Advantech Drives Partnership Initiative to Kick-Start Global IoT
Advantech Co., Ltd. has concluded its Advantech IoT Co-Creation Summit, which was held at the Suzhou Inter-national Expo Center in Suzhou, China. The two-day event comes in unison with the company’s artificial intelligence/IoT (AIoT) long-term co-creation business model and aims to create new values to its business and solutions, focusing on each domain along with partners in different industrial sectors.
Author: Dempa-AEI with images provided by Advantech
The 15-year business model, which it started in 2010, is dividedinto three phases. The first phase is the development of IoT architecture basedon embedded platforms; the second phase is the development of IoT software andhardware integrated solution platforms; and the third phase, is the developmentof domain-focused solution integrators. Based on its business model time frame,Advantech is already shifting towards the second phase of the long-term IoTdevelopment, which is centered on the deployment of the WISE-PaaS CloudIndustrial IoT Platform and Solution Ready Packages.
New Business Model
The first IoT Co-Creation Summit hosted by Advantech inChina serves as a kickstarter for the implementation of the IoT business modeltogether with partner companies. The summit drew 5,598 people from around theworld, including Advantech’s partners and system integrators. In a keynotespeech on the first day of the summit, which was attended by 2,500 industryplayers, K.C. Liu, Chairman and Chief Executive Officer of Advantech Co., Ltd.,said the company’s WISE-PaaS software platform has been designed with users ofindustrial IoT in mind. Based on Edge Computing, Liu said WISE-PaaS supportsthird party partners in developing comprehensive cloud-based service platformsand industrial IoT solutions. “Our company’s mission is to combine software andhardware solutions to facilitate our customers and IoT cloud service providersin IoT solution deployment,” said Liu. Concurrent with the keynote speecheswere around 100 IoT-related sessions and seminars, where more than 50 partner-companiesof Advantech presented innovative co-created applications in the industrialdomain. In another room, Advantech showcased a wide variety of products, andpartner companies displayed and demonstrated their co-created models in theirrespective booths. Panasonic Corporation presented their smart city initiativein China using Advantech’s communications solutions and system developmentenvironment. This was designed in a bid to obtain U.S. WELL Building Standardcertification, which evaluates building space that gives consideration to humanhealth and wellbeing.
Strategies Chart Growth Opportunities in IIoT
A balance of market place and manufacturing activity willbe achieved as manufacturing moves closer to the market, creating an industryeco-system and job opportunities. This, according to Chaney Ho, ExecutiveDirector of the Board at Advantech Co., Ltd., will be the hallmark ofGlobalization 3.0, as the world transforms from globalization tode-globalization. “The strategy response to Globalization 3.0 is to develop themanufacturing value chain closer to the end market and strengthen theintelligence capability of manufacturing,” said Ho. “And to enable growth inthe IoT ecosystem with Advantech as facilitator,” he added, in reference to thecompany’s 15-year co-creation business model. “There is a need to deploy IoTPhase II and Phase III to simplify and expedite the industrial IoT revolutionand the continuing globalization path to become the IoT global leader.”
