China Securities Co., Ltd.: AI toys have become one of the best applications to land, and many companies and products are emerging.

China Securities Co., Ltd. released a research report stating that AI toys have a long payment cycle and high market growth rate, making them one of the best landing scenarios for large models. AI toys are not a one-time purchase, they can continue to charge users for calls to large models; moreover, the tolerance of the accompanying scene towards large model illusions is high, making AI toys one of the best landing scenarios for large models. It is expected that AI toys will be able to meet the user demand for traditional children's toys, millet products, smart speakers, and AI virtual companion applications. Main points from China Securities Co., Ltd. are as follows: AI toys have emerged in a timely manner - AI Application Tracking Series Byte AI toy "Visible Bean Bag" leads a new round of AI toys breaking out. The Visible Bean Bag is a blue and white plush toy with integrated large model technology for dialogue interaction and emotional communication, with transfer prices on second-hand platforms reaching hundreds of yuan. The Visible Bean Bag is a typical case of the rise of the AI toy track, and a number of AI toy start-up companies have emerged both domestically and internationally, with new products like BubblePal experiencing sales breakthroughs of over ten thousand units. Byte AI toy "Visible Bean Bag": a new form of bean bag model The Byte AI toy "Visible Bean Bag" stands out with its unique appearance and AI capabilities. The Visible Bean Bag is an emotional companion toy developed internally by ByteDance, appearing as a blue and white, mountain-shaped plush toy that integrates multiple artificial intelligence technologies such as the bean bag large model, button professional edition, speech recognition, and synthesis. Since this product is not sold to the public and is produced in limited quantities, its transfer price on second-hand platforms can reach up to 500 yuan. The Visible Bean Bag is equipped with AI dialogue interaction function and excels in emotional communication. As evaluated by multiple media outlets including Duozhi.com, 36Kr, and Z Finance, the Visible Bean Bag can engage in Chinese and English dialogue with users, such as telling stories and reciting ancient poems. When users express their concerns to the Visible Bean Bag, it also provides targeted advice, showing good emotional communication and companionship effects. Moreover, it has a memory capability to accurately respond to the content of the previous two rounds of dialogue. However, it displays weakness in mathematical logic, unable to compare the numbers 9.9 and 9.11. The Visible Bean Bag embeds an AI brain, thus integrating the bean bag large model technology. This AI brain, called Magicbox, accesses cloud-based bean bag large model and button professional edition capabilities through WiFi, developed as a general AI hardware by the third-party company Folotoy. It integrates AI dialogue chip, microphone, and speaker, with a small size that can be placed inside various dolls to provide AI dialogue and companionship functions. AI toys are on the rise, with frequent small hits recently AI toys have a long payment cycle and high market growth rate, making them one of the best landing scenarios for large models. AI toys provide users with language and action interaction experiences, enhancing the toy's companionship function. From a technical perspective, there are still certain illusions surrounding large models, but the fault tolerance rate in the AI toy scenario is high, matching the current technological status of large models. From a business model perspective, AI toys are not a one-time purchase but can adopt a business model of one-time hardware fee + software subscription fee, leading to longer user lifecycles and higher average prices. In terms of market size, the toy market has entered a mature stage, with NPD data showing a global scale of $108.7 billion in 23 years, with growth rates below 10% over the past five years. However, as an emerging track, the AI companionship market has a larger market space and higher growth rate. According to Ark Invest, the global AI companionship market is expected to reach $150 billion by 2030, with a compound annual growth rate exceeding 200% from 2024 to 2030. AI toys target a wide range of users, meeting the needs of both children and adults. For children, compared to traditional toys, AI toys not only provide emotional companionship but can also extend to scenarios like spoken language practice, knowledge popularization, and personalized educational experiences. Moreover, the continuous iteration and update of educational content can provide long-term stable cash flow for related companies. For adults, from the perspective of emotional and mental consumption value, AI toys offer rich emotional and social value. Compared to AI