Audience looking for a wider audience

A woman attends a mobile phone trade show on June 27 in Nanjing, Jiangsu province. The US-based Audience Inc has teamed up with Chinese smartphone companies like Xiaomi and mobile operators like China Mobile. CHINA DAILY

US audio tech firm hoping China will drive its future growth

It is not often that you would spot the chief executive of a Silicon Valley-based company "asking" his smartphone to take a selfie of himself in a Shanghai subway car. But that was exactly what Peter Santos, the chief executive of the United States-based Audience Inc, was doing on a bright and sunny morning in Shanghai during a recent business trip.

Like a proud parent who talks about the achievements of his children, Santos pointed to the smartphone and said that it is not just an instrument with voice capabilities, but something that can interface across multiple platforms and unleash a veritable revolution in wearable technologies.

"It is a whole new market, and China will be the key for us," said Santos. Set up in 2000, Audience specializes in advanced audio, voice processing and multi-sensory processing technologies. The company was listed on the tech-focused Nasdaq in 2012.

The US-based company reported total revenue of $160.6 million in 2013, compared with $143.9 million in 2012. Santos says that Chinese smartphone vendors are crucial to the US company's long-term fortunes. During the first quarter of this year, Chinese mobile phone maker Xiaomi, often called China's Apple, accounted for 14 percent of Audience's total revenue and was instrumental in popularizing the US company's applications and technologies across China.

Audience's China connection does not end with just Xiaomi. Instead, it is a virtual who's who including Huawei, ZTE, Lenovo, Coolpad, Meizu, Gionee and OPPO. Among its global customers are big names like Samsung, LG, Motorola, HTC, Dell and NEC.

"The phone market in China has changed rapidly in the past seven years," said Santos. Explaining his point, Santos said that when he first visited China in 2007, he saw that most of the phones being developed were basic models. "Most of the OEMs had limited advanced audio and voice technology capabilities," he said.

"Today, Chinese smartphone makers are the most sophisticated users of advanced technologies, and in some cases, they are faster than their foreign peers in terms of technology adoption," said Santos adding that this has provided the right momentum for the fast growth of Audience's core businesses.

Smartphone shipments in China are expected to reach 420 million units this year, a 19.8 percent year-on-year growth, according to data provided by global market research institution International Data Corp. According to IDC, smartphone shipment volumes have increased for nine consecutive quarters in China from 2012 onward, making the country the largest smartphone market in the world.

According to IDC, Lenovo was the top-ranked Chinese smartphone vendor with shipments of 13 million in the second quarter of this year. Xiaomi placed second with 12.9 million units and was followed by Coolpad with 12 million units. Samsung was ranked fifth during the period under review, a sharp fall from the top slot it had during the first quarter.

"Though smartphones are extremely popular in China, there's still enough room for growth, as China is a huge country, and lots of people have yet to use these devices," said Santos.

The number of smartphone buyers is also going up steadily due to the better income levels in China. "In contrast, the Western markets have become saturated," he said.

"Most of the smartphone vendors and application developers are searching for greener pastures in overseas markets. However, the biggest opportunities are in the developing world, particularly in China "

Santos said he believes that the burgeoning domestic market in China offers huge growth prospects for trendy technology developers and manufacturers. "What Samsung and Apple offered in the past is now being offered by their peers from China," he said, adding that developers have a plethora of smartphone makers from China like Huawei, ZTE, Lenovo, Coolpad, Xiaomi, Gionee and Meizu to choose from. Some Chinese smartphone makers like Lenovo and Xiaomi have already made a beginning in this regard, he said.

"Audience, of course, wants to engage with these fast-growing Chinese companies because of the scale of business that they can provide," said Santos. "When we look at the various devices that are made by them, we sight lots of opportunities, as do other foreign companies that hope to enter the Chinese market."

Audience's cooperation with Xiaomi began in 2012 when it was roped in to reduce the external noise levels in mobile phone calls. The company was tasked with improving the quality of phone calls, to provide speech recognition assistance and boost performance of services like Lingxi, an application provided by China Mobile that is similar to Apple Inc's Siri service. Siri is an intelligent personal assistant and knowledge navigator for iPhone users.

Audience and Xiaomi are also cooperating in additional sectors like voice-and motion - processing technologies, which allows users to tell whether a device is mobile or not. The technologies include those that combine motion processing with voice, as well as the continuous VoiceQ capability, a facility that enables smartphone activation through voice recognition.

Audience and China Mobile have also set up a testing laboratory, and are working with each other on voice quality specifications for 4G VoLTE, a new standard for wireless communication of high-speed data for mobile phones, as well as on voice and audio quality programs for China Mobile subscribers.

"Our bargaining power, or pricing power, comes from our ability to deliver a compelling user experience, and that ability includes our core technology, sustainable innovation and supporting customers," said Santos.

Audience currently faces competition from a number of companies that produce components for the mobile device audio subsystem, such as Qualcomm Inc. It also competes against solutions internally developed by original equipment manufactures, as well as combined third-party software and hardware systems.

"There is competition in voice processing, but we are better off as our voice processing capabilities are much stronger than most others," said Santos. "As we go to the market this year and in the future, we will look to provide more functions that very few competitors have."

As a listed company, Audience has several reasons to bolster investor confidence, said Santos. "The first is our leading voice technology. But the second drive is the Chinese market," he said, adding that "three out of the top five OEMs in the world will be from China."

The real growth impetus, however, will come from multi-sensory processing and using voice and motion simultaneously.

"I believe that smartphones will over time be based on aspects like energy detectors, microphones, accelerometers, radios, touch panels, smell sensors, etc. They will have a very high degree of intelligence about the operating environment and what the user is doing," said Santos.

He said such technologies would be an integral part of future smartphones, though very few companies actually use them now.

Santos said that in the long term, it would not be surprising to see the big phone makers taking a more conservative approach to growth.