Source: Interface News

The popularity of AI has blown into the toy world. Recently, the theme of AI toys based on the large model of bean bags has continued to ferment, and one of the leading companies Espressif Technology (688018. SH) pulled out the 20cm price limit on December 10 and December 11 one after another, an increase of more than 50% in a week. In addition, it is reported that Espressif Technology will also participate in the ByteDance Volcano Engine 2024 Winter FORCE Conference Video Cloud and Edge Cloud Forum on December 19 to further enhance the market topic.

How does AI connect to toys? What is Espressif's role?

Toys are an ideal application scenario for large models at this stage

Previously, the hype of A-share AI large models mainly focused on the training side, including optical modules, liquid cooling, circuit boards, etc., but the training of AI large models alone cannot create value for users, and AI large models urgently need to find suitable application scenarios.

In the application scenario of AI large-scale model hardware, it may not be accidental that toys are selected as the entry point of the outbreak. In the hardware model session of the Volcano Engine Conference, the main hardware terminals that appeared were mobile phones, toys, cars, smart hardware and PCs.

Among them, on mobile phones, automobiles and PCs, the tasks that need to be processed by large models are more complex and require higher accuracy. However, toys and smart hardware processing tasks are relatively simple, have low requirements for accuracy, and relatively small privacy risks, so large AI models can be quickly promoted.

At present, there are a number of toys equipped with large models of bean bags, such as the "conspicuous bag" launched by ByteDance, which is embedded with FoloToy's large model AI movement Magicbox (magic box), which can be equipped with and present the ability of the large model of bean bags and the professional version of the button; The start-up company launched the innovative toy BubblePal, which is also equipped with a large model of a bean bag.

Previously, Gao Feng, the co-founder of Yueran Innovation, revealed that after the BubblePal test, the maximum usage time of users can reach 6 hours/day, and the average daily usage time is about 2 hours. This user time, which is comparable to that of a short video platform, not only means that the user stickiness is extremely high, but also contains huge commercial value.

The Wi-Fi communication protocol is the optimal solution for AI toys

The unit price of smart hardware such as toys is generally low, and the price is generally less than 200 yuan, and the cost determines that the performance of the chip configured by it is limited, so the large model is unlikely to be processed on the device side, but needs to communicate with the cloud to send the AI processing requirements to the cloud. At present, smart hardware relies on Wi-Fi, Bluetooth or Cat1 and other communication protocols for network connection, and the Bluetooth transmission rate is relatively slow, which is not conducive to transmitting the data required by large models, while Cat1 belongs to the operator's cellular network, and users need to bear additional communication costs. In this context, the Wifi communication protocol has inevitably become the mainstream choice of AI toys.

At present, in addition to Espressif Technology, there are a number of A-share companies involved in the Wi-Fi chip business, including Broadcom Integration (603068. SH), Arcjet Technology (688220. SH), Hengxuan Technology (688608. SH), Telink Micro (688501. SH), among which only Espressif Technology and Broadcom Integration have Wi-Fi chips as their main business.

According to the Wireless Connectivity Market Analysis published by TSR, a semiconductor industry research firm, Espressif has the largest shipments in the Wi-Fi MCU market, a sub-segment of Wi-Fi. Byte's "conspicuous bag" is equipped with Espressif's products in the Magicbox.

The toy market naturally has a long-tail effect

It is true that Espressif Technology has already enjoyed the first wave of Wi-Fi dividends in the AI toy market, do other Wi-Fi chip companies still have a chance?

At present, there are tens of thousands of toy manufacturers in China, and the market concentration is relatively low, so to integrate AI models into the toy products of traditional enterprises, it is necessary for relevant Wi-Fi chip companies to have a complete software and hardware ecosystem. From this perspective, Espressif Systems is therefore able to undertake the needs of a large number of small B-end customers, and the customer base reflects the long-tail characteristics.

However, other domestic Wi-Fi chip companies often need to invest manpower in customer service due to their immature ecology, and they can only serve large-scale key toy customers, ignoring the majority of small and medium-sized toy customers.

In addition, in the smart home industry, which is similar to the toy market, variables are also quietly occurring. Apple plans to launch a new AI central control screen and related accessories in 2025, which will help cultivate its smart home ecosystem. Previously, Apple was Embedded at the 2024 Worldwide Developers Conference (WWDC

Espressif's ESP32-C6 was selected for the Swift demo, which provides an endorsement for more Apple ecosystem developers to choose Espressif's products.

However, after a sharp rise, the valuation of Espressif Technology has reached nearly 24 billion yuan, according to the consensus forecast of brokers, the company's net profit in 2024 and 2025 will be 345 million yuan and 455 million yuan respectively, corresponding to a price-earnings ratio of 53 times in 2025, and the valuation is not low. It is worth noting that in November 2024, Jiang Jiangjian, the company's core technical personnel, reduced his holdings by a total of 23,000 shares at 151.4 yuan and 138.16 yuan respectively. Of course, considering the increment brought by AI toys, the company's net profit in 2025 cannot be ruled out to exceed the consensus forecast of brokers.