Shanghai Evans Investment Management Limited

Interview with Mr Yuexiang Wang, Co Founder | Malu Innovation

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Malu Innovation, established in 2015 and affiliated to Zhuineng Robotic (Shanghai) Co., Ltd., is a high-tech enterprise founded by overseas returnees. Since its establishment, Malu Innovation has been deeply involved in the R&D of core technologies and core modules such as robotics, AI, big data, algorithm and IoT, and has successively launched multiple AMRAMR products and software systems. It has leading technical advantages in VSLAM positioning and navigation and large-scale robot scheduling, and provides customers with intelligent, efficient, flexible and safe integrated software and hardware solutions for mobile robots.

Script of Interview

Interviewee                                   Mr. Yuexiang Wang (YW)

Position                                         Co-Founder

Company name                           Malu Innovation

Company website URL     

Interviewer                                   John D. Evans, CFA (JE)

Interview conducted on             14th August 2020

About Yuexiang Wang

JE: Start off by giving a brief personal overview of yourself (where you live, etc.). Brief professional overview (studies & specialisation, history, etc.)

YW: Yeah, so I am Yuexiang Wang and I was born at Shanghai and got my bachelor’s degrees in mathematics at Fudan university, and after that, I went to France in Europe, continue my study over there. I spent almost six years over there, finish my master’s degree as well as doing jobs over there for one to two years. And in 2015, I came back to China and founded Malu Innovation with some friends. And after now we have a company team of about 100 people and we are producing robot solutions for companies and clients from here in China as well as overseas.

JE: Now, I think you studied in France, is that correct?

YW: Yes, Ecole Polytechnique, Paris.

JE: I mean, it’s been a long time since I’ve lived in Europe. I mean, is the state of education and technology and robotics advancing in France? Or, or were you studying something slightly

YW: Yeah, something different. So, I think France has a different educational system compared to the Britain or United States or a very big difference to even China. Example, our university or the so-called Grande Ecole is really great school degree. Here they have received the general engineering degrees. And now some of them for example can expect more theoretical ones, but also involve more vocational fields, for example for computer science.

JE: Okay, okay. And you move back into 2015. But I think according to your website, you started off in Shenzhen.

YW: Yes, because we are doing robotic solutions in the beginning. When we didn’t have that prototype, we thought it’s easier that were closer to the suppliers and can be true, because we order something from online regardless of the time in the afternoon, sometimes several hours for delivery, very interesting and convenient for building the prototype.

JE: But then within a year, you moved back to Shanghai. What was the reason for not staying in Shenzhen and coming back to Shanghai?

YW: Because on the client side, so for one year, essentially we have two or three prototypes, and all the while contracting with our clients, etc., comes far away not so concentrated as in China, in Shanghai. That’s why we moved back to Shanghai, so I develop better relationships with our client.

JE: Okay. So, Shenzhen was very much for the development of your technology, but the customers and the market was in sort of the Yangtze River Delta. So, you came back to be close to your customers. Okay, very interesting. Is Malu Innovation 100% of what you do or do you have any interest in, in other companies, strategic partners, investors, etc.

YW: Yeah, its 100%, or even 120%. It takes all of our time.

About Malu Innovation

JE: Okay, good for that. So, let’s, let’s turn to the second section now and talk a little bit about your company, Malu Innovation. I know you’ve put a timeline up on the website. But, we won’t be showing that in this article per se. So, give us a little bit of the history of the company since it was first established, I think in 2015. Until today,

YW: Yes, since 2015, in the beginning were looking for a robot solution for the e- commercial warehouse. Workers in these houses are working really hard. They have to finish almost one and a half marathon per day, just to do the peak period. Our job, our solution, is to place some moving parts in this warehouse, so that the workers can concentrate on the picking instead of moving around and to be really tired, reducing mistakes during the process. However, after we delivered our robot solutions for several companies in 2016/17, we began to look into the new markets, much bigger markets in manufacturing. For example, we’ve got our solution into the Land Rover factory and providing picking solutions as well as moving solutions for big manufacturing companies in the assembly lines to ensure higher efficiency or lower error rates, etc. Now we have providing our solutions for solving warehouse but also even a manufacturing process.

