Advantech’s Ho: “The components shortage will end soon”

The Taiwanese Advantech is a major provider of industrial and rugged computers and Embedded Systems, traded in the Taiwan Stock Exchange at a market cap of $8.2 billion. Its 2021 annual revenues totaled $2.1 billion. Advantech was founded in 1983 by the Chairman Mr. Chaney Ho. During his visit to Israel as part of the Taiwanese innovation IP² LaunchPad program (of which he is one of its active partners), he met with Techtime and has shed unique light on the Technology Industry in an era of the COVID-19 pandemic and an increased Geo-political tension.

How the tension between Taiwan and China affects Advantech’s operations and strategy?

Ho: “In the past 20 years, the Chinese economy has grown rapidly and reached an average of 10% growth annually, but currently it is slowing down and the forecast for the current year in merely 3%. The Chinese market is very important for us – about 29% of our sales are at China, split up between the infrastructures and the industrial markets. The Chinese export has been ben extremely beaten by the USA-Chine trade war, which deeply influenced the production industries. Many businesses had returned to their countries of origin – Japan, Korea or Taiwan”.

“Chips Act weakens the Chinese army”

“This tension has yet no real effect on us, but it might cause a long-term influence: If China continues to hold the conflict with the free world, such as in supporting Russia, we can expect more sanctions and additional slowdown of its economy. Even with this scenario, the impact on Advantech is limited. Our strategy is clear: 50% of our production always stay in Taiwan, and the rest is distributed. We do not put all our eggs in one basket. Indeed, we have one factory in Chine, but if China will be sanctioned, we can transfer our production to other sites in Asia, Europe, and the US”.

How are you affected by the American CHIPS Act?

“The act contains two major components: support for the build up of chips production infrastructures in the USA, and a set of sanctions intended to suppress the Chinese Semiconductor industry. For example, according to the Act it is forbidden to sell to China advanced equipment and technologies for sub-22 nanometer nodes production. This act weakens the Chinese army and impairs its ability to purchase advanced chips”.

Chaney Ho with Ilan Bercovich, Israel Country Manager for Advantech Embedded-IoT
Chaney Ho with Ilan Bercovich, Israel Country Manager for Advantech Embedded-IoT

“Manufacturers of advanced equipment that there production facilities are located in China will be forced to leave the country and move their production back to Japan, Taiwan, or USA. In my opinion, this aspect of the law has extremely strong  influence on China’s military and industrial capabilities. We will not be affected by this act, as our Chinese factory delivers only basic products. Our advanced PCs are manufactured in Taiwan”.

How are you affected by the supply chain crisis and the shortage of components?

“The supply chain problem is not critical since the demand for computers is declining. In the past two years there was a great demand for PCs because of the COVID-19, and this led to extra demands for components. Now the pandemic is gone and  I expect the problem to disappear in few months. In the past we have purchased substantial amounts of components that we still use, and this will be enough for the next 6 months. One should keep in mind that as we speak, more than 50 chips’ factories are being built around the world. They will be completed in two to three years, and then there will be an oversupply. This will be the next nightmare of the semiconductors industry”.

Does the advent of Artificial Intelligence affect your IoT Strategy?

“The new growing fields, such as AI, Industry 4.0 and autonomous systems are particularly good for us. They need integrated computers with CPU and GPU, and we witness extended growth for this kind of computers (AIoT) in the next years. Also, the average price of these systems is growing. AI is a present that accelerate our business”.

What is Israel’s place in Advantech’s activities and plans?

“Although we hold a small team here, the Israeli market is very important and accounts for 5% of our Global sales. We have large customers here, such as Orbotech, Applied Materials and Check Point. Israel has a special weight in the industry, thanks to the fact that many Global markets emerged from PoC (Proof of Concept) ideas originated here. We are open to the idea of an acquisition, although we currently do not have a specific target company in mind”.

Translated by P. Ofer