In a posh office building in eastern Beijing, Chinese unicorn startup Terminus occupies a whole floor with a sleek all-white modern design from floor to ceiling. Visitors to the company’s headquarters couldn’t help but to feel that they’ve been transported into a different dimension, somewhat futuristic.
What the company does is equally futuristic. It combines artificial intelligence with the Internet-of-Things (IoT) to make buildings, communities and cities smarter. For instance, Terminus helped secure a residential compound in Shanghai with smart access terminals and intelligent software systems that allow the building management to see the movements of residents, visitors and vehicles in real time on their computer screens via facial and image recognition. Terminus said that its system has led to a significant decrease in once common crimes like theft.
The company has actually implemented thousands of projects across China. Along the way, it achieved a valuation of more than $1 billion backed by top investors, including China Everbright and IDG Capital, although the company declined to disclose the exact figure.
“China is ahead in this type of new technology applications, especially in civilian use cases,” Xie Chao, vice president of Terminus, told China Money Network in an interview in the company’s Beijing office earlier this month. “In more advanced areas, like satellite tracking, China is still lagging behind.”
Terminus was founded in 2015 and incubated by China Everbright, the investment platform of China Everbright Group. Ai Yu, managing director of the Chinese state-owned conglomerate, serves as Terminus’ CEO. But beyond the support of China Everbright’s vast resources, Terminus also has to thank a growing domestic market and few regulatory hurdles for its success so far.
China is unquestionably the most advanced country in terms of deploying smart devices like surveillance cameras with facial recognition capabilities to almost all corners of its largest cities. There are 176 million surveillance cameras installed in China, and the number is expected to increase to 626 million in three years, according to IHS Markit. That means there will be roughly one surveillance camera for every other person in China by the end of 2020.
While this may be a cause of concern for people who disagree with the government’s efforts to monitor and control public dissent, China has embraced this new technology wholeheartedly because these tools can improve the efficiency of the tasks that officials have long been practicing. And once Beijing determines a course of action, things usually get executed with few questions asked.
That has been one of the main drivers for tech providers such as Terminus, which has found the majority of its clients among local governments. Labeling itself as an AIoT company, a play on the term Internet-of-Things, replacing “Internet” with “AI,” Terminus helps local governments to improve public security using AI-powered solutions. The area where Terminus focuses the most is population control, allowing China’s smallest social management units–neighborhood committees–to better monitor residents, visitors and vehicles within designated areas.
Like perhaps thousands of Chinese companies, Terminus is competing for a piece of the pie in China’s massive public security market. Including video surveillance systems, access control systems, police alerts, safety inspection systems and more, China’s public security market was estimated to be worth 620 billion yuan ($90 billion) in 2017, and will grow to 1.12 trillion yuan ($162 billion) in 2023, according to the China Security And Protection Industry Association. The global public and personal safety market, by comparison, is expected to reach $518 billion by 2023, according to a 2018 Market Research Future report.
Terminus says that its ability to provide one-stop solutions is what differentiates it from the rest of the pack. Local governments in China generally lack the expertise and resources to manage the many vendors often required for smart city initiatives. They need one trustworthy partner who can help them source, integrate and manage the various hardware and software pieces altogether, Xie Chao explains.
That’s why Terminus works with companies like video surveillance camera giant Hangzhou Hikvision Digital Technology and Chinese facial recognition tech leader SenseTime, which was one of the investors in Terminus’ 1.2 billion yuan ($172.7 million) series B-1 round in October. What’s more, Terminus helps clients manage such systems to continue making buildings smarter over time through deep learning.
“Unlike Internet companies that provide software systems or mobile apps, what is totally different in AIoT systems is that after installation, [our systems] need to keep pumping out data, which needs to be analyzed and optimized to improve efficiency in the long term,” said Xie.
So, after Terminus was able to do a few projects initially in Shanghai, other cities followed. With almost every county and city in China setting aside budgets for smart city and public security projects combined with the central government’s support, the money available to purchase related services is enormous.
On the website that gathers information of contract bidding and purchases in China, www.zbytb.com, there are 4,216 bidding items with the keyword “security” from the past 12 months. There are 847 bidding items with the keyword “Xueliang Gongcheng,” or Bright Project in English, a term that refers to a central government program aimed at establishing a mass security and safety platforms across China. The total budget available to be deployed under Xueliang Gongcheng is estimated to be around 50 billion yuan ($7.6 billion) at the beginning of 2018, according to Chinese media outlet iYiou.
But Terminus’ target goes beyond governments. Parallel to providing solutions to government-led projects, it also sees a huge potential market in commercial properties like office buildings, shopping malls, hotels, hospitals, schools and industrial parks. Aside from keeping the buildings safe, like what Terminus does for government projects, the company also integrates sensors that can measure temperatures, water pressure and many other data. Its backend systems work like a central nervous system controlling various functions of the building, therefore improving the efficiency of the buildings’ operations to save energy and labor.
The challenge for Terminus and other companies like it is that commercial building owners in China today have few incentives for investing in optimization measures like these. “Domestic buildings are not that sensitive towards cost-savings, so smart buildings will be better for markets in advanced economies like Hong Kong because the labor costs are much higher,” said Xie. “But overall, labor costs will increase (in China), and more and more enterprises will start to focus on lowering their costs.” That’s why Terminus has been exploring the Hong Kong market and other countries, though the effort is still preliminary.
Outside of these two main areas, Terminus is exploring other ideas to utilize its relatively mature systems. Answering some clients’ requests, the company is exploring adding more features for emergencies like fire alarms. Its systems can add fire alerts, but also accurately inform the fire department the numbers and locations of residents during times of emergencies. It is also looking into various ways of helping environmental protection agencies to better monitor factories’ pollution treatment practices by adding sensors and connecting those to its backend systems and other data points.
The potential seems limitless, but the reality is that many of the solutions like these are still unproven. For example, the idea of continued optimization through deep learning and data mining is yet to be tested as all these projects are only one or two years old. Despite having done thousands of projects, Xie admits that perhaps a fraction of 1% of the buildings in China have been made “intelligent.” What Terminus plans to do is keep at it, making buildings smart, one at a time.
