Thanks to everyone for joining today's call. My name is Carrie Liu, I'm the coverage analyst of Advantech here at Citi Research. Today, we are honored to have Eric, President of General Management, Miller, President of Embedded IoT Group, and Grace from the IR team with us to discuss Advantech's recent results and growth outlook. Grace will walk us through the financials first, and then after that, we will open the floor for questions. Without further ado, I will now hand it over to Grace. Grace, please go ahead.
Thank you, Carrie. Good morning and good afternoon, ladies and gentlemen. Thank you for your time today. This is Grace Liao, the Senior IR Manager of Advantech. Please see the agenda. In the section one, I will give 10 minutes briefing regarding third quarter 2023 financial results. In section two, President Eric Chen will share business updates and Q4 guidance.
In Q&A section, we will also invite President Miller Chang to join us and share more insights and market trend to the investors. As usual, please take a few seconds to see the safe harbor notice. For third quarter financial results, in the left side, third quarter revenue reached TWD 15 billion, decreased 12% quarter-on-quarter, and 19% year-on-year.
Gross margin rate was 40.1%, improved 3.7 percentage points year-on-year basis, mainly benefit from material price softening and the favorable regional mix. Operating profit was TWD 2.51 billion, with OP rate of 16.7%, decreased from 20.1% in the previous quarter, mainly impacted by higher expenses rate resulting from a smaller revenue base. Effective tax rate was at 17.2%, lower than average, due to tax exemption on dividend income. Third quarter net income reported TWD 2.58 billion, decreased 14% quarter-on-quarter and 19% year-on-year. Earnings per share in Q3 reported TWD 3.01.
In the right side, for year to third quarter revenue performance, for the first nine months, sales revenue reached TWD 49.4 billion, decreased 4% year-on-year. Gross margin rate was 40.3%, improved 2.6 percentage point year-on-year basis. Operating expenses slightly improved due to increase in R&D, traveling, and marketing expenses.
Operating margin rate reached 19.1%, moderately improved year-on-year basis. For non-operating items, Advantech booked TWD 178 million for FX gain. For the first three quarters, net income reached TWD 8.55 billion, up 4% year-on-year, also set company new records. Year to third quarter earnings per share reached 9.98 TWD, share-based adjust after stock dividends of 2022. Next page.
For the regional performance, in terms of US dollars, year-to-date third quarter revenue reached $1.6 billion, declined 10% year-on-year. The major three markets accounted for 71% of our revenue contribution as usual. North America is the biggest contributor, which was down 4% year-on-year, while Europe markets increased 1% year-on-year.
Drivers in North America and Europe, including smart automation, gaming, enterprise networking equipments. For China markets, declined 20% year-on-year due to recovery uncertainties and consumption downgrading, and also caused the end demand weaken in China. For North Asia overall, increased 5% year-on-year, and Japan market is the best performer, enjoyed 22% year-on-year growth, driven by strong demand in industrial equipments and smart automation projects.
For emerging markets, underperformed with a 24% year-on-year decline. However, the momentum in India and Latin remains strong. During the off-season, Advantech continued to strengthen the global presence and invest in forward-looking technologies to cope with the sector-driven strategy. We can share more details during the Q&A section.
For the performance by SBG, the Industrial IoT accounts for 26% revenue contribution, declined 15% year-on-year, mainly due to China market slowdown and also semiconductor equipment weaken. However, the IoT GP performance also improved due to better regional mix.
For Embedded IoT, up 4% year-on-year, driven by automotive, smart factory, and the gaming projects. Industrial Cloud and Video Group, ICVG, declined 13% year-on-year due to the high base last year in cloud infrastructure and media streaming projects.
For Service IoT, declined 16% year-on-year.... Both Smart Medical and the retail slowed down by the positive growth in fleet management projects. For balance sheet, this is my last page. For balance sheet, the dollar amount of inventory has been managed effectively, resulting in a decrease in the inventory to assets percentage, already down to 16% from 21%.
