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Periscope Volume 7 | This industry may spawn the next Xiaomi (Part 1 of 2)

Written by KrASIA Periscope Published on     2 mins read

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During the COVID-19 pandemic, education hardware products rose in popularity.

This is a preview of Periscope—a weekly report by KrASIA, delving into China’s industries and markets. We discuss a different space each week and include highlights of relevant top stories. If you would like to read the report in full and gain access to our library, please click here.

The online education industry during 2020 has been a study in contrasts, flushed with money but with a tragic recount of failed companies, such as Xiaobawang, a stalwart from an older generation of Chinese companies. Over the first half of the year, total financing in the Chinese online education industry reached tens of billions of yuan, but with high injection of capital, cash burn has been inevitable as competition between players heated up.

Against this backdrop, one sub-industry has remained relatively conservative — the hardware market. During the COVID-19 pandemic, education hardware products rose in popularity, with tablets and pen scanners sales surging. NetEase’s Youdao’s dictionary pens even went out of stock, while ByteDance made a furtive start at hardware products.

Education hardware, what is it?

Education hardware are devices specifically optimized for learning applications. They address the gap left behind by mobile phones and hardware that don’t actively build up learning habits in their users.

According to Chen Jing, vice president of Blue Elephant Capital Investment, the education hardware sub-industry is underrated. “People revisit the industry every few years. This is an industry that grew up due to the boom in education, and the terrifying scale of the entire education industry means that nearly 100% of parents in first-tier cities will participate in it,” he said.

Finding the right use case is crucial to crack the market, according to Wu Yinghui, senior vice president of Youdao, an industry leader in many popular education hardware products, such as dictionary pens. Having competent artificial intelligence (AI) capabilities isn’t enough, as good content and hardware product design are integral, he mentioned.

A saturated growing market

At present, the education hardware industry is still in an exploratory stage. DJ Capital estimates that by 2022, the K-12 education smart hardware market will be worth RMB 57 billion (USD 8.72 billion).

The market consists mainly of two kinds of players. On one hand, new Internet players, such as tech giant ByteDance, and online education companies such as Youdao, have distinguished themselves with their product innovation and software service capabilities.

On the other hand, traditional players such as BBK Educational Electronics Company, with its line of products ranging from small smartwatches to learning tablets, has developed a strong distribution and supply chain integration.

The sky is the limit

With the rapid development of augmented reality (AR), virtual reality (VR), and 5G technologies, it remains unclear what new possibilities lie ahead and what the ceiling of the industry’s growth is.

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