ABB sets sights on 'designed in China'

　　Von Grunberg identifies servicing innovations as a key profit driver

Hubertus von Grunberg suddenly got up and walked around the table holding his black electronic device.

He pointed to some tiny words on the back of the tablet computer and said excitedly: "Here everybody can see a symbolic phrase.

"It says 'Designed in USA, assembled in China', " which "has a lot to do with how our company thinks about China differently from what's being done here. This is not what we pursue and it will not work in the future", said the 70-year-old chairman of the board of directors of Swedish-Swiss power and automation technology giant ABB Group.

"ABB is targeting an approach of 'Designed in China and made in China'. Chinese homemade products, which we produce here, are also increasingly designed, invented and patented here by our high-quality Chinese engineers. And these products are increasingly sold worldwide," said Von Grunberg.

Since it first supplied a steam boiler to China in 1907 and invested in its first joint venture in Xiamen, Fujian province, in 1992, ABB has established a full range of business activities in China, including research and development, supply chain management, engineering, manufacturing, sales and services. It has 18,300 employees, 35 local companies and an extensive sales and service network across 80 cities.

It has also established itself as a dominant presence in China's fast-growing power transmission market, with total revenue in China of $5.1 billion in 2011. As much as 85 percent of its revenues are derived from its locally made products.

While implementing its "In China, For China" strategy, the company is now also expanding its goal of bringing products made and designed in China to the world, making China one of its core global markets and manufacturing bases. The blueprint has enabled ABB China to export to more than 40 countries and regions, achieving export growth of more than 50 percent in 2011 year-on-year.

Under the new strategy, with its focus on exports, Beijing-based ABB High Voltage Switchgear Co, which was established in 1995, has performed strongly in overseas markets. The company has exported more than 1,000 high-voltage circuit breakers to more than 20 countries and regions.

"We are proud of our high-tech leadership - we are second to none - in the premium segment (of the market) globally. Now we are moving into the mid-segment where Chinese products will play a very important role," said Von Grunberg, indicating the potential of the designed-in-China products.

"This mid-segment market has been developed in China and some other emerging markets. We therefore focus first on bringing the products to the Chinese market. As a next step we see if these products can be also interesting for other markets including Europe and the United States," added Claudio Facchin, president of ABB North Asia and China.

An example of this is ABB's recently established company Winride Switchgear Co Ltd, which independently researches and develops switches in line with the mid-segment demand of the local market.

"We establish a technology center that takes a look at the requirements of the customers and then design these new products to fit these processes. And once the product is developed, we launch that new enterprise. We will see more such opportunities," said Facchin.

"But China is not only for the mid-segment. Being strong in the mid-segment in making affordable products allows ABB also to have the investment to become a technology leader through innovation," said Von Grunberg.

The fast development of its robotics business is a good example of the success of ABB's R&D localization strategy, marking the evolution of "Made in China" into "Designed in China".

ABB was the first and only company to localize its robotics manufacturing in China. It has focused on the localization of robotics R&D since 2005, when it established the group's third robotics R&D facility in China, following facilities in Sweden and Norway. Since its inception, the local robotics R&D team has increased in size by 10 times. Seeing the huge potential and great importance of the China market, the company moved its robotics global headquarters from Detroit to Shanghai in 2006.

In 2009, the local team developed the world's fastest and most accurate six-axis robot as well as ABB's first core robotics product designed in China. This robot model also introduced locally developed robotics products and technology to the global market.

Last year it added a compact four-axis robot, the world's fastest robot for high-speed end-of-line palletizing, to its designed-in-China list.

"I am a firm believer in the economic future of this country and I think our future will be determined by what happens in China in the next 10 years," said Von Grunberg. "So it is very important to watch very closely what's going on here to learn and to adapt and to make the most of it by developing, designing, manufacturing and exporting and so forth."

According to a recent report released by German consulting firm Roland Berger, the power transmission and distribution equipment manufacturing industry in China will maintain stable growth until 2015, when it will reach 320 billion yuan ($50.11 billion), an all-time high.

Meanwhile, the market will develop with the following features: The percentage of industrial clients will increase steadily, making it the next market focus. Equipment such as smart grids, and protection and control systems will be the new growth sectors. And there will be huge growth space for China's ultra-high voltage equipment and medium voltage switchgear markets - all in line with ABB's advantages in the local market.

The report also points out four "megatrends" of the industry in China: Smart, integration, systemization and overseas expansion, which indicates Chinese companies will need to expand overseas in consideration of the emerging opportunities there, the saturation of the China market and the issue of overcapacity.

However, Von Grunberg also said that the explosive growth of China's economy requires ever-increasing amounts of energy.