However, the inventory turnover days have slightly increased to 116 days due to the reduction in the revenue base. For the cash equivalents, accounts for 27% of our assets, indicating we have a sufficient working capital. This is the financial briefing of the third quarter 2023. Now, I'm hand over the time to President Eric Chen, to share business updates and the Q4 guidance.
Yeah, next page, please. Thank you, Grace. Good morning, and good afternoon, everyone. Welcome to join the conference today. This is Eric, and I would like to comment on the third quarter results, followed by the fourth quarter guidance.
Due to the weak demand in the industrial market, across the low B/B ratio starting from the first quarter, as you can see in the slide, from quarter one to quarter three, for the B/B ratio, it lost 1.0. So the third quarter sales performance led to a 19.4% decline year-on-year, and 11.9% decline quarter-on-quarter. On the margin side, due to an average of 4% material cost savings, we know we encounter an intensive price competition in the Chinese market and unfavorable product mix.
Our gross margin in the third quarter was 40.1%. Year to month gross margins were 40.3%. The OPEX is under control, and operating margin were 16.7%, which meets our guidance. For the effective tax rate in the third quarter, we got around TWD 150 million in tax-free cash dividends from ASUSTeK. Therefore, the effective tax rate was about three percent lower than the second quarter. As a result, the diluted EPS in the third quarter was TWD 3.1.
Regarding the region performance in the U.S. and Europe, due to the holiday seasons and some key accounts postponing their shipment, the two region led to a two-digit decline in the third quarter.
In China, the booking was better than the first half average, and the shipment aligns with our target. For the Japanese and the South Korean market, the Korean market performance was flat in the third quarter, but year-on-year had declined by 16% due to low demand in the semiconductor and equipment builders sectors. Japan market was on track, and the result were good, YTM with 22% growth.
From the product group aspect, IIoT suffers from the Chinese market slow performance. China market represent about 51% of IIoT total revenues, and the slow performance in China result in a 15% decline. With a strong rebound in the gaming sectors and project order on time delivery, IoT maintains a 4% positive growth.
SLT suffers from the medical projects end of life and the low demand in the retail market, which led to a 16% decrease. This is regarding the SBG performance. Next page. Looking forward to the fourth quarter, Advantech still suffer from the low booking in the quarter two and quarter three, so we expect fourth quarter revenue to be between $465 million-$485 million, based on the exchange rate assumption of $1 to TWD 32 . In terms of margin, the first quarter gross margin is expected to be between 38.5%-40.5%. And the operating margin is expected to be between 16%-18%. This conclude all my comments, and thank you for your attention.
Thank you, Eric. Well, let's hand over the time to Carrie, and maybe we can enter the Q&A section.
Yeah, sure. Thank you very much, Eric and Grace. We will now open the floor for questions. Management has kindly prepared several questions for investors as a reference. We will go through those first, and then we will open the floor, you know, for online participants to raise questions later. So first of all, on the financials and outlook front, the first question would be, you know, regarding the outlook for 4Q in 2024, and also, you know, whether the management can talk about more, you know, specific drivers for the RBU and SBU?
Okay, let me answer the questions. For the quarter four, the revenue projection is expected to be between TWD 465 million and TWD 485 million, just as I mentioned before. The operating margin between 16%-18%. For the full year of 2024, there are no specific figures we can share so far. Our official guidance will be announced every quarter.
But overall, we aim to have a high single-digit revenue growth with stable profitability in 2024. Again, we aim to have a high single-digit revenue growth with a stable profitability in 2024. Besides, due to the low B/B ratio in the third quarter and the Chinese New Year holiday seasons, revenue in the first half will likely remain slow.
For the second half, we expect the performance will be better than the first half due to some project business being in the mass productions and the delivery stage. Also, a high inventory issue should be gone. Regarding the key driver for the growth, three major attention area had vital role.
Firstly, it comes from ESG-driven new industrial demands, such as EV charging, energy storage, and environment monitoring. This is regarding the ESG-driven new business. Secondly, is the AI adoption for edge computing. We foresee more and more edge AI use cases in specific domains, such as industrial AI-based visual inspections and AIoT security platforms, and et cetera. The last is the medical sector. We still have a lot of design winning projects coming from the medical sector.