Extending Solution Ready Packages
Advantech is making progress in innovating its IoTbusiness model, not only by extending its Solution Ready Packages (SRPs) withpartners to improve value creation, but also delivering value through workingin concert with Domain-focused Solution Integrators (DFSI). The co-creationecosystem creates a competitive advantage that is difficult to replicate. Themilestone Advantech announced at the Summit is to have more than 60 SRPdevelopers, around 80 DFSIs and over 1,000 VIP members of the WISE PaaS servicein the next three years. The strategy is to provide its WISE-PaaS service, acloud-enabled platform, at a very accessible price for its SRP partners duringthe growth stage. Advantech has also scaled down its venture capital activitiesto focus on investing in DFSIs and acquiring stakes in certain in IIoTstart-ups. Eric Chen, Advantech President of General Management said, “The goalin 2021 is to achieve revenues of US$2.3 billion up from this year’s(estimated) US$1.6 billion, an increase of 43 percent. It is estimated 87%(US$2 billion) will come from automation and embedded hardware products fromPhase I, 7% (US$170 million) from Wise-PaaS platform & Service from PhaseII, and 6% (US$130 million) from vertical market DFSI from Phase III.” “Solid demandfrom the manufacturing sector; the rise of Edge computing; and global sales andservices site expansion in Vietnam, Russia and the UK are three of the drivingforces for Advantech in 2019,” added Chen. Advantech revenue for FY2017(January to December) reached US$1.455 billion. For January to September 2018period, accumulated net sales totaled US1.23 billion, up 14% year-on-year. ByRegion, Europe, North America and Greater China regions accounted for 78% oftotal revenue. They are also considered the best performing regions with growthrates of 25% for Europe, 16%for North America, and 14% for Greater China. ByBusiness Unit (BU), Industrial IoT, Embedded IoT and Service IoT all enjoyedtwo digit growth. Industrial IoT and Embedded IoT contributed 81% in total tooperating profit. Industrial IoT earned the highest gross margin among allbusiness units at 45 to 50% gross margin range.
Plans in Major Markets
In 2018, Advantech took some initiatives in the Japanmarket. In March, it invested a 19% stake in Nippon RAD Inc. aiming to furtherexpand the business scope in the IIoT sector. In October, the company acquired80 percent stake of OMRON Nohgata Co., Ltd. to enhance localized manufacturingand design services capability and market coverage in Western Japan. Followingthe acquisition, Mike Koike, President, Advantech Japan said Japan sales couldrise and take the fourth or fifth spot among markets. “The growth segment ofthe IoT market in Japan is factory automation and smart city. New areas such asmedical, retail, logistic, electric vehicle charger and agriculture are growingfast too,” said Koike.
One of the prominent co-creation businesses Advantech hasentered in the Japan market with is with Mirai Co. Ltd., a vegetable providerto food companies. It has implemented its own IoT solution to monitor andcontrol the cultivation and environment of the factory, as well as handle datacollected from sensors covering 200 variables, including temperature, humidity,photosynthesis, and water control, amongst others. “To be the best in a certainniche market, furthermore, the success model could be copied to another areaand keep repeating the same approach. This represents Advantech’s growthmodel.” said Koike. In the United States, along with IoT, 5G and artificialintelligence (AI) mega trends will drive the industrial market in divergentstages. In explaining Advantech’s strategy in the area, Ween Niu, GeneralManager, Advantech North America, said, “We will use a few dedicated salesteams to support different customers; focus on selected vertical market toextend market know-how; leverage different sales channel; and provide differentservices model to meet customer’s logistic needs and services.” Niu added thatAdvantech North America uses a so-called diversify business model in dealingwith divergent market places that allows the company to seize moreopportunities in North America. Parts manufactured in Advantech Kunshan factoryaccount for 40% of Advantech North America revenues. For trade frictions betweenthe U.S. and China which caused key accounts to be impacted by tariffincreases, around 15% of the production cost has been offset by transferringthe process to Advantech’s Taiwan factory. The company plans to implement majorfacility upgrades in Advantech North America to be completed in the first halfof 2019 to increase capacity by 40%. Another service center is at the planningstage as well as further expansion from 2020 to 2021. “Even though with tariffimpacts, our target organic growth rate is between 12 to 15% per year, and thekey here are the new net design-wins,” said Niu. In Europe, Jash Bansidhar,Sector Head of Industrial IoT Europe at Advantech said, “European companies arealso moving back their production from Asia to Europe. There are 2.1 millionfactories in Europe. The opportunity is starting to happen as IoT inmanufacturing gains pace. In particular, automotive in manufacturing drives thegrowth in IoT in Europe.” Advantech Europe handles 10 countries covered by 14offices with one logistic center and one service center. To meet the rise of EUmarket demand in Industrial IoT, the company’s primary strategy is a localizedapproach and increased presence through co-creation in sectors includingmanufacturing, transportation, and energy, amongst others.