PERCIPIO.XYZ: Crafting Products with Dedication, Upholding High Cost-effectiveness

Technology Author: Xiaoguang Zhang Aug 09, 2023 12:32 PM (GMT+8)

A new round of industrial upgrading is sweeping across the world, and the business drive empowered by technology has become a settled reality.


In the era of new economy, technology-driven industrial upgrading and transformation have become a prevailing trend, both at the national policy level and in the market selection. Within this trend, a group of innovative companies has emerged in the market. These companies not only include the famous enterprises making headlines but also numerous startups born with an innovative spirit, flourishing under the national strategy of technological innovation-driven development in the new era, and showcasing their global market leadership through technology prowess and innovative spirit.

EqualOcean's "Technology Innovation, Guiding the Global Market" series of interviews will focus on startup companies in advanced manufacturing, new energy, consumer technology, digitalization, and other fields. These companies possess technological and product innovativeness, global competitiveness, and a global presence. Through close observation of their technology and product development processes and the global vision and vision of their core management, we aim to present the new faces and opportunities of China's technology and innovation-driven enterprises. In this issue, EqualOcean interviews Fei Zheping, CEO of PERCIPIO.XYZ, a leading company in the 3D machine vision industry.


Fei Zheping, CEO of PERCIPIO.XYZ

EqualOcean: Please start by introducing an overview of PERCIPIO.XYZ.

PERCIPIO.XYZ - Fei Zheping: PERCIPIO.XYZ has been established for 8 years now. We specialize in 3D machine vision products. While traditional machine vision deals with two-dimensional information, utilizing images or videos for recognition, intelligent analysis, and detection, we have extended this from the 2D foundation to incorporate XYZ, which signifies three-dimensional spatial geometry measurement. This transformation results in a new product application. Spatial geometry measurement corresponds to the human visual system, essentially the three-dimensional visual system. While photos can capture color information, obtaining distance and coordinate information necessitates new optical measurement methods. Therefore, our work in 3D machine vision encompasses an emerging market.

PERCIPIO.XYZ primarily focuses on industrial automation, logistics, security, healthcare, and scientific research. Although there are numerous opportunities for visual applications in areas like consumer entertainment and security, our emphasis is on industries and sectors that underscore productivity rather than consumer entertainment. In the realm of industrial machine vision, our business model revolves around refining industrial cameras, core vision software, and algorithms, without delving into specific application scenarios. Downstream clients extensively integrate our products with industrial robots to accomplish specific functions, such as handling, screw assembly, or more advanced tasks, which require visual input for installation and calibration.

We term the application across various industries as "system integration." We provide visual industrial cameras and software algorithms to system integration clients. Due to diverse specifications and requirements across application domains, we strive to achieve the optimal balance between hardware and software, making us a product-focused company. Our downstream clients are system integrators. Ultimately, end-users could range from the general public to enterprises across various sectors, such as BMW, Guangming, or Mengniu.

EqualOcean: We have learned that as the founder, Mr. Fei, you have a technical background. Could you share the backgrounds or fields from which other members of PERCIPIO.XYZ's founding team hail?

PERCIPIO.XYZ - Fei Zheping: Our early colleagues, apart from myself, all have technical backgrounds. When we embarked on our entrepreneurial journey, I had already transitioned from a technical role to a marketing one. Across my nearly 20-year career, I initially engaged in technically-oriented positions, while the subsequent 10 years were more oriented toward marketing and sales. I firmly believe that our organizational structure is well-established. For a product-based company, being technology-intensive and possessing competitive cost-effectiveness is crucial. In the entrepreneurial sphere, for a commercial company like ours, both product development and market prowess are equally vital and must be balanced.

EqualOcean: What led you to focus on the 3D vision sector?