So there are key drivers, mainly from the ESG-driven business and the AI adoption for the edge computing and the medical sectors. For RBU outlook in the fourth quarter, since the booking was low in the third quarter, we expect revenue in the three big regions will decline as well. Some of the emerging countries, such as Mexico and India, still have a great chance to maintain a high growth rate listed from the regional performance views.
So, the operating margin was slightly lower than the third quarter, mainly due to three large events hosted in the fourth quarter. We just finished the IIoT WPC. WPC means World Partner Conference, last week, and the IIoT WPC will be hosted at the end of this month. So the marketing expense will be slightly higher than quarter three.
So this is the why the guidance in the quarter four has slightly declined. So this is my input regarding the question one.
Thank you. And then, for the second question, is about book-to-bill ratio. I think, Eric, you have, you know, briefly, you know, touched on the book-to-bill ratio. Anything you would like to add? For example, you know, other than book-to-bill ratio, is there any other leading indicators that investors, you know, can follow and engage the end demand?
Okay. For the quarter four, we expect we'll have slightly improved compared to quarter three. And for the overall IPC and embedded computing market, I think it's tough times for the customer to consume their overbuilt inventories. Also, the global economic outlook is unclear, so our customers tend to hold their demand to postpone their purchase.
This is the main reason for why our B/B ratio is still in a low rate. In the Chinese market, a lot of consumer confidence is low due to the real estate crisis, hence some customers, our customers downgrade their requirement and adopt low-spec solutions to overcome the difficult periods. We will keep monitoring these situations.
In the meanwhile, our product team has also taken actions and developed the China market purpose products that can fit the local demand to boost the Chinese market. And many adapt the China supply chain, such as China core CPU, China LCD and flash and memory, something like that. So we already take actions to develop some China market purpose, China for China products, to to boost the China Chinese market demand.
For the indicator, internally, we have the B/B ratios. We have design-in and design wins ratio, and we also track the new product and new customers contributions as well. And for the internal indicator, we always reference the macro GDP growth in each country's PMI, CPI, and China fixed asset investment. Yeah, this is my answer.
Thank you, Eric. Then, the next question will be about ASP. Investors would like to know whether you have any plans to, you know, adjust your ASP up or down. Also, for the margins, how should investors think about the margin trends, you know, for both growth and operating margin for next year?
Okay. For the ASP trend, average ASP means average selling price. We have more flexible pricing strategy in the China market due to the local competitions and the demand downgrade. For other reasons, we did foresee no pressure to lower our ASP.
Regarding the GP and OP trend, we target to maintain a consistent GP and OP performance next years. The positive factor on the margin side, we foresee a better product mix with IIoT return to growth. This year, IIoT dropped around 15%. Also, IIoT is our gross margin main contributors. So we foresee next year, IIoT will return to growth. Also, the utilization rate improvement in the production site have a chance to improve.
Right now, the production site, the utilization rate in China is around 75%-78% only. In Taiwan is around 85%-90%. So we foresee we can have a high single digit growth, then our utilization rate will be improved as well.
So this is the positive factors on the margin side. For the negative factors, ASP softened in China, just as I mentioned before, and strong U.S. dollar may impact our GP as well. And the transportation cost might boost if the conflict in the Middle East expands. So if the conflict in Middle East out of control, the transportation costs might be sky high. So this is another negative factor in terms of our GP performance.
So overall, we will maintain a consistent GP and OP performance next year.
Thank you. Next question is on capacity. Could you please provide an update on capacity by each region? And also, what would be the CapEx plan for 2024 and 2025?
Okay. The capacity allocation this year, Taiwan accounts for 48%, with 9 SMT lines. This is 48% is regarding the production volume, not the production quantities. China for 46%, with 12 SMT lines, and Japan for the rest of the 6%. In Japan, we have 4 SMT lines. The utilization rate in the China plant around, just as I mentioned, below 90%, and in China, Kunshan is around 75%-78%. And in Japan, due to a lot of local business burst and the utilization rate was almost full. This is the situation in Japan.
