Sandalwood advisors : The Learning Machine Boom Amidst Unprecedented Changes

The landscape of education underwent a seismic shift during the 2020 pandemic, giving rise to a remarkable surge in demand for learning machines. As we navigate the aftermath of unprecedented events and policy changes, this blog explores the factors contributing to the rapid growth of learning machines in 2022 and their sustained impact on the market.

01 The Dual Catalysts

The covid pandemic-driven "continue studying without school" scenario, and the "Double Reduction" Policy effective from July 2021, which significantly restricted subject-based after-school tutoring institutions, jointly propelled the surge in demand for learning machines. Parents, seeking alternatives in the wake of reduced tutoring options, turned to learning machines as a viable and adaptive educational solution.

Public news sources highlight a significant transformation in the domestic education tablet market, experiencing a sell-in volume growth rate surge from 3.9% in 2018 to 7% in 2020, further elevating to 7.2% in 2021 and double-digit growth in 2022. This remarkable uptick underscores the pivotal role learning machines played in addressing the evolving educational needs of students during challenging times.

02 Market Dynamics in 3Q23

According to Sandalwood’s China Online data, the learning machine sector exhibited a stable yet robust growth in 3Q23. Overall online sales grew at +24% y/y compared to 2Q23's +27% y/y. The learning tablet sub-sector experienced a noteworthy evolution, with online sales growing at +11% y/y in 3Q23, reflecting a strategic adjustment from the substantial +56% y/y growth observed in the previous quarter.

03 Top Companies' Dominance

In the competitive landscape of learning tablets, the top 4 companies—Better Life, Iflytek, Xueersi, and Xiaodu—maintained their dominance. Their aggregated online sales surged at +58% in 3Q23, though showing a moderation from the extraordinary +152% in 2Q23. Despite this, these companies remained stalwarts, contributing approximately 65% of the total online sales in the sector, maintaining stability from 2Q23's ~69%.

It is evident that learning machines have become a cornerstone in the education landscape. Investors, educators, and parents alike are navigating this dynamic market. The learning machine sector's resilience and adaptability signal a future where innovation shapes the future of education in unprecedented ways.

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