PERCIPIO.XYZ - Fei Zheping: Choosing this path was not solely driven by a perception of its potential. To be frank, especially in the realm of STEM disciplines, from one's educational journey to professional experience, these aspects determine the scope of our capabilities. If, hypothetically, the biopharmaceutical industry were thriving, no matter how promising it seemed, it would still be an implausible field for us to enter. AI is also flourishing at present, and while we incorporate AI elements in our visual software algorithms, our primary focus revolves around graphics, imagery, and three-dimensional measurement. Hence, we didn't choose a field merely because it was trending; rather, it was because we already possessed the expertise in this domain, understood its technological nuances, comprehended its market dynamics, and fortuitously, this sector also became a focal point in the capital market, presenting lucrative business opportunities.

To be frank, I believe that luck played a role in this. From the very beginning of choosing our fields of expertise, we didn't have the ability to switch tracks based on which one was better. We're a bit idealistic now – the whole company, including myself, wonders why, out of so many people in the world, it's our group that formed this company, and we're so aligned in our goals. Sometimes, work and life are blurred, and many of our colleagues spend more time with their coworkers than with their families. Our older colleagues have been with us for seven or eight years; it's all a matter of fate.

In summary, we formed a team based on the diverse professional backgrounds of each individual. It wasn't because machine vision was trending; it's just that our technical expertise and resources naturally led us in this direction. When the right entrepreneurial opportunity came along, and it happened to be a time when financing was relatively easier, we started. Seven or eight years ago, startups could secure funding based solely on the team, without products or clients. Opportunities might have been better back then.

EqualOcean: In the realm of 3D vision, which field currently boasts the widest application for PERCIPIO.XYZ?

PERCIPIO.XYZ - Fei Zheping: 3D vision is a new product with evolving applications; everything is still undergoing significant changes. Over the past two years, including this year, our largest application market has been industrial automation. Our visual products are applicable across various industries, so our market analysis differs from that of conventional integrators.

Integrators might tell you which specific sectors are thriving, such as the food and beverage industry, the automotive sector, or the power battery industry. Because we don't solely engage in system integration, we support all clients involved in industrial automation. This makes our industry attributes somewhat less pronounced.

Our products and technology support involve the combination of 3D vision with industrial robots, with the differentiation being created by the clients themselves. Regardless of the type of integration, the key to our 3D vision products is the coordination between the "eye" (3D camera) and the "hand" (industrial robot). Industrial automation accounts for roughly 40% of our revenue.

The second market is within logistics technology. There is a substantial amount of manual labor in logistics, and automation levels are not as high as in industry. However, due to the larger scale, even a small proportion represents our second-largest application market.

The third area is in the emerging field of mobile robotics. AGVs/AMRs and automated forklifts, essentially unmanned handling, are progressing rapidly. Generally, we consider AGVs and automated forklifts to be robots. As long as a machine has autonomous intelligence, it likely requires our intelligent 3D vision. In the real world, smooth operation necessitates perception of three-dimensional space and dynamic navigation and obstacle avoidance, which can't be achieved with just a 2D video camera. Therefore, mobile robotics might become our third-largest application scenario this year. These three areas are relatively well-established and together account for about 70% of our revenue. The remaining third of our revenue comes from numerous niche industries that haven't yet reached a significant scale, but they hold substantial market potential.

Application of products.PNG.PNG

Application area of PERCIPIO.XYZ's products

EqualOcean: Throughout our discussion, you have consistently emphasized the concept of "products." In PERCIPIO.XYZ's product development efforts, which aspect do you prioritize the most in terms of improvement or adjustment?

PERCIPIO.XYZ - Fei Zheping: I believe there are many dimensions to this. People generally mention satisfying customer needs, technological advancement, continuous iteration, excellent support services, stable quality, and more. But if we were to condense all these dimensions into one, I believe it's the pursuit of the highest cost-effectiveness. Because we cater to clients in demanding industrial sectors, it's crucial that the products are genuinely suitable for large-scale use. When facing such a clientele and striving for significant breakthroughs, the most critical aspect is undoubtedly cost-effectiveness. If the performance isn't up to par, industrial clients won't be able to use it; they can't compromise as consumers might. We can't afford to have first-time customers who buy our products and then discard them like trash. Industrial clients require products of exceptional quality.