For the year 2024 to 2025, capacity plant in Japan, we have our SMT production line upgrade and capacity expansions, and mainly for Japan's tier count customer and local requirement and local business. In Taiwan, we will start second manufacturing center construction in Huaya, Linkou. Our board meeting just approved this project and mainly for the global market by DMS account.
The second manufacturing site is expected to be complete in the year 2026 or early of 2027. Besides, we will enlarge our outsourcing portion to Malaysia's outsourcing partner for the Asian markets. So this is our production allocations. We will enlarge Japan's manufacturing capacities.
Also, we will build up the second manufacturing site in Huaya, Linkou, and expand the outsourcing portion to Malaysia's third party for Asian market.
Thank you. The last question, for financials and outlook will be on R&D. Could you talk a little bit more about your R&D investment plan in the next one to two years? And also, investors would like to know what would be the rationale, behind the expansion of operation and also R&D centers in India. Thank you.
Okay. Okay. At Advantech, we continue to invest in R&D, especially in the following areas, for talent, for solution business, because we are moving forward from the product-centric company to the solution company. So we also need the expertise in IIoT verticals and the emerging technology and patterns. And R&D expense is expected to account for 8% of our total revenue. In year 2022, the R&D expense accounts for 6 point...
... at 8% of the total revenues in 2023. Year-to-date, it was 70.1%, increased 0.3%. So we have a plan to enlarge our R&D investment to 8%. For the India market, India enjoys high GDP growth in 2023 to 2030, and will be the one best growth market.
So we expect a 30% growth in India market in the next three years. So we plan to expand diverse site capacity plant in India. Right now, we have two offices, one in Pune, will be the software design center to support AIoT edge software development and AIoT vertical domain solutions. And this is a software center we are located in Pune.
In Bengaluru, India, operation and service center will build up the capacity for SKD, DTOS, and RMA. This is our plan to enlarge the Pune and the Bengaluru capacities. Besides, considering the strong software capacity in India, we also build up our e-commerce talents in India to focus on our IIoT digital commerce platform developments. So this is our plan in India, for Pune, is a software design center, and for Bengaluru, will be the operation and service center.
Thank you, Eric. We will now move on to RBU and SBU related question. First question would be the outlook for Q 2023 for the China market. And also, regarding the recent, you know, export control from the U.S. government to China, do you expect to see any negative impact for your business? Thank you.
Right. This is Miller . Let me answer the question. Regarding for 2.1, China business for Q4 this year, actually, we, we saw a small number of the urgent order, okay, which should be, shortened orders. The overall recovery signal in China is still not clear.
Okay. Then, about the chip ban issue, of course, the chip ban will affect our corporate for human needs, but the impact on the Advantech business will be extremely, slight, very limited. Okay, there are two reasons. The first one, our current AI product, from module to system, are not on the restricted list. Okay. And second reason is, according to our AI, our internal report, our AI product division, only 2%-3% of our revenue come from the sales in China.
So, as I mentioned, the impact will be very limited. Okay, that's the answer for the question 2.1. Okay.
Okay. And then, for the second question, is about European market recovery. When do you expect the market to recover? Is it going to be first quarter next year, or, you know, even longer than that? And, and then also, what about your strategies for the European market? Are you planning, you know, to adjust your ASPs? Or, you know, or if there's any other, you know, new opportunities that you are seeing from the market. Thank you.
Okay, actually, it is difficult for me to predict the, when is the European economy will recover. Okay. If I can see our booking number keep increase for next two or three months, then I will be more happy to share the positive message. All right. So now, still not so clear for me from the Euro market recovery. Then, yeah, of course, like Eric mentioned earlier, we have not any chip plan to, to, for the Europe on the ASP adjustment. No. Okay.
Then, yes, there are some new emerging market business opportunity. Okay. Like EV charging infra, robot, MR, like, autonomous, mobile robot, also smart agriculture, right? Those, emerging market, that currently we are not just invest the resources in Taiwan from the product development, but also invest the business and sales, development in region.
So taking as an example, in Europe, I mentioned that EV charging, robot, AMR, smart agriculture, are all our focus for next growth engine in Europe. Which is very significant that we put the resources for this region to further grow our business in Europe. Okay.
