Advantech Strengthens Core Strategies with an Infinite Game Mindset to Embrace the Rapid Growth of AIoT in 2025
Advantech (TWSE: 2395), a global leader in Industrial IoT, hosted its latest investor’s meeting today. Advantech’s Y2021 second-quarter revenue was reported to set a second highest record in a single quarter. However, due to component shortages and rising costs, the operating revenue growth rate for the second quarter was 36.7%, slightly lower than the previous estimate. The second-quarter EPS was NT$2.31.
Optimistic second half 2021, 30% production capacity increase drives order deliveries
Eric Chen, President of General Management commented that, “Looking ahead to the third quarter, apart from the relatively higher rate of deferred orders in North America affected by components shortages, we benefitted from projects resumed after lockdown and all the other remaining markets are expected to see double-digit growth rates. In terms of business units, benefiting from the soaring demand for new infrastructure, new energy (wind power, solar energy, electric vehicles, etc.) and smart healthcare, the overall business operation momentum is strong. It is estimated that the revenue in the third quarter will fall in the range of US$510 to US$530 million, and the operating margin ratio will be between 16% to 18%.”
Jamie Lin, Chief Operations Officer, added that thanks to the significant demand increase for industrial computers, servers, and industrial applications, the number of new orders in the first half of the year increased by 80%. The second quarter's book-to-bill ratio (B/B ratio) reached a historical high of 1.72 and order visibility extends to the first half of 2022. However, the impact of components shortages continues. In response, apart from optimization of procurement procedures, Advantech adopted a proactive approach, such as signing long-term agreements to guarantee supply commitments, as well as introducing alternative component sources. To prepare for the peak of order deliveries after the shortages, Advantech also plans to scale up production at its Taoyuan and Kunshan sites simultaneously. It is expected that production capacity will increase by 30% in the second half of the year.
Reorganizing regional organizations and establishing a new team formation with GIRC
Eric further explained the business concept of Globally Integrated Regional Competence (GIRC) proposed last year for the development of a new global market strategy. The headquarters will penetrate the global market with a so called “Sector Drive” strategy, and will strengthen local services with two core strategies, both deeply rooted in the capabilities of regional Corporate Management & Development (CMD) and commercialized domestic services with Advantech Service Plus (AS+). These strategies will first be carried out in Japan and South Korea for reorganizing regional organizations and establishing a new team formation. The combined revenue of Japan and South Korea aims to exceed US$400 million by 2025. The same business concept will be gradually implemented in China and Taiwan.
- Sector Drive: iHealthcare, iCity Services, Energy & Environment, iFactory, Focus AOnline/IoTMart, General Channel & eCommerce Channel, Industrial Equipment Manufacturer/Machine to Intelligence Transportation, Embedded (Standard), DMS/KA Design-Win, Cloud Platforms.
- Regional Corporate Management & Development (CMD): Digital Business & Infrastructure, Sales Operation & Management, Organization & People Development, Corporate Investment & Alliance, ESG & Corporate Branding.
- Advantech Service Plus(AS+): In addition to maintaining the existing customized assembly and RMA support services, the organization also extends its services to on-site services, leasing services, system integration services, and even one-stop shopping services for industrial peripherals.
Plans to build 15 AIoT emerging business units in the next five years
Advantech Chairman KC Liu said that according to Gartner, the AIoT application market will see strong growth in software solutions and industry integration services from 2020 to 2025. To cope with the wave of growth, Advantech will expand investment in its software platform business that includes WISE-IoT, Solution Ready Packages (SRPs), and regional service business development units (Advantech Service Plus, AS+). At the same time, a clear marketing blueprint for the emerging business unit (SBU) has been proposed. It is estimated that a total of 15 new business units will be established before the end of 2025, including about 5 business units for AIoT software and industrial apps, 7 business units for Solution Ready Packages (SRPs), plus 3 new business units for Advantech Service+.
Advantech hopes to become one of the world's leading companies in industrial AIoT, and reaffirms its determination to accelerate the achievement of the AIoT ecosystem. The company also wishes to invite partners in various sectors to jointly invest in AIoT applications and establish co-creation business models to share in the huge business opportunities together.