Secondly, cost reduction is currently a prevailing theme across industries worldwide. I believe that not being cost-effective is akin to the automotive industry. Previously, OEMs used expensive vision hardware from overseas manufacturers. However, the era of cameras selling for tens of thousands of dollars is long gone. Every industry now focuses on cost reduction and efficiency enhancement; the era of excessive profits has passed. Even in cutting-edge assembly industries, like aircraft or engine manufacturing, the urgency for cost reduction is acute. Well-known OEM clients have been consistently requesting cost reductions since last year, and this trend continues. So, the key factor is cost-effectiveness; the product's performance must be exceptional. Otherwise, even if you offer the product at a lower price, it won't be usable. Second, under the premise of usability, cost containment will become even more stringent.

EqualOcean: I've noticed that you've spoken highly of Cognex in many interviews. You hold great admiration for this company. Could you please elaborate on the specific reasons for your appreciation?

PERCIPIO.XYZ - Fei Zheping: Cognex is an immensely respected enterprise in the field of 2D machine vision, and its business model is product-oriented. Despite being established for 30 years, it is not a highly innovative or young company anymore. Yet, its innovation prowess remains remarkable. Thirty years ago, it was the most innovative company and played a significant role in shaping the machine vision industry, which, before Cognex's emergence, was incredibly niche. Today, the industry has matured into a substantial high-tech sector with significant scale and commercial value, largely thanks to pioneers like Cognex. Additionally, the fact that it has sustained growth over three decades is quite remarkable. So, first and foremost, I believe it pioneered the machine vision industry. Secondly, over the past 30 years, it has continued to exhibit remarkable innovation and leadership in product development.

Thirdly, its business model is exceptionally clear – it exclusively focuses on producing products to serve integrators across various industries. This serves as a model for us. Specifically, Cognex excels in industrial cameras and software platforms, catering to integrators in sectors ranging from logistics and biopharmaceuticals to automotive and 3C electronics. This broad coverage across industries showcases their sustained product innovation capability and business model. This is objectively reflected in their financial performance as well. As a product-oriented company, one doesn't necessarily need excessive revenue. However, Cognex commands a significant market share within the machine vision industry, displaying strong profitability. With a team of over a thousand members, it has achieved a market capitalization of over a hundred billion dollars, underscoring their exceptional financial strength.

In essence, Cognex is a quintessential technology product company with significant industry influence. To some extent, many companies in China's machine vision industry find themselves constrained by Cognex's influence. Its ability to maintain high gross and net profit margins places clients in a position where they lack bargaining power. I view this as a testament to their capabilities. In the realm of 3D machine vision, we aspire to be a company like Cognex. We share a similar business model and hope to match their industry influence and commercial value in the capital market. We also aim to sustain a continuous ability to innovate, just like them.

EqualOcean: You just mentioned that Cognex primarily serves these integrators with its products. We understand that many 3D vision integrators are also moving upstream to develop hardware. Traditionally, having a vertically integrated supply chain might confer competitive advantages. However, it seems this might not be the case in the 3D vision industry. Is this law not applicable here?

PERCIPIO.XYZ - Fei Zheping: I believe that whether we discuss economies of scale, division of labor within the supply chain, or specialized roles, there are technical and economic reasons behind these arrangements, which are objectively grounded principles. However, the 3D vision industry appears to deviate somewhat from these principles. This deviation can be attributed to two main factors.

Firstly, our industry's development is still immature, which leads to an unclear landscape. This lack of maturity is primarily responsible for the absence of established norms. As the industry grows and matures, these principles will inevitably come into play, shaping the dynamics. Any industry, when it achieves significant scale and maturity, will adhere to the principles of supply chain division and specialization. Therefore, the stage of development and maturity of our industry are key factors.

