Deal focus: Asia-IO embraces machine learning

When Asia-IO Advisors was set up last year, the premise was to create customized co-investment programs to meet the strategic needs of select institutional investors. Over the past 12 months or so, the various ingredients of the firm's debut investment have come together - resulting in a services platform intended to help manufacturers bring data analysis to the factory floor.

The starting point was the client: Foxconn Technology Group, the world's largest contract manufacturer best known as Apple's outsourcer of choice. "When Foxconn said it wanted to turn its IT services capability into something commercial, we helped them identify a platform and built a greenfield team comprising some of their resources and people brought in from outside," explains Denis Tse, managing principal at Asia-IO.

In the interests of speedy implementation and flexibility when addressing future expansion, Asia-IO structured this new business as a public shell. Last October, the firm completed the acquisition of Hong Kong-listed Daiwa Associate Holdings, paying $69 million for a 70% interest. A joint venture formed by Foxconn companies and SK Holdings, together with executives of Foxconn, participated through a fund managed by Asia-IO. The GP as well as Huatai Principal Investment also co-invested directly.

Once the platform was secured and the legacy assets had been disposed of, the company was renamed Maxnerva Technology Services and Sam Baker, formerly of Samsung Electronics and IBM, was recruited to lead it. His brief is to build a systems integration specialist focusing on "industry 4.0" - which means introducing cloud computing, big data and artificial intelligence to manufacturing. Companies that have adopted automation will now communicate with their machines more efficiently.

"This is the cognitive era, with data as a resource," Baker says. "Non-IT companies will behave more like IT companies. Legacy equipment will be connected to the internet and the data that get produced need to be analyzed, and it needs to be actionable intelligence that can be fed back into the production line."

Maxnerva positions itself at the intersection of the systems integration and internet of things (IoT) in manufacturing markets, which are expected to be worth $293 billion and $8.4 billion by 2018. With Foxconn as an anchor client, the hope is that Maxnerva can establish its systems as a global standard and generate business from other manufacturers going through the upgrade process.

The company is already active at five Foxconn sites in China, where early initiatives include streamlining printer cartridge production by using real-time visualization and big data analysis prediction to reduce manpower costs, quality problems and downtime. The company expects to generate HK$3.1 billion in revenue from this relationship over the next two years, although it has promised that at least 20% of its revenue will come from non-Foxconn clients so as to ensure some diversification.

Baker cites a demonstration at the Hannover Messe trade fair earlier this year as evidence of the difference Maxnerva can make: the company integrated a conventional robotic arm with IBM Watson, a standard artificial intelligence engine, which allowed the robot to take natural language commands and develop predictive maintenance capabilities by means of big data machine learning.

"When you look at the projected growth in IoT manufacturing, and the need for expertise in such implementation, there is a real opportunity - and we are going to be the glue in the ecosystem," Tse adds.

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• Topics
• Greater China
• Industrials
• Buyouts
• Early-stage
• Technology
• manufacturing
• Asia-IO Advisors