For Teo Cher Koon, ISDN Holdings I07 ’ managing director and president, the name of the game is offering a fully integrated solution for its clients.
Teo sees the range of solutions across a three-tier triangle. At the bottom level, ISDN collaborates with original equipment manufacturers (OEMs) to produce state-of-the-art components like servo motors, industrial computers and robots. “They are not interested in selling to the market, so we become their preferred partner because we know the market, its players and its needs,” explains Teo in an interview with The Edge Singapore.
“A layer above that, there are clients who want to have more sophisticated systems instead of just buying components from us. We can offer integrated systems such as gantries, for example, and if they want to deploy robots into a production line, we can also do that,” says Teo. “And finally, we do industrial software as well, for clients to manage their operations in a production line.”
This top-to-bottom approach especially applies to ISDN’s original business pillar: motion control, which is used in various industries to develop automated systems.
Teo says: “We supply many hardware and software solutions to help equipment makers, system integrators, end users, the Internet of Things (IoT) and factories in today’s industrial 4.0 environment. This has been our core business since ISDN was set up 37 years ago.”
In the 1HFY2024 ended June, group revenue grew 2.4% y-o-y to $174.6 million, which the company attributes to the demand in certain industries within one of its key markets, China, holding up well despite the broader downturn of the world’s second-largest economy and a key manufacturing base.
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Teo, having spent years in China, believes that the slowdown experienced now varies across different industry sectors. “The construction and property segments were very badly hit by the slowdown, whereas in the advanced manufacturing and the medical industry in artificial intelligence (AI), in robotics, in energy storage, electric vehicles (EVs) are still at the growing stage. So being a motion control solution provider, being a software solution provider, system solutions provider, we can go into different markets and offer different things,” he says.
With the ability to offer a cross-industry approach, ISDN’s business within China, which makes up 76% of revenue, grew 3.2% y-o-y and 3.2% h-o-h in the period. “We’re quite flexible because of our diversification. Customers who buy motion control solutions from us may also need metal injection moulding technology and software, and these are usually provided by different people.”
Even so, ISDN’s revenue growth in 1HFY2024 was slower than anticipated. Teo attributes the softness to the semiconductor industry’s downcycle, where recovery has been uneven across sub-segments and also coming later than expected.
On the other hand, ISDN’s Southeast Asia industrial automation business, which accounts for some 19% of its total revenue, declined 9.3% y-o-y in the period.
Despite this, Teo is gearing up to tap the broader recovery as a matter of when. To this end, ISDN is investing in new facilities in Taiwan, where a vibrant electronics and manufacturing ecosystem exists, and in Penang, Malaysia, which has grown to be a key semiconductor base. According to Teo, the industry’s decoupling from China should provide an opportunity for the group to better serve OEMs in markets outside of the country.
He adds: “With the China+1 policy, moving forward we will see more and more AI chips, equipment required, production manufacturing facilities set up in other markets, and so we are positioning ourselves to cater to this demand. In Taiwan, we set up a factory to produce precision solutions for the semiconductor industry, while in Malaysia we set up an integrated outfit, and we might also set up a sales team.”
What’s next after 37 years?
Although the group’s core business remains crucial, ISDN has also ventured into new fields of growth, namely in its systems solutions and renewable energy business pillars.
In the former, Teo eyes the woes in Singapore’s construction industry as an addressable pain point. He observes that the local construction industry is lagging when it comes to adopting automation technology, as the easier way out is to continue to rely on migrant workers. However, in a bid to discourage this trend, the government has been increasing the levy on foreign workers, which would in turn, drive up costs for contractors and across the sector further. “So the government is now saying that the industry needs to automate. They have announced that half of BTO projects must involve robotics in painting operations.”
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With this in mind, ISDN, through its subsidiary, Servo Dynamics, has entered into an agreement with Chinese AI design and robotics company DaFang AI to distribute 3m and 6m wall-finishing robots in Singapore.
“They’re a very promising start-up. One of the founders used to work for the New York Stock Exchange, and they also have people from Google, Tesla and Huawei. They have a lot of patents and also copyrights for their software,” says Teo.
The robots use sensors like laser range finders and inertial measurement units (IMUs) to construct a three-dimensional floor plan map before being able to perform a full range of tasks, such as wall sanding, plastering, and painting.
Teo says that just one 3m model can replace three human operators and cover 1,000 sq m per day. He adds that these robots can be deployed to finish the interiors of HDBs, factories, warehouses, classrooms and office buildings, as long as the structure is within a height of 6m.
He says: “HDB says that they will start the programme next year, so we are gearing up for that. They are putting up a tender to acquire some of these robots. We have confidence in this product because its multi-function ability seems to be rare. I think HDB is only putting the tender up for painting, but we can offer a full range.”
To make it more palatable for potential users to get on board, Teo says that the cost of the robots will be flexible, as ISDN will offer two business models: leasing and sales. “But DaFang’s founder was telling me that in China, when they first lease out the robots to customers, after a while, they all want to purchase because they recognise how this is more cost-effective.”
Robots aside, ISDN has expanded into hydropower plants in North Sumatra. The group operates three hydropower plants in Indonesia, with all up and running as of FY2023. The electricity generated was sold to Indonesian power distributor Perusahaan Listrik Negara (PLN), for a total of $6.5 million in 1HFY2024.
“Actually, the establishment of this business was a coincidence. When I looked around for industrial automation opportunities in Indonesia, there weren’t many, but I was being approached to develop power plants instead. I looked at that and thought it wasn’t a bad idea because ISDN has a lot of network connections in China,” says Teo.
He continues: “So we started to brainstorm with an engineering, procurement and construction (EPC) contractor in China, and they actually loaned us some money to develop the project.”
The robots can perform a full range of tasks, such as wall sanding, plastering and painting / Photo: ISDN
Although ISDN currently does not plan to develop its renewable energy business further, Teo says the door is open to potential development in the space.
“We have a lot of land because of the hydropower plants in Indonesia. So, if the tariff for solar energy is right, we could venture into that. But if it isn’t, then it doesn’t make any sense. There are also people approaching me to grow elephant grass, which has a carbon content of around 20% to 30%, so it’s actually good for waste-to-energy burning, and it is very easy to grow.”
Own way of doing things
As a veteran in the engineering solutions business, Teo says that his modus operandi throughout the years has been spotting talent and allowing them to mature within their own platform. “We have around 50 to 60 subsidiaries today; I cannot remember exactly,” laughs Teo.
He continues: “By doing this, they can tap the know-how, the support and the network from the platform that I’ve created, and this is how we’ve structured the company. While the growth is unlimited, the limitation is instead with the one who runs the operation.”
It is also with this approach of consistent expansion that Teo remains unbothered by ISDN’s share price, which now hovers at 30 cents per share as at Nov 27, just slightly above its opening price of 25 cents 19 years ago on Nov 25, 2005.
“I’m not worried about our share price, whether it’s high or low. I won’t sell regardless, and I’m in it for the long haul. Being a public-listed entity puts us in a different league when it comes to competition. When we are offering critical machines or critical solutions, customers will listen to us because we’re not seen as a small company,” he says.