JE: Now I’m not an expert on robots, but I’ve seen a couple of different applications. So, I’ve seen the distribution centers for like Alibaba or Amazon, where they’re moving lots of inventory around but also seen the big production lines where the robots are huge and part of a manufacturing process. Do create those two different types of robots. I mean, do you do both of them? They seem to me a very different line of product.

YW: So, we are focusing me on the AGV’s or automotive guided vehicles, which move around in a factory in warehouse that is different from the traditional industrial variables, which are more robot arms.

JE: Yeah. But for when you mentioned the Jaguar Land Rover plant, and that was larger, more industrial robots like to a production line. So, you’re also moving into that sector as well. Is that correct?

YW: No, actually not, because it’s factory we’re still with a moving robot, the AGV’s, because before the workers are using humans to transfer the carts of the parts to different locations in the assembly line. Now we are using the AGV to the process automatically or systematically.

JE: Okay, okay.

YW: But in the factories the inventory management prefer about our mature solutions and already done by the big companies.

JE: Okay. Okay, so that’s very interesting. So, it’s very much as you said AGV’s the movable ones, not the big simple fixed things that are a part of the production line. Okay. Now when I was researching that a while ago and I wrote a very brief overview about industry 4.0, it was more about the big industrial robots, precision manufacturing and how those go together. What about the storage, is that as relevant in your sector when you’re using these movable robots? Is there the same important relationship between the automated systems and the precision storage? Or is it less of an issue in your sector?

YW: I think it is very important, highly connected to the industry 4.0 because with automated capture and automated warehouse, of course, we need as robots do the job to do the final job. But for the transferring products, we also need more elastic solutions or more scalable solutions. For example, due to the cost of change of the clients need, we have to readjust the assembly line. For example, previously we need to process one or two steps, in the production. Now when you have to add to that all of the steps from before the only solution is the track-AGV or with conveyors. So once fixed or once installed, it’s hard to switch over, adapt them to the new condition. Otherwise AJV our new solutions, can kind of realize this elastic as well as the scalable products from the elastic scalable solutions. So much has changed in the assembly line. There’s no need to change the infrastructure, just put out more configurations in our systems and our robots in the new job. This line becomes more interesting and part of Industry 4.0.

JE: Yeah. So, is your company also designing the storage facilities and all of the other things in addition to the agvs?

YW: Yes, we’re part of the precision storage solutions because it’s all the facilities that can be adaptable to all AGV’s ease and work.

JE: And you’ve mentioned the e-commerce industry a fair bit. I know when, when we were on a call together before, you also mentioned the pharmaceutical industries. Are there another two or three industries that are real targets for your company other than e commerce and pharmaceutical?

YW: Yeah, pharmaceutical and e commerce are mainly for the warehouse or the distribution center. Whenever the warehouse has multiple SKUs or complicated ordered structures. We can use the robotic solution to lower the level calls, but also the help standardize the whole process. So, we can have a better efficiency etc. but e-commerce, pharmaceuticals these are key parts, but also now, as in the Land Rover factory, the Karman edge brain, additional assembly line, the electronic type. These are the traditional manufacturing factories in us our solutions. Okay.

JE: Okay. Sounds very interesting. Tell us a little bit more about your team. Did you have co-founders? What is sort of the group that’s managing Malu with you now? How many of you are there etc.?

YW: Yeah, in the beginning is four co-founders. All of us study background as well as working backgrounds, not only here in China, but also overseas, many in France or in United kingdoms and that’s now after four or five years. In startups, we have a better, more experienced team example, we have our Sales Director, which has been in the logistic industry for more than 15 years. We have our Supply Chain Director, which has been working for traditional robot arm factories and our aim is to ensure we have a better supply and factory assembly condition for the whole team of around 100 people, and 15 are for research and development,

JE: You and the other three or four founders Did you know each other before the company was formed? How did they come together?

YW: Yeah, that’s interesting combination. Actually. Three of us are high school students, high school classmates. And the three of us are also University classmates. The two of us, the CEO and me, we are from the same school in France, Ecole Polytechnique.

JE: Okay, so there’s been a long connection between many of you, right? Some from high school. Okay, well, that’s, that’s very interesting. So at least you know, the people you’re working with. There are no strangers there, which is always an important thing. Okay, so you’ve answered the third point, the company, currently 100 staff now, it’s becoming much more growing, much more structured. You’re getting specialized salespeople. I think you said you had two facilities, an R&D center and a manufacturing plant in Shanghai. Was that correct?