I see. Next question is about Japan. I think, Grace, you know, in a prepared remark, talk about strong growth momentum coming out of the Japan market. Could you please, you know, talk more about the key growth drivers and, you know, if there's any challenges that you are seeing for the market going forward?
Okay. Yeah, this year, Japan is very positive. Yeah, the business are quite good, driving by several vertical, like, medical equipment, industrial equipment, and also, you know, the Japan, they have a lot of self-service check-in system and kiosk system. Okay? Also, robot application.
Okay. And so that's the reason we foresee they will continue to growth in this year. Okay. Then you talk about any biggest challenge. I think from the external factor are the exchange rate. But this is exchange rate issue, but we cannot control, right? Because of our quotation in Japan are more, a big portion are quote in Japanese yen.
Okay, so the exchange rate is keep, the Japanese yen is keep decrease, so we may be considered to negotiate with our partner, channel, and also customer to adjust the quotation. Okay, this is quite a challenge from external factor. Internally, I do see some big opportunity instead of the challenge. Okay?
A s mentioned earlier, that we will plan to construct our new AJSC, Advantech Japan Service Center, in Kyushu, Fukuoka City. Okay, to upgrade our services to our customer in Japan locally. Then together, to upgrade our existing AJMC, Advantech Japan Manufacturing Center. Okay, now we have 4 SMT lines, then we will continue to upgrade the capacity. Then, now the roughly 50% Japan revenue is come from made in Japan locally. Okay?
We can expect that we will invest the resources and our capacity to service the high quality, to provide high quality to our Japan region customer. Okay, this is our continued investment, direction and strategy in Japan. All right.
Thank you. And then the next two questions are, you know, actually correlated, and it's about geopolitical tensions. We've just talked about China, but what about Middle East and also, you know, the cross-strait relations, as well as, you know, the U.S. What kind of the challenges that you are seeing due to the geopolitical tensions?
Do you have any, you know, plans to relocate your capacity further? Do you have any concerns about, you know, these tensions might potentially have a negative impact on your financials? And also, lastly, specifically for the U.S. market, will there be any policy-driven projects or orders in the future?
Let me answer these questions. The impact of the U.S. elections is still not clear from our side. And regarding the geopolitical factors, there are two impacts to Advantech. The first is we shut down our Russia office in 2022, which led to a revenue cutdown of around $60 million per year. This is the first impact.
The second is a few DMS customers asking us to develop a China+1 manufacturing strategies to ease their concern about the Taiwan Straits political conflict. This is why we plan to upgrade and extend our Japan's manufacturing capacities and the third-party manufacturing partner in Malaysia. So right now, all things are on track. We have a plan to upgrade and expand our Japan's manufacturing capacity.
Also, the outsourcing to Malaysia is on track. Regarding the B/B ratios have declined, the U.S. is mainly due to our customer inventory high, is high. Also, the demand from the semiconductor sector is weak. Take one of our semiconductor customers, for example. In last year, the revenue is around $16 million, and this year it downgrade to $2.3 million or $2.4 million only. It's a clear decline for the semiconductors.
According to our data on hand, the Design-in and Design-w in indicator in the U.S. is healthy. As you may know, the Design-in business accounts for the U.S. around 70% of total revenue. So we foresee the U.S. region revenue will growth positively, positively in 2024. Normally, a design case will take around nine months to one year to complete the power run, then production.
So we foresee in the next year, a lot of parts of business will start in a mass production and mass delivery stage. So we have quite confidence that the U.S. will return to the growth momentum in the year 2024.
Thank you. We will now move on to the strategy and development related questions. First question will be regarding to M&A. So as your peers are, you know, quite aggressive on M&A, what will be your actions and strategies in M&A for the coming years?
Let me try to answer the questions, and welcome Eric to add on more information. First of all, as a policy, I think Advantech is rarely engaged in pure financial investment. Our focus is to create synergy. Maybe is it in technology-wise or regional-wise, or even, even in the customer or supply chain, to cope with the company long-term strategy and also to complete our technology roadmap. And second of all, to our existing investment portfolio could be separate in three types.
