Advantech ready to embrace IoT challenges

Colley Hwang, Suzhou; Willis Ke, DIGITIMES Asia 0

The just-concluded 2018 Advantech IoT Co-Creation Summit held in Suzhou, China highlighted the top IPC vendor's roadmap for developing IoT solutions and services in cooperation with global partners, in tune with the forum's theme of "co-creation." And the sheer size of the event showed Advantech's determination to embrace the challenges of the IoT era.

The event proved quite a success, as it gathered more than 5,000 business partners, media representatives and venture capitalists, according to Advantech chairman KC Liu, who along with other company executives, including board executive director Chaney Ho and president Eric Chen, demonstrated what "co-creation" means.

Advantech believes that the thriving IoT market provides immense and multiple business opportunities that are ubiquitous and growing fast, and new business models beyond the traditional "design-win" model are required to secure a preemptive presence in the space. Accordingly, Advantech adopts the strategy of soliciting more partners to develop vertical markets. It will provide partners with cross-domain and cross-platform service solutions integrating software and hardware to co-create business opportunities and achieve a win-win scenario.

Cooperation with 20 DFSI partners

At the event, Advantech signed cooperation contracts with 20 domain-focused system integrators (DFSI) in China, which can offer customized domain-oriented solutions in their respective dedicated fields of smart manufacturing, smart city, information security, mobility and smart healthcare. The company plans to build business ties with 50 more DFSI partners in 2019 and then pursue an annual increase of 20 such firms from 2020 on.

In his briefing, Advantech CTO Allan Yang said that as IoT services are still short of standard solutions, intermediary service platform will play a crucial role in this regard. Yang highlighted the importance of Advantech's WISE-PaaS (platform as a service) architecture, which can serve as an intermediary platform between a data platform and application end to provide an easier access for customers and allow them to pay only for use.

Advantech has managed to sustain healthy revenue growths and high gross margins over the past few years. The company saw its revenues for 2017 surge 12% on year to US$1.455 billion, and its revenues for the first three quarters of 2018 expand 14% on year to US$1.213 billion, which is expected to soar further to US$1.6 billion for the whole 2018. The firm's average annual revenue growth will hit a high of 11.5% during 2010-2018, with its gross margins lingering at a high level of 38-39%. High gross margins have enabled Advantech to step up business upgrades and transformations and enhance deployments in the IoT space.

Operation strategy for 2019

When it comes to operation strategy for 2019, Advantech will focus on consolidating its manufacturing systems, tapping edge-computing business opportunities and promoting localized production and services worldwide.

Advantech president Eric Chen pointed out that in order to render better services to customers in Japan, the company has acquired a 80% stake in Japan-based ORMON Nohgata, a specialist in embedded computing systems, and both sides will also enhance cooperation in IoT platform services.

Advantech has also shown high regard for multiple manufacturing systems at its plants. The firm's board executive director Chaney Ho noted that Advantech's robust capability of handling small volume production of a variety of products has helped to maintain the firm's gross margins at a certain level despite the shortfall of components. In 2017, Ho continued, the firm's plant in Kunshan, China, managed to boost its per capita production value by 16.9% and cut power consumption by 7.8% while slashing its workforce by 2.2%.

Marketwise, Advantech has seen 78% of its revenues coming from Europe, North America and Greater China, with North America contributing 27.1% and greater China 32% (including 25% from China and 7% from Taiwan).

To mitigate the impact of US-China trade rows, Advantech China general manager Paul Luo said that his company will continue soliciting more DFSI partners in smart manufacturing or smart city sector, adding that Advantech has developed a set of mechanism to sort out reliable partners and provide different cooperation packages in accordance with their professional competences and financial conditions.

Globalization 3.0

In terms of localized production, Ho said that the de-globalization trend is emerging, but the globalization trend is yet to subside, with Globalization 3.0 gaining momentum in 2018, which highlights localization, differentiation and customization services and requires more production foothold worldwide.

At the summit, Advantech also releases its revenue goal of US$2.3 billion for 2021, including US$2.0 billion from traditional industry-control, automotive electronics, and built-in hardware sectors, US$170 million from WISE-PaaS systems and US$130 million from cloud SRP and WISE-PaaS cloud services.

Bold moves

It is never easy to arrange such a big event, and Taiwan's ICT firms have rarely held events of such a big scale as Advantech's. The business opportunities are there, and different firms may take different approaches to seize those opportunities. Taiwan's ICT firms have been typically timid in the face of opportunites, but this time maybe they should stake bolder steps.

Advantech chairman KC Liu  Photo: Company, November 2018

Advantech chairman KC Liu

Advantech board executive director Chaney Ho  Photo: Company,  November 2018

Advantech board executive director Chaney Ho

Advantech president Eric Chen  Photo: Company, November 2018

Advantech president Eric Chen

2018 Advantech IoT Co-Creation Summit  Photo: Company, November 2018

2018 Advantech IoT Co-Creation Summit
Photos: Company

Colley Hwang, president of DIGITIMES Asia, is a tech industry analyst with more than three decades of experience under his belt. He has written several books about the trends and developments of the tech industry, including Asian Edge: On the Frontline of the ICT World published in 2019, and Disconnected ICT Supply Chain: New Power Plays Unfolding published in 2020.