YW: Yeah. Our R&D center is in the center of Shanghai. So, we have better access as always, got your groups, more technically adept people. We have our factory located in suburban areas in Shanghai and we’re still looking for bigger sites because we have already seen there’s a bottleneck in our production. There’s many owners and we’re looking forward to expanding our factories to satisfy this need.

JE: Would that mean you’d add a second manufacturing plant or just move your manufacturing to a single, much bigger plant?

YW: In the beginning we will keep two sites working together, and we’ll see whether the second or the bigger one could replace totally the original one.

JE: Okay. So even this year when we’re all suffering from the COVID-19, your business is still growing or are you just anticipating good growth, maybe come next year.

YW: Actually, the growth is much faster than we expected. Actually, how in Q1 we were totally free, no business activity, there was no business trips. However, by April or May, when we could move around in China and we’re also starting to have Videoconference with clients overseas, we are receiving more and more orders from both here in China, but also over the Asia Pacific areas as well.

JE: Okay, now, that’s interesting. So, the fourth point was looking at your geographic target market? So, it’s not just China, you’re already starting to get some exports or overseas sales? Tell it tell us a little bit about how that’s developing.

YW: Yeah. And also, we’re trying to keep our quality of our products to the EU standards. Some of our products have already received with the CE certificate. We can export them for the European areas and as instinctively or presents the principal problem or solution trying to replace the human beings. So whenever when the labor cost is higher, the higher the labor cost, the more adaptable and more important our solution is. So, we’re looking for more developed areas, for example, Japan and South Korea, as well as United States, Singapore or for our European

JE: Okay, now, when you’re going into a lot of different countries, there’s always the issue, will there be varying regulation? So, for the robot industry, do you need to get any local regulatory
approval in a different country or in the EU? To sell those or our robots within warehouses, sort of an unregulated business.

YW: Yeah, depending on areas, I think the robots because they’re their electronic products. Yeah. So, answer certain regulatory agencies that demand regulatory standards. And that’s going to be in different areas. And also, we’re looking for local patents. We have a better understanding and analysis concerning the local regulations and we are going to launch our products in cooperation companies, with these partners, to make sure that all of our products can satisfy any legal requirement.

JE: Now, I remember in our previous conversation, you said you were interested in expanding into Europe potentially, but you also have just said now that you see, potentially Singapore, Japan and South Korea as areas to expand as well. So, what’s the what’s the priority? That’s a big area EU, Asia you also said America. What is sort of the priority about which country you may try to go to next?

YW: In the second half year of 2020, I think we focus on South Korea, Japan and Singapore, not only because you’re closer to China, but also I think the influence of the COVID19 is less important than the Europe.

JE: Okay. And then, so that that’s the first step, the developed markets of Asia outside of China. And then maybe the next step after that might be, would it be Europe or would it be America?

YW: The US, it’s complicated, especially nowadays, this relationship, probably not in a good direction.

JE: You can come back and revisit that on the 21st of January 2021. Maybe there’ll be a different perspective. Okay, good for you. I was just writing down a few notes there. So, you’ve got expansion plans. I assume robotics is still a big growth market in China. So where do you see your company in three years? It sounds like it’s going through a very high period of growth, both domestically and maybe potentially internationally.

YW: Yes, probably three years we’re looking forward to more mature supply chain systems. more mature after sales supporting team, because we’re selling our solutions. So, we look forward to continuing to talk to many clients. And here in China, it’s the first step of automating the whole warehouse the whole process and once entered into markets or into different industries looking forward to doing better jobs, improvements, industries. For example, first half it’s only 10% of automation robots are that we’re looking forward to making that 30% is this continuous improvements we help to improve our products improve upon solutions, not only the stability but also looking for more versatile. For example, we can make our clients configure by themselves. So, our solution could be more to be adopted to different areas all by themselves instead of us. In the beginning, it’s only our engineers who do the configuration. We will help to build at first, but once launched the clients can adapt them to, to their different needs in case of changing their assembly line. Actually, that’s the original idea of this. So, when with standard robots, solutions, clients can switch or configure between different areas, etc. So, adapt these ones to more elastic and scalable working conditions.