First of all, is the IoT supply chain and alliance, which is more focused in the listed company. And the second part is the co-creation and the domain SI, system integrator, and more like incubation concept. And this is more in the business or technical partnership, and the target would be more start-up and unlisted company.
The third part is through VC or PE firms. We also leverage external experts to evaluate the IoT opportunity and the local niche opportunity for us, including the markets in U.S., Europe, China, Asia. Okay? So, well, going forward, actually, for the deal size, we aim to be more flexibility in the deal size to create higher synergy.
Of course, we were seeking for the board's approval for matter of materiality. And for the future focus, including, like, Industrial IoT, tech, connectivity, and also like a domain SI in the vertical, we are more focused. And also including the candidates with a strong AI capability. For example, in the early September, we already complete a 100% acquisition of the BitFlow, which is a U.S.-based global AI vision capture solution company.
Through the acquisition, we are able to aim at the advanced semi equipment and also a medical high definition image area. Going forward, we will try to be more open-minded in this kind of AI capability or high-end technology company to complete our technology roadmap. Thank you.
Yeah. Just one comment from my side. Our board of director encouraged Advantech management department to have a big deal in the M&A. In the past, we always do the small deals for the M&A, but for the future, we want to reach our double revenue goals. We need to go ahead to search for big deals, especially for the area, for the Edge AI, for the IoT, new ESG related vertical application area or something like that. So that is my comments.
Thank you, Eric and Grace. Next question is about Edge AI. So investors would like to know what kind of products or applications that you will be providing for Edge AI. And how should investors think about the revenue and profit contribution in the next two years? Would the competitive landscape, you know, be very different for Edge AI versus industrial PC?
All right, let me answer the question first, and then maybe Eric can support later. All right? Yeah, our direction for the AI, Edge AI, is trying to support all the edge devices, all the edge computing, to upgrade the AI capability. Right. So the offerings will start from that we are providing the AI acceleration module to AI inference system, then to AI machine learning and training system. Okay, those are from the hardware portion. And also we provide an Edge AI Suite solution, the software SDK solution, put together with our platform to our customer.
Okay, to speed up the AI deployment. Then regarding the revenue aspect, now the revenue, I have to say, the revenue is still a very low single digit percentage of Advantech total revenue. Quite low, okay? But we see the growth momentum, the requirement is quite high. So if you say that 2024, 2025, that we may expecting to achieve the more high single digit percentage of our total revenue, that even can have a double digit, that mean the 10% more of our total revenue.
That's our expectation, okay? That we are working on that. Regarding the competitive landscape, I have to say, as I mentioned, that we are trying to support our existing customer, existing service sector, to upgrading their edge computing to have AI capability.
So roughly 50% of our business will come from our existing edge computing, edge system, IPC system market, okay? And then rest of the 50% will come from the new application developer and segment. Okay, so from the existing market, our currently service market, will keep upgrading, and service our customer to upgrade, support our customer to upgrade their AI solution.
Then continue together with our new, customer, new partner in different of the area, especially from the emerging market, to support their, AI solution development. So that's the quick answer from me.
Just one comment from my side. We just completed internal vote regarding our EBO. EBO means emerging business opportunity of Advantech by the 2030s. And the top points are just listed down for your reference. All our management team has high consensus. The first one were industrial GenAI solution. And the second one is industrial AI platform.
And the third one is smart transportation, and the fourth is energy storage solution, and the last is environmental monitoring. So we define this five category as our growth engines. And for the AIs accounts for the number one and number two. So far, I think the revenue in terms of revenue is around $60 million-$80 million contributions so far.
But for the future, I believe it will become a large portion of our, our, one of our solution accomplished with the edge computings. So we are have a great side, we, we, we have bright sight on the AI adaptations, especially in the Edge AI, where gradually extend to the Edge Computing and for the different domain focus specific for different, different domain purpose. This is my comment.
Thank you. And then the very last question is about business update of iEMS business and software business, as well as, you know, whether there will be any indicators that investors will be able to track the revenue contribution, you know, or the solutions.
