope to bring a series of state-of-the-art technologies to people’s lives, solving serious problems for our society. We will continue to be pragmatic and do our work, but at the same time we will endeavor to increase communication with the public. I hope this speech has inspired your support and confidence in Guomai’s future. Thank you!

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