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Advantech Strengthens Core Competencies with GICC Strategy and Embraces the Rapid Growth of AIoT up to 2025

3/2/2022

Advantech (TWSE: 2395), a global leader in Industrial IoT, held an online investor conference today. Advantech’s 2021 operating revenues and profits both hit historic highs, reaching year-on-year growth of 15% and 14% respectively. However, due to component shortages and rising costs, the annual operating gross margin was 37.8%, the consolidated net income after tax was NT$8.25 billion and the annual EPS reached NT$10.67.

Optimistic outlook for manufacturing capacity and organizational upgrades in response to the growing business opportunities of AIoT in 2022 and beyond

Eric Chen, President of General Management commented, “Looking ahead to 2022, and benefiting from infrastructure upgrades in major markets and demands related to the electric vehicle and new energy business, the outlook for each business unit remains optimistic and the overall operating momentum is strong. The first quarter of 2022 is expected to be outperformed compared to historical off-season level. It is estimated that revenues will fall in the range of US$550 to US$570 million, and the operating margin ratio will be 16% to 18%.”

Eric further elaborated that thanks to the significant demand increase for applications such as iFactory, intelligent energy management (iEMS), and smart healthcare, the current orders in hand have reached a record high and the 2021 annual book-to-bill ratio (B/B ratio) reached 1.56. With the increase of shipping capacity, the B/B ratio will gradually return to a healthy level. The overall supply of chips is heading in a positive direction and it is estimated that this year, the component shortage will improve quarter by quarter. However, the shortage relief time difference between various chips is still a challenge for the tech industry. It is expected that there will be an impact of 8% to 10% order backlog in 1H22. Advantech's 30% capacity expansion plan has been completed ahead of the schedule with the production capacity utilization rate is nearly full, the overall capacity is well-prepared for the order shipments in the following quarters. 

Cloud-IoT Group and emerging markets planning are key to growth in the next stage

Magic Pao, Associate Vice President of Cloud-IoT Group (CIoT) of Advantech said, “To embrace the booming business opportunities brought about by 5G and digital transformation, CIoT Group will adopt the industrial server and the niche server dual business models to gain market shares. The could and networking industry is highly technology-oriented, and Advantech has great R&D advantages in areas such as software and hardware customization, as well as in self-developed remote IPMI (Intelligent Platform Management Interface) solutions. For the Video Solutions Division (VSMD), applications such as smart warehousing and smart inspection will continue to grow in popularity, and industrial AI technologies are in strong demand, so future growth is expected.”

Vincent Chang, Managing Director of Asia and Intercontinental Region (AInterCon) of Advantech, explained that, “Benefiting from global market trends such as new infrastructure and carbon neutrality, there are unlimited business opportunities for vertical applications in the IoT industry. In addition, emerging markets have opportunities to develop and benchmark AIoT regional ecosystems, so it is expected that the next five years these markets will grow steadily with double-digit growth rates.”

Advantech has done extensive market planning in emerging markets and will further expand its market share through the following three strategies.

  1. Combine market trends and cultivate the IoT industry in depth, dedicated to vertical market development.
  2. Accelerate the realization of regional AIoT ecosystem development and strategies through strategic alliances and/or investments.
  3. Strengthen regional core competencies with the Globally Integrated Regional Competence (GIRC) vision and strategy — establishing localized service business models with local characteristics.

Making progress over the next decade with Advantech's core competencies (GICC/GIRC) strategy

KC Liu, chairman of Advantech, pointed out that to embrace the fast-growing AIoT industry, the next ten years will be a key stage for Advantech's corporate development. The company will follow in the footsteps of long-established international enterprises that emphasize the importance of strong corporate functions, and plan its strategic development, career development, and capital investment from a long-term perspective. Under such strategy, Advantech's important development directions will be unveiled for the next decade:

  1. Extend and solidify the corporate and regions’ core competencies: Integrate the concept of outside-in and inside-out thinking. Make a comprehensive inventory of Globally Integrated Corporate Competencies/Regional Competences (GICC/GIRC). Then, extend and realize them to support the effective development of diverse niche-focused business entities. 
  2. In-depth development of various application fields in a co-creation model: Advantech embraces the advantages of the WIES-PaaS platform and abundant software and hardware modules. Its future strategy is to form a co-creation cooperation model with solution integrators (SI) and independent software vendors (ISV) in various fields in order to cultivate various IoT application fields together.
  3. Separately focus on each important application field: In response to the uniqueness of each IoT application and domain, specialized and in-depth cultivation from dedicated business units will be needed. Going forward, the company plans to add several solution business units (Solution BU), including iFactory, iEMS, M2I, smart healthcare, smart retail, smart city, and more.

To conclude, Advantech has focused on the AIoT WISE-PaaS software platform for many years now and is committed to becoming a global leader in the Industrial IoT business. Not only has it launched many Solution Ready Packages (SRPs) for application implementation, to go with its IoT hardware platforms, it is also dedicated to the development of an AIoT ecosystem. To this end, Advantech actively invites partners from various fields who are willing to invest in AIoT applications to form a joint co-creation business model with the intention of contributing and leading the global promotion of AIoT.