Hangzhou Emerges as a Key Artificial Intelligence Development Hub
Hangzhou, a city on China's southeastern coast, is establishing itself as a significant hub for artificial intelligence (AI) development. Technology companies and startups in the region are actively developing advanced chips, robotics, and brain-computer interfaces, alongside consumer-focused applications such as AI pets and fortune-telling apps. This activity follows the international attention drawn by DeepSeek, an AI entity based in Hangzhou.
Development of Physical AI
China and the United States are pursuing similar development paths in the field of physical AI, which involves applications for robots, autonomous vehicles, and simulating real-world events. Companies like Meta and Tencent are developing "world models" that utilize AI for these purposes. Beijing has designated "embodied intelligence" as a priority in its upcoming Five-Year Plan.
In November, the U.S.-China Economic and Security Review Commission, which advises the U.S. Congress, recommended increased investment and regulatory approvals for autonomous systems and robotics, noting China's advances in physical AI.
Hangzhou's AI Industry Landscape
Several Hangzhou-based technology startups, including spatial intelligence firm Manycore and robot manufacturers Unitree and Deep Robotics, are planning initial public offerings in Hong Kong or mainland China, contributing to a series of AI-related market entries.
Training AI for physical world applications requires diverse inputs, such as weight, texture, structure, and temperature, in addition to data for generating text and images. Manycore cofounder Victor Huang states that using AI methods to calculate these data points can streamline and accelerate the process. Huang, a former Nvidia software engineer, reports that Manycore utilizes Nvidia chips due to their computing power efficiency.
He also suggests that China's lower energy costs may offer a competitive advantage, potentially mitigating the impact of using less advanced, higher-power-consuming chips. For example, a three-nanometer chip reduces power consumption by approximately 30% compared to five- or seven-nanometer chips. However, companies can maintain competitiveness if electricity costs are 40%-50% lower. Huang emphasizes that computing power is interdependent with data quality, energy supply, and operating conditions. Locating data centers in colder regions can conserve energy, and cleaner data can reduce the computing power required for training.
Manycore has also open-sourced its spatial AI model, an approach adopted by some Chinese companies contrasting with the pay-to-use models prevalent in the U.S. This strategy facilitates feedback collection but can limit direct revenue, as users are not required to pay for access.
Diverse AI Applications and Entrepreneurship
China's AI development has largely concentrated on practical applications, exemplified by Baidu Map's personalized recommendations and ByteDance's chatbot, Doubao. In December, Doubao registered 155 million weekly active users, nearly double that of its closest competitor, DeepSeek's chatbot, according to QuestMobile data. This indicates that user experience and utility may contribute significantly to app adoption.
An experimental development culture is emerging alongside these efforts. While major Hangzhou entities like Alibaba and DeepSeek focus on advanced AI, the Liangzhu district has become a center for diverse AI applications. Entrepreneurs in Liangzhu are developing products ranging from gamified fitness trackers to ADHD-friendly calendar tools. Alex Wei, an entrepreneur in Liangzhu, is developing an AI app based on traditional Chinese divination tools, focusing on AI's capacity to address emotional needs.
Liangzhu is characterized by low commercial pressure. Wei states that entrepreneurs can develop product demonstrations with limited initial investment in Liangzhu and that the environment is inclusive, supporting small-scale applications.
The increase in innovation in Liangzhu has attracted investor interest. Monthly "Demo Days," which originated in a private setting, now draw founders and investors from various regions. This exposure is influencing how startups consider scale, with many targeting international users. Some founders intend to leverage China's hardware supply chains to offer competitive pricing globally. Domestic competition and consumer payment habits have also prompted startups to explore international markets.
Afra Wang, author of the Concurrent newsletter on China and Silicon Valley, observes that some developers are utilizing AI to pursue independent business ventures as "superindividuals" or small teams. However, Wang also notes that some businesses integrate AI features primarily for marketing purposes in products ranging from air conditioners to mirrors. She refers to some of these integrations as "physical AI slop," a term suggesting low-quality content produced by generative AI.
Currently, entrepreneurs in Hangzhou are exploring a wide range of applications, including those focused on efficiency, comfort, and entertainment, within a rapidly evolving market.