Secondly, our industry is heavily influenced by venture capital and speculative capital. Capital can, within a short period, counteract economic principles. Take the example of Luckin Coffee in the past – although they appear successful today, developing and profitable, they diverged significantly from economic principles at the outset. Earlier, when there was excessive and misdirected spending, they focused on expanding their product range and entering unmanned retail, often claiming that coffee wasn't profitable. These actions clearly violated economic principles. However, they were able to operate in such a manner due to available funds. It's clear that actions that contradict economic principles can be sustained as long as there's funding, but they won't be sustainable in the long run.

Similarly, in our current context, our market is garnering significant attention from capital, leading to companies securing substantial funding and undertaking unconventional actions. These actions, or departures from what we consider economic norms, are present due to capital influence. However, in the end, when the funds are depleted, these activities that defy norms will either lead to the company's disappearance or the survival of those that align with objective economic principles.

As you mentioned earlier, whether it's economies of scale or the division of labor within the supply chain, these principles undoubtedly apply to any industry, especially within the realm of industrial technology. Therefore, the two main reasons are the influence of capital driving certain irrational actions and the industry's relative immaturity and insufficient scale.


PERCIPIO.XYZ's products

EqualOcean: Can we anticipate a wave of reshuffling within the industry in the coming years?

PERCIPIO.XYZ - Fei Zheping: Definitely, it will be a significant reshuffling. From the current state of immaturity to maturity, I believe it might take about three more years. In reality, the reshuffling process began last year. Considering the entire process, it might take around four to five years. During this process, I believe the probability of new companies emerging will decrease, and the main theme will be reshuffling. Competing companies will either vanish or undergo transformation. For us at PERCIPIO.XYZ, there is no need for transformation, as our positioning has always been clear – we focus on producing products. Most of our peers that choose to transform will likely move towards integration.

EqualOcean: In the previous round of financing, we saw that PERCIPIO.XYZ has set its sights on further expanding its overseas market presence. Currently, where is PERCIPIO.XYZ's main presence in the international market?

PERCIPIO.XYZ - Fei Zheping: Currently, our main customer base is in the Europe and the United States regions. Between the US and Europe, the US is larger, and Europe is smaller. However, we believe that our key markets should be the US, Germany, and Japan and South Korea. Currently, we're doing well in the US, have begun making inroads in Europe (albeit in a smaller way), and we're still relatively small in South Korea and Japan. Therefore, this year, we plan to focus on establishing a stronger presence in these areas. These countries are all industrially developed, which aligns with the trend of automation and machine vision.

EqualOcean: In 2021, you mentioned that PERCIPIO.XYZ's achievements in overseas markets are due to significant shipment volumes. However, you believe that the value of this achievement lies not in substitution but in the application of new products and technologies in new scenarios. How do you interpret this? Can we understand that PERCIPIO.XYZ's products are fundamentally different from those of overseas companies?

PERCIPIO.XYZ - Fei Zheping: Our products are actually unique in the overseas market. We are not imitating a specific foreign company; within the 3D machine vision industry we are part of, we are innovative product creators, and this is something we take pride in. From another perspective, this is also the most challenging aspect for us.

Firstly, we must define and break through the product ourselves, which involves a high level of risk. Our product definition and forward-looking market requirements are quite demanding. Conversely, when imitating a popular product, the product definition becomes simple. You just need to control costs; if someone else sells a product for $100, I can sell it for $60, and there will certainly be customers and a market.

Secondly, the business opportunities and customer demands are not readily available. We aren't simply replacing imports or providing low-cost alternatives. We are aiming to explore the value of 3D machine vision together with our customers. Previously, these tasks were done by humans, but with the combination of robotic vision, we can achieve human-machine collaboration and automation. The challenge lies in the exploratory discussions of these needs. Sometimes, we can't move forward because clients might say they'll use human labor, or they'll wait for a competitor to prove the concept first. Our initial landing will always be a kind of research and development project, an innovative endeavor. In this stage, the challenges are evident – we need to invest in R&D, manpower, money, all while facing risks.

