Anticipated Strength of NT Dollar May Impact Revenues for Advantech
Rewritten Article:
By Meryl Kao
The Almighty NT Dollar Hitting Advantech's Wallet
Advantech Co's (研華) chairman, K.C. Liu, had some bad news to share in a recent Taoyuan press conference - a surging New Taiwan dollar (NTD) will push down the industrial motherboard and embedded computer module maker's revenue and earnings per share (EPS).
"The strong NTD ain't peachy for us," Liu admitted. "Our revenue might dip, and while we crunch the numbers in NT dollars, our EPS and share price could take a tumble too, but we'll recoup those losses from other sectors."
The company works primarily in the US dollar market overseas but handles its financial statements in NTD. An appreciation of about 3-5% in the NTD will trigger foreign exchange losses, affecting its profits, Liu noted. But worry not, it's bearable.
Yesterday, the NTD traded at NT$30.145 against the US dollar, marking a 2.96% jump. In the past two sessions, it has surged 5.85% against the greenback.
Liu was also asked about the potential impact of US tariffs on the company. "We'll share the pain with our clients," he said, adding that the actual tariff rate for Taiwanese goods might be around 15-20%, not the dreaded 32%. So not a crisis, he assured.
As the trade tensions linger, the pricey NTD isn't Advantech's sole concern. To cope with the anticipated revenue drop, the company plans to double down on artificial intelligence (AI) and software systems to offer higher value to its clients.
Advantech is pushing the boundaries by constructing new factories in southern California, half of which is reserved for future expansion. The company has been assembling large system products in northern California for the past two decades, and some board members have suggested setting up surface mount technology (SMT) plants in the US to dodge high import tariffs, according to Liu. However, setting up SMT plants stateside requires taking labor, cost, and flexibility into account, and the complex, low-volume, and diverse nature of SMT production would necessitate shipping experienced supervisors abroad, leading to added expenses.
Moving forward, Advantech aims to expand its footprint in smart factories, energy, retail, and hospitality sectors, as the demand for edge AI computing and AI of things continues to rise. The company will showcase edge AI applications at the upcoming Computex Taipei trade show, including autonomous robots, robotic arms, and service robots developed with partners.
As for the NTD, Liu suggested that Advantech might follow industry best practices to counter its effects, such as diversifying sales and production locations internationally, increasing operational efficiencies and cost control, using financial hedging instruments, adjusting pricing strategies, and expanding in higher-growth regions or segments less impacted by currency fluctuations. In sum, the company will dance around the NTD storm to maintain its profitability and growth trajectory.
- Despite Advantech Co's primary operations in the US dollar market, the strong New Taiwan dollar (NTD) could impact its finance, as an appreciation of about 3-5% will trigger foreign exchange losses, affecting its profit.
- In response to the anticipated revenue drop due to currency fluctuations, Advantech is investigating opportunities in technology, particularly doubling down on artificial intelligence (AI) and software systems to offer higher value to clients and potentially setting up surface mount technology (SMT) plants in the US to dodge high import tariffs.