JE: Okay, so the R&D Center, based on what you’ve said, it’s more looking to refine and advance the robots you have as opposed to trying to get into some sort of brand-new line of robotics. Is that correct?

YW: Yes, because were doing a more industrial kind of jobs, and there’s all kinds of news coming from different companies from different countries, and we are looking forward to integrating all of them into one single system, and during the process probably will transfer the know-how from this industrial this can be the core parts of our site. So, during the standardization of the process, we can find this stock or saved expertise on different name searches.

JE: Okay. Now, if you’re potentially looking forward to a, a period of high growth, how are you going to find finance that can you do that from internal profits or will you need to raise external funding? How are you going to finance a potentially high growth rate?

YW: Yeah, we’re seeing the beginning side because 100 people is not a big company. And all the solutions will probably have a pay-period of longer, it’s a half a year or one year. So, in order to keep a balance, will be bigger. In the beginning, in the ones we have several dozen online same time, probably the first projects can finance the second batch catch up. And again, go around, the beginning we will still need an investment to particularly for the growth, and up to 1.4 million can keep the balance.

JE: So, are you looking for some external financing this year? Is that what you’re saying? Yes. Okay.

YW: That’s we’re looking for a fundraising right now.

About the Robotics Industry

JE: Okay, okay. Very interesting to know. Let’s talk a little bit about the robotics industry. You’ve already differentiated two segments, the sort of what you call the AGV’s, the smaller ones and the bigger, less movable, industrial robots and you’re more focused on the first sector. How homogenous is the industry for robot producers in China? Are there a lot of firms like you, are there a lot of smaller firms or is it dominated by a few bigger firms?

YW: Now, betters can come in this area, this robotic solutions company. There are several competitors including big, listed companies.

JE: Okay. How many how many firms do you feel like you’re competing with in China in total? In China, how many direct competitors? do you have? Number? Three, six,

YW: Between 10 and 21.

JE: So quite a few. Okay. It’s not like the tech industry where there’s sort of two or three

YW: There are more startups entering the market right now.

JE: Okay. Are they concentrated in any one part of the country are they spread out all over?

YW: Several in Beijing, Shanghai, as well and also in Hangzhou.

JE: So those are the three major centers. Who are the major suppliers? I mean, do you physically manufacture your own robots and build them from raw materials yourself?

YW: Yeah, some of them from different modules. Of course, we will not produce our own motors who or not produce our own cameras. We ordered them from different suppliers and they do certain adaptations for apartments, and we’ll do the assembly afterwards.

JE: So, you do the design, you outsource the manufacturing of some or many of the individual components and then you do the putting together and the delivery and installation in a client’s warehouse. That’s it. That’s how it works. How many different suppliers would you have in a robotics are there a very large number of different one for each component are?

YW: There are a lot of components.

JE: Okay. So, a large number of suppliers. So that’s a complex situation for whoever is managing your supplier relationships? And on the on the customer side, do you tend to have a several very large customers that, you know, maybe account for 60 or 70% of your sales? Or do you have a much larger number that have customers each, which take maybe a smaller percentage?

YW: Yeah, it’s also kind of evenly distributed.

JE: Okay. So as Michael Porter would say, Lots of suppliers and lots of customers. Okay, fair enough. How big? I get the sense that China is leading the world in terms of robot development and applications to manufacturing. Is it fair to say that this is sort of the place to be right now in terms of robot applications? Is that how you view it?

YW: Yeah, probably because China is the number one manufacturer in the world. So even though only a small percentage of it needs to be automated, it’s still a huge market, and also especially for e-commerce areas, China is number one, even bigger than the US markets with Amazon inside. We have the good features for robotic solutions. Not only for warehouse but also for manufacturing factory, the factory. So, I guess that’s why we came back to China as well, because there’s more new or startup environments. So now it’s our choice. And also, we think that’s a choice we’re about the robotic industry as well.

JE: Do Japan and South Korea have large domestic e-commerce industries? I know there are industrial robots, particularly for automotive production has been in place for a very long time. But you think there’s an interesting market in Japan and South Korea? So, what’s the short-term opportunity in those two countries?

YW: Yes, as you mentioned their industry robots are really advanced, the manufacturers all are Japanese companies. And however, concerning the AGV market, probably the Chinese is a better advantage, compared to there and also the labor cost over there. The aged people percentage over there are much higher, and they have strong requirements for these kinds of robotic solutions.