Yeah, let me answer first. Now we have some progress regarding for the question for iEMS business, the intelligent energy management system and solution. We have some more progress in Taiwan and China. Okay? The Advantech hardware perform with our WISE-IoT PaaS services, with the partner and customer, their application put together as a solution.
The focus for our focus customer is domain focus system integrator, we call DFSI. Okay? And the indicator for checking, I have to say, the revenue contribution is very, very small in current moment. In less than 1%. Less than 1%, very small. The very small number, they... The group, the team still have a long way to go. Okay? And the other side, aside for iEMS, we also have the iFactory, industrial factory solution.
It is not another focus segment that we are currently very dedicated resources on that. Okay? We have some technology update. They are working with Microsoft closely by leveraging their generative AI, GenAI, technology into our SRP solution. Okay?
The GenAI, both iFactory and iEMS solution, are gradually introducing the GenAI technology and upgrading our WISE-IoT services. Where I see this is maybe a breakthrough from technological point of view, and provide a suitable solution to our customer. So at present, the main market progress is still in Taiwan and China, and other regions still need further breakthrough. Okay, so this is my update.
Any add-on information from Eric?
For the WISE-IoT, we call include i preference, iEMS, and InsightAPM , something like that. We internally have around TWD 30 million quarter, but actually rate so far is still low. So, just as Miller mentions, the revenue contributions is below 1%. It's below 1%. And for the subscription rate, as I know, before, it's around 200 per VIP subscribed our WISE-IoT platform, our industrial AIoT platforms. And so far, I don't have the up-to-date figures. Maybe we can share these figures after the meetings. Yeah.
Thank you, Eric. We think we answered the questions which you gathered beforehand. So maybe we can hand over to Carrie and open for Q&A from the online investors, and also through overall or even through the chat box.
Yes, sure. So for investors on the line who would like to ask questions, please use the Raise Hand button and wait for your name to be announced. Alternatively, you can also type in your questions in the chat box, and then, we will get to that shortly. Once again, for investors who would like to ask questions, please use the Raise Hand button on the screen. Alternatively, you can also type in your questions in the chat box, and we will get to that shortly. If there's no questions from investors, I would like to check if Eric or Miller would like to share closing remark before we conclude the call.
Yes, this is Eric speaking. I think 2023 is a difficult year for Advantech. We encountered the third revenue decline in the past four years. For the next year, we have some positive reason, such as we have a positive business delivery in the next year, especially from the U.S. region. Also, for China, we do foresee the booking number is under the right direction.
The revenue performance is on track so far. So we have... I think the China region we are gradually getting better. This is our expectations. So for the product side, we were more focused on the edge AI adaptations and some ESG-related new business developments.
Also, we have the plan to consolidate our manufacturing side. We just moved the Donghu plant into Linkou manufacturing campus. We will move consolidate all the manufacturing plant in Taiwan together to streamline our process and improve our operation efficiency. I think which can reflect our OP and the margin in the next year. So this is my close comment from my side.
Thank you, Eric.
May I have one comment I can add? Actually, this year, even though the revenue business is, some decline, our profit are all still very positive. Okay? Then, yes, eventually, we are focusing on the content business. So every project, product designed in is still our focus for next year and year to continue growth.
Fortunately, we did not lose any key customer this year, but, and also we continue to have more and more new project design in from the key region. Like three big key region, China, U.S., and Europe, and also from Japan and Korea. Okay, this is a very positive sign. Then those new product project designed in, for sure will support our future growth continuously.
Okay, so this is our focus to provide the edge computing, then plus the AI and IoT solution to our customer to service our service market. This is our commitment for long term, and we will definitely put all the resources from the product division, Taiwan and also our region sales division, work together to service our customer and market. Yeah, that's my comment. Thank you.
Thank you. Thank you very much, Eric and Miller, for the closing remark, and thanks to everyone for joining us again. This concludes today's call. If you have any further questions, please feel free to reach out to Grace from Advantech or Carrie, myself, at Citi. Thank you. See you next time. Bye-bye.