Advantech’s Dual Subscription Service and Cross-Border e-commerce Platform Strategy
Advantech (TWSE: 2395), a global leader in Industrial IoT, hosted its latest investor’s meeting today. Advantech’s operating revenue and profit both hit historic highs in the first half of 2022, with a year-on-year growth of 20% and 36% respectively. The gross profit margin in the first half of the year rose to 38.4% and the consolidated net income after tax was NT$5.03 billion (net profit margin 15.3%). The EPS for the first half of 2022 reached NT$6.49.
Optimistic outlook for the second half of the year: aggressive operation upgrade to embrace the booming business opportunities of AIoT
Eric Chen, President of General Management commented that looking ahead to the second half of 2022, despite uncertainties such as elevated inflation and global economic slowdown, major markets are still actively promoting net zero and energy transition, driving growth and the inelasticity of demand for intelligent manufacturing, intelligent energy management, and smart cities. With production capacity preparation in place and improvements in component shortages, disruptive factors are expected to decrease in the second half of the year and previously accumulated orders have a high chance of being delivered. It is estimated that revenues in the third quarter of 2022 will challenge the new high of US$590~610 million dollars, and the operating margin ratio will be between 17.5% and 19%, representing steady growth of overall operations.
Eric added that in the face of future opportunities and challenges, Advantech will propel forward both internally and externally to deepen strategic planning. Internally, we will strengthen the procurement process and optimize inventory control, so the benefits of the direct supply strategy will gradually take effect. Externally, the regional business development strategy, the reorganization of GIRC (Globally Integrated Regional Competence), and the establishment of a new team formation were all gradually completed last year to deepen the capacity of local services and make the global service network more comprehensive.
In terms of inventory, Advantech's inventory turnover days in the second quarter was 125 days, a slight drop from the previous quarter, but still at a relatively high level compared to historical records. The operations department has carried out inventory level control and mitigation of risky materials. The goal is to reduce the inventory turnover days to 100-day levels by the end of 2022, so that the inventory structure will return to its pre-pandemic standard.
WISE-IoT transitions to a subscription service with iEMS BU first to apply
ChingPo Lin, Associate Vice President of Industrial-IoT Group said, “Advantech has invested in the WISE-IoT field for many years and has deep experience in IoT hardware products, software platforms, and module integration, as well as solution implementation. To embrace the rapid growth of AIoT in the next decade, the transition from Advantech WISE-IoT into a low code subscription-based business model will be regarded as a major development strategy. The stability and visibility of revenue sources will increase by applying an Annual Recurring Revenue (ARR) business model, so that the overall operating structure will be more stable and mature. At the same time, we will support the development of industrial software with our in-house software teams and develop industrial applications with co-creation partners.”
In order to fully develop the subscription-based business and in line with the global trend of net zero and energy conservation, we will invest more in the intelligent energy management solution (iEMS) business and launch a flagship no code/low code total solution to meet customers’ management and production needs in energy monitoring, carbon reduction KPI, net-zero pathways, and energy cost saving. At the same time, iEMS will be adopted in Advantech’s own manufacturing centers on both sides of the Taiwan Strait to showcase real world demonstrations of intelligent energy solutions.
Finally, for the customized needs of a small number of large-scale prime customers, Advantech will mobilize corporate resources and set up the IoT.SENSE team to selectively undertake key projects that deepen the collaboration and subcontracting cooperation with system integrators.
Construct IoTMart cross-border e-commerce platform to complete the digital transformation of an industrial AIoT ecosystem
Linda Tsai, President of Industrial IoT Group, pointed out that the pandemic has created unexpected remote and contactless business opportunities, bringing about a positive impact to people’s work routines, manufacturing processes, and commercial business activities, thereby creating new business momentum in the global IoT industry. Advantech targeted contactless business opportunities and developed the IoTMart 2.0 cross-border e-commerce platform, which combines an online platform and precision marketing to drive forward the complete digital transformation in its global sales.
Taking advantage of IoT technology, Advantech realized the high level connection of online and offline platforms, global logistics and warehousing, and a backend administration solution that seamlessly links all processes from ordering to shipping to enhance the customer experience. Embracing great business opportunities of cross-border e-commerce in the future, Advantech not only deepened its collaborative operation with its regional offices to explore potential new customers, but also became an industrial e-commerce platform and service provider for digital products. Advantech will continue to cooperate with co-creation partners in sales and grow its business synergy, as well as accelerate the development of an industrial AIoT ecosystem. Lastly, Advantech plans to establish door-to-door IoTMart distribution centers in Taoyuan/Taiwan, Illinois /US, and Kunshan/China, to restructure distribution competitiveness and fast delivery service for popular products.