JE: Yes, I think wages are certainly very high in Japan. So that’s a real economic driver. Okay. We’ve talked about the nature of this situation in China, we’ve talked about your suppliers, your competitors. What is the general business model, the revenue model, I mean, is your business? Sort of a, cost per individual robot and so the more robots you sell, the more you charge? What’s the basic structure of a contract and revenue model?

YW: Basically, we’re a solution provider. In the first place we do the planning for our clients as to how many robots are required, specific technical requirements for the systems, how many APIs to develop, etc., to ensure launch of the solutions.  And also, in a contract as the first part, the number of robots requirements, adaptation of the systems or software architecture and because of that, through learning, how we launched the products, in example, how to do certain tax rate adaptation. The electricity is fire to the robots with them, etc. So, this is your top and also for a second part to continuously support our clients, total service afterwards, especially when the solutions are usually designed for 8 years or 10 years. Service after installation.

JE: Okay, so there the initial evaluation and design of what’s needed. There’s the production and delivery of the robots. There’s the aftermarket service maintenance. I mean, do you offer that all as one single bundled service? Or do you charge say, a consultancy fee to go in and determine what the robots are to charge for maintenance separate? Do you take that as sort of three distinct lines of revenue? How does that work?

YW: As we mentioned, we have so many clients, even distributors, so we have not only smaller clients but also big groups, though, with different clients will have different solutions for them. For example, big companies usually prefer bundle, we are going to listen to all our different items, solutions, etc.. And in smaller ones, they prefer a more designed one, as once fixed is different to change, we are kind of elastic on our size.

JE: Okay. One has to be flexible these days, doesn’t it? Do you need to provide training? Is that an important part of your aftermarket service, particularly if a company is introducing robots for the first time?

YW: Yeah, it’s very important to do the training, not only for the operators for safety reason, but also for our customers, and always because sometimes we need to support the market. So usually we have a one-week, two-week training for the techniques as well as engineers ensure they’re the smooth installations of our solutions on time.

JE: Okay. Very interesting. So, we’re in August now, is there sort of any general industrial cycle that is seasonal? You know, I guess it’s a difficult year to make generalizations with the Coronavirus, but when you’re selling industrial products, I mean, is there parts of the year where you’re getting the bulk of your sales? Or is it just a continuous sales process over time of a fairly equal amount?

YW: Maybe circle seasonal circles around our rows. But right now, it is a continuous growth.

Case Study

JE: Okay. And I guess with so much of the economy about to change, it probably will be continuous for quite a while to come. So that’s very interesting. Now, I’d like to finish off with just a very brief case study. And I’m very interested in the Cherry Jaguar Land Rover thing that you’ve talked about. Now you’ve given us a generic overview about the customer assessment, the building of the robots, the training, but give us just a little bit more details of those steps. In the Cherry Jaguar case, just so we can visualize it. And that is Cherry Jaguar automobiles, so those are large, more industrial robot production.

YW: Yeah, that’s right. So, it’s very conflicting, typical case. Good choice either way. And, and so the whole process can be which suppliers that they were using, takes about one and a half year. So, we participated with all the major competitors here in mainland China. Comparing here and there, providing a solution designed for them, including the robot types were produced, where he was going to use the host to restructure the technical specifications, and how long we’re going to do the installation etc. So, during the process, we have to go into the factories and know exactly how it works originally with the traditional ways, and we said, we’re going to discuss with the local workers operators as well as the managers and decide why or in the how far we go. It goes immediate process. So, in the beginning we have several or even several dozens of projects, presentations, describe our solutions. And each matter was applied, how many AGVs and how many APIs are going to use a week The process the flow charts, to do the how the data flow as well as the material flows and move around between their original systems and the AGV system and get backwards capture. And once finished the whole process, we’re going to produce the robots if there’s any specific requirements, and after installation after the testing area, etc., and also on site, well, that’s the hard part. There’s another parallel part, where we think software connections, we there IT for example, we are going to configure, they are using the original SAP systems and how our system can connect to them and the specific APIs between the demo products or the older requirements, etc. So once done, software, hardware, we are doing together and conversion a single point where we do the testing, which leads to AGV on site will the job. It is to continue stuff because in a factory sometimes, even though we have a big area, and we’ll be automated, however, we can only do the construction for something or do the preparation for a single part. And it is parts to build jobs once it’s done producing second part, and one little one, the whole parts of the estimated. And in this process, we continuously improve the software requirements as well as the software connections between their systems in our systems. And I think the preparation will become virtual, very fast, four months. And afterwards we have a half year to examine the continuous improvement of the system as well as the hardware. Yeah, that’s kind of the general outline of how it works in the Jaguar Land Rover

JE: And you said a while back in China, there was about 10 to 20 competitors. How many of you were competing on this specific contract?

