Reduced Third Quarter Revenue Reported by Advantech
In the second quarter of 2021, Taiwanese industrial computer maker Advantech Co reported a 6% decrease in net profit, down to NT$1.99 billion from NT$2.1 billion a year earlier. The company did not specify its foreign exchange losses in the second quarter, but posted non-operating losses of NT$630 million.
One of the key factors affecting Advantech's gross margin was the appreciation of the New Taiwan dollar (NTD), which shaved 0.1 to 0.2 percentage points off the company's margin. The stronger NTD typically reduces the USD-reported revenue when foreign sales are converted back into local currency, potentially impacting reported earnings.
Looking ahead to the third quarter, Advantech Co expects its revenue to be lower than the second quarter due to the continued appreciation of the NTD against the US dollar. However, the impact of the US President Donald Trump's announced 20% tariff on Taiwanese goods on most of Advantech's products is still uncertain, as it depends on the outcome of the ongoing Section 232 investigation under the US Trade Expansion Act of 1962.
Despite these challenges, Advantech Co expects revenue from Europe to rise on the back of semiconductor and automotive-related orders. The company also anticipates revenue from North America to grow by a double-digit percentage, driven by stronger sales of medical and audio-video equipment. Revenue from China is expected to grow by a high-single-digit percentage, driven by stronger shipments of automated inspection equipment.
In addition to its focus on traditional markets, Advantech Co is also expanding its edge artificial intelligence (AI) business, which is expected to account for 20% or more of total revenue at the end of this year, up from 16.5% in the first half. The company has focused its edge AI business on five sectors: smart factory, energy & utility, intelligent system and autonomous mobile robot, medical, and smart services & retail.
The restructuring of Retail Technology Group Inc, a US-based unit fully owned by Advantech's French point-of-sale subsidiary, trimmed gross margin by another 0.3 percentage points in the second quarter. The company's gross margin fell 0.5 percentage points both annually and quarterly to 40%.
The book-to-bill ratio in the second quarter for Advantech Co was 1.08. Regional breakdowns of the book-to-bill ratio were 1.19 in the US, 1.03 in Europe, and 1.08 in China. The company expects the second half of the year to account for 51% of full-year sales.
Despite the ongoing tariff-related uncertainties, clients have not adjusted their US expansion plans. Advantech Co's focus on expanding its edge AI business and its strong performance in key markets such as Europe and North America indicate a resilient company ready to navigate the challenges ahead.
- Advantech Co, in its expansion strategy, plans to increase revenue from finance-related industries such as semiconductors and automotive, as well as technology sectors like medical and audio-video equipment, by a high double-digit percentage in North America and China.
- The company's edge artificial intelligence (AI) business, primarily focused on sectors like smart factory, energy & utility, intelligent system and autonomous mobile robot, medical, and smart services & retail, is expected to contribute over 20% of Advantech's total revenue by the end of the year.
