Race to make robots for China spurs manufacturer to double capacity

ABB Ltd. is accelerating expansion in China with a plan to double robot production capacity as part of a bid to become the biggest provider worldwide of the industrial-automation equipment, said Chief Executive Officer Ulrich Spiesshofer.

The blueprint includes doubling the number of robotics research employees in China, where a close rival Kuka AG – backed by Chinese appliances-maker Midea Group Co. – is seeking to unseat ABB’s lead in the USD11 billion industry in the nation. ABB also plans to seize on a growing industry in China for electric vehicles by supplying more charging facilities, Spiesshofer said.

The push is part of ABB’s broader ambition to surpass Fanuc Corp. of Japan as the top global provider in robotics and automation and also take the lead in e-mobility infrastructure in China, which this month unveiled a decision to phase out combustion- engine cars. The moves come as Spiesshofer prepares to wrap up a four-year restructuring plan under which the Swiss company regrouped operations and resisted investor pressure to break up its businesses to better realize shareholder value.

“ABB is ahead of Kuka globally, we are ahead of Kuka here in the market and our ambition is to stay so,” Spiesshofer said in an interview in Shanghai Sept. 16. ABB leads Kuka and Fanuc in the Chinese market, while the Swiss company trails Fanuc in global sales of robotics equipment, according to an ABB presentation.

Zurich-based ABB also “absolutely” has the ability to be No. 1 in e-mobility infrastructure in China, said Spiesshofer, adding that he met with the mayor of Shanghai to discuss the company’s plan to boost robot production. He didn’t provide a timeline or figures for the increase in capacity and research employees. ABB currently employs more than 17,000 people in 139 Chinese cities.

China is installing more robots than any other nation as its vast manufacturing industry increases automation to move up the value chain. The country added about 90,000 robots last year, a third of the global total, and this will rise to 160,000 in 2019, figures from the International Federation of Robotics show. The government wants domestic robot makers to have half of the market by 2020, according to Bloomberg Intelligence.

ABB is willing to provide technology and other forms of support to its local partners to help them become strong players in their own right, Spiesshofer said. More than 80 percent of the robots ABB sells in China are “developed, produced and shipped” in the nation, he said.

The recent decision by China, the world’s biggest auto market, to determine a timetable to end sales of vehicles powered by fossil fuels in line with a global trend provides another growth opportunity. Spiesshofer said ABB is working with regional governments on pilot projects for charging facilities in places like public carparks, where it’s more common for drivers in China to leave their cars than in private garages.

As many as 800,000 charging stations will be built this year alone, according to the official China Daily. ABB has the manufacturing capacity in place to support that pace, Spiesshofer said.

Charging stations are part of ABB’s electrification products division, which contributed $9.9 billion in revenue last year, or about 29 percent of the company’s total. The robotics and motion business, which includes robots as well as motors and drives, accounted for $7.9 billion, or about 23 percent.

These are among four new divisions, the other two being industrial automation and power grids. ABB regrouped its businesses after Spiesshofer resisted a call – led by its second-largest shareholder, Swedish activist investor Cevian Capital AB – to break up the company. It also placed the power grids business under review and promised to cut costs to boost profitability.

“That page is turned and we are moving into the future,” the CEO said. The shares rose 0.3 percent to 23.51 Swiss francs as of 12:51 p.m. in Zurich, valuing the company at 51 billion francs ($53.2 billion).

He said organic growth would be the company’s focus, with acquisitions a secondary possibility. In April, it paid $2 billion for Austrian company Bernecker & Rainer Industrie-Elektronik GmbH to help the company move away from its traditional hardware business and expand in higher-margin software.

Spiesshofer declined to comment on whether ABB is bidding for General Electric Co.’s industrial solutions business, which the U.S. company is looking to unload amid a shift in its portfolio.

“Consolidation in the robotics and automation industry is ongoing,” Bloomberg Intelligence analyst Jawahar Hingorani said, referring to ABB’s potential interest in the GE business. “The U.S. is a strategically important market for ABB,” and it “wouldn’t be surprising” to see the company look to shore up market share there, he said.

Spiesshofer said ABB’s restructuring efforts would be completed this year, after the company’s unclear identity led it to move in a “convoluted” direction when he started as CEO four years ago.

“Today we have a crisp, clear identity. We know for what we stand,” Spiesshofer said. “2018 will be the first year of what I call the new normal. It will be then steady-state sailing.” Bloomberg