YW: Ten to twenty of the hardware providers, and of the whole solution provider, I think it’s limited to ten. And this one, I think, all four or not actually, 5 or 6 of the major competitors are in it.

JE: So very competitive situation. I assume it must be more difficult to convert a plant that’s in place and manual and try to convert it to automated as opposed to building a plant that’s automated, right from the scratch where, you know, you don’t have to deal with legacy systems. It must be very complicated because you said there was an existing plan, there was old ways that sort of transition must be very difficult to manage.

YW: Yeah, just like software development, it’s always hard to convert something then to finding a new one.

JE: Okay. What was the end result in terms of the increase in automation? Can you give a percentage of what was the conversion from people manual labor, was it a reduction of 20%, 30% just sort of an order of magnitude.

YW: So, example, traditionally, the one person outputs rates will be doubled or tripled, when after the completed process. For example, original one people can pitch 200 objects an hour and with this real time solutions and generate support 400 or 500 items an hour.

JE: Now there’s two possible outcomes to that, you can hold your production level and just reduce your staff and costs or you can hold your staff and cost level and greatly increase your output. So, was this more of an objective to greatly increase the output? Or was it more to reduce the labor and the cost side? Or both?

YW: It is a difference between our clients. So, some people are looking for these solutions. Some are looking for the other side. And most of them I think that’s the general purpose of all factories around reduce the people increase efficiency increase output.

JE: Okay. What is your general thought on automation, you know, China, the demographics, the cost pressures, the economic pressures, the labor employment issues? How do you think robotics is going to impact the country and employment in general?

YW: Yes, robotics, there are two types of robotics, there is the hardware ones and there also software, side robotics, for example, or the AI community etc. And I think we’re doing the jobs to replace the traditional or simple, repetitive works in the physical side, from our robotic solution. And all the AI solutions or algorithms, are replacing the human being seen the other the other way around. I think this is to maybe one in the future could Converge together and produce a general-purpose robot. But I think 10 or 20 years in the future, not right now, I think that will further increase the working conditions in different factories and also to liberate people from repetitive task so that people can do more creative job. And our job is to try to make all the jobs in the warehouse in the factory easier.

JE: And I guess if you’ve looked at it from population projections, in the second half of the century, there’s going to be a projected big drop in China. So, there will be just an outright need for more labor as well. So, I guess there’s, it’s not just replacing people currently, but it’s replacing labor in the future that may not physically be there in human form, so I can see it being driven by a lot of different things. It’s the business is your company. I’m sure it is very profitable. It sounds like you’re at an early stage in the growth cycle because you’re not into the older, more industrial robots of the manufacturing line. It sounds like it’s probably got many years of good high growth in front of you. Do you do any sort of medium-term projections three to five years to speculate how much the company may grow over that point of time see increase in revenue or things like that? Or is that too speculative?

YW: Actually, it is growing at its own pace so we cannot do the predictions.

JE: Okay, so, as we used to say, you just ride the wave and the waves going in the right direction.

YW: Okay, we’ll see how far we’ll go.

JE: Very good. Very good. Okay. Well, that’s, that’s been a very good overview. you’ve addressed all of the four sections here. It was very interesting to hear about the case study that sounds like a very complex and competitive situation. But I guess any big commercial contract is these stays. Is there any sort of closing comment you’d like to make just about the industry, the company that I’ve not thought to raise in our discussion?

YW: I think that’s a very good time for a lot of companies. Because the technology, the computational power, the social conditions are all kind of right now. And during the process of talking with our clients and implementing our solutions, we saw a real increased improvements logging additions as well as an efficiency of these facilities. So, we look forward to continuing along and hopefully, we can have further automation automated job ensure a better quality. Much better efficiency, right?