virtual companion applications like Character AI and Talkie, AI toys provide unique tactile and physical attributes, offering higher companionship value. According to a survey released by "DT Business Observation" on "2023 Youth Consumption", nearly half of the surveyed youth believe that good products or services can provide emotional value, and 41.6% of them say they spend more due to developing new hobbies in the current year. The high prosperity of IP millet consumption this year also reflects the high demand for mental consumption by users. From a practical value perspective, AI toys can meet the needs of upgrading smart speakers, playing music on one side, and interacting with smart homes on the other, becoming a new control entry for smart homes. In addition to Byte's Visible Bean Bag, a number of AI toy start-up companies have emerged both domestically and internationally, with some products achieving sales breakthroughs of over ten thousand units this year. Domestically, a group of high-ranking officials from technology giants have chosen the AI toy track for entrepreneurship, including Li Yong, former partner of AliGenie, Batao, Vice President of Meituan, and Guo Zhi, General Manager of Microsoft DPS Global Solutions Innovation Department, founding Leap Ahead Innovation, Qi Dian Ling Zhi, and Yi Jia Yi Ban. Overseas, both major companies like Tesla and Casio, as well as overseas start-ups like Curio and Lovot, have achieved impressive performances. 1)Domestically: multiple start-up companies are emerging. Leap Ahead Innovation has made rapid progress in product development, with AI pendant BubblePal officially on sale at the end of July, with tens of thousands of units sold within three months. Established in 2021, Leap Ahead Innovation, led by CEO Li Yong, formerly served as a partner of AliGenie and Chief Marketing Officer of iQIYI Intelligent, with its core product BubblePal worn in the form of a pendant on any doll, integrating large model capabilities to tell stories, answer questions, play word games, and support different roles.IP image, providing a more personalized voice interaction experience. Although BubblePal's voice interaction function is similar to Tmall Elf and Xiaoai speakers, it offers a better companion experience, expresses understanding of children's emotions in language interaction, and communicates with children in language that is easy to understand.In addition, companies such as Singular Intelligence, Yijia Yiban, Beipei Technology, and Sanyi Cat Technology are all researching AI toys, and are expected to launch a batch of new products next year. Overseas: Some products have received good feedback from users, and are sold out as soon as they are launched. Among the leading companies, Tesla recently launched a mini version (1:10 scale replica) of its Optimus Gen2 humanoid robot Siasun Robot & Automation, priced at $40. It sold out within 24 hours of going online, and is currently being resold on platforms such as eBay for as high as $1300. Casio, in collaboration with startup Vanguard Industries, released the AI pet Moflin in November this year, priced at nearly 3000 RMB. It also sold out during the pre-sale period. The product has a furry appearance, provides emotional feedback, and gradually forms a strong emotional connection with the user. Among startup companies, the Japanese company GROOVEX developed the home companion robot LOVOT back in 2018, equipped with high-precision devices such as a light sensor, 360-degree hemispherical camera, and LCD screen simulating eyes. Each LOVOT has a unique personality, providing users with a nurturing gameplay experience. Priced at 59,800 RMB, the product had sold over 10,000 units by the end of 2023 in Japan, and officially entered the Chinese market in June 2023, opening retail stores in Shanghai. Silicon Valley startup Curio also developed the AI plush toy Grok, integrating the GPT series model to provide users with language interaction and emotional companionship. The doll's specifications are similar to Byte's conspicuous package, including a doll toy set, a built-in speaker, microphone, and Wi-Fi hardware, priced at $99. Risk warning: Risks include copyright protection not meeting expectations, unclear intellectual property rights division, declining influence of IP, interruption in cooperation with IP or celebrities, risks due to changes in public aesthetic preferences, intensified competition, low willingness of users to pay, difficulty in changing consumer habits, risks related to corporate governance of related companies, underperformance in content online, risks of underperformance in the development of generative AI technology, risks of high difficulty in product development, risks of product launch delays, risks of rising marketing acquisition costs, risks of talent loss, risks of rising labor costs, risks of policy regulation, and risks of commercialization capabilities falling short of expectations.