EqualOcean: In the process of expanding internationally, localization also becomes a significant factor. How does PERCIPIO.XYZ approach localization?

PERCIPIO.XYZ - Fei Zheping: Currently, we service our US and European customers from Shanghai. At the sales level, we have direct contact. Over the past two years, face-to-face meetings were rare. Starting from October of last year, we began having the ability to travel, and our clients were eager to visit us. Both business support and technical support are carried out remotely. At that time, we did face many objective difficulties. However, a positive aspect is that our support and service work have been reduced since we mainly work with integrators, not end-users. Any issues that occur on-site are handled by the integrator customers themselves, and we are responsible for the products only. But as our client base and product shipments increase, there will inevitably be a certain proportion of maintenance and service required. We are actively working on improving this aspect.

The second issue involves the unique aspect of the US market. The lingering impact of the Trump‘s trade war has left a 25% tariff. Our US customers are now paying this additional special tariff on top of the regular tariff. I believe this damages customer interests and weakens our price advantage. This issue also needs to be considered from the perspective of international trade channels.

EqualOcean: In various speeches and even in the company's introduction, Mr. Fei has mentioned that in the future, the commercial field represents a blue ocean for 3D vision. How do you view the opportunities and challenges within this blue ocean?

PERCIPIO.XYZ - Fei Zheping: We hold significant predictions and expectations for applications involving humanoid robots. How do we define commercial applications? For instance, within a factory setting, it's relatively easy to define, as it pertains to industrial automation for manufacturing purposes. Nowadays, there's a broad range of industry applications, such as logistics and healthcare, which we consider as industry markets. In our perspective, the commercial aspect pertains to scenarios like shopping malls, hotels, offices, and homes. This could involve tasks like cleaning, being a chef, barista, or performing janitorial work.

Fundamentally, the commercial market revolves around the replacement of human labor by machines. In industrial manufacturing, it replaces production workers, and in industry applications, it might replace operational workers in fields like logistics or certain medical functions. In the realm of commercial applications, it could replace roles like janitors, chefs, baristas, and the like. We've positioned these scenarios as commercial applications, and within these, we believe humanoid robots have a significant opportunity.

If we're talking about robots for production functions in factories, designing them in a humanoid form might be redundant. Today's robotic arms and the various compact collaborative robots available are already quite ideal in their designs. So, why make humanoid robots in the first place? It's largely due to aesthetic reasons. Additionally, there's a need for more human-like and flexible movements, which are essential in commercial scenarios. Thus, while we believe the commercial scenario hasn't fully emerged, it represents a highly potential and emerging opportunity, and the market potential is immense, mirroring the logic of labor substitution with machines. Another perspective to consider is whether this is a red ocean or a blue ocean – that determination depends on the scale and the size of the business opportunity. If commercial applications take off, their quantity could be a hundredfold or even more compared to industrial scenarios, as the number of industrial workers is inherently limited. For instance, in automated production lines or tasks suitable for robot substitution, like in the automotive or engineering machinery industries, there's a defined boundary where only about 20-30% of the tasks are suitable for robotization. The commercial market is considerably larger – consider chefs, janitors, and various skilled technicians – the potential volume and scale might truly be a hundredfold or even more compared to the industrial sector.

Thus, we believe this opportunity is immense, but the timeframe is the most extended. Ultimately, the technologies that we apply in commercial applications will originate from industrial automation. Whether it's robots, our 3D vision, other sensors, or components, they always start from industrial applications before gradually reducing costs and transitioning to industries, and finally moving into the commercial sphere. We regard this as a very clear development pace and sequential implementation.