ABB says China’s innovation ‘very significant’
Print Edition
ULRICH Spiesshofer, CEO of the Zurich-based ABB Group was in Shanghai this month to attend the 27th annual forum of the International Business Leaders Advisory Council, which brings together city leaders, multinational executives and local industry chieftains to discuss Shanghai’s economic development.
Born in Germany in 1964, Spiesshofer holds a doctorate in economics and a master’s degree in business administration and engineering from the University of Stuttgart. He joined automation technology specialist ABB in 2009 after working at Roland Berger Strategy Consultants and at global management consulting firm A.T. Kearney International.
He sat down with Shanghai Daily to discuss innovation and economic policies in China.
Q: What is your view on China’s push for innovation?
A: China is making steady progress on the innovation side. The quality, speed and amount of innovation here is very significant. The move from an investment-led to a consumption-driven economy means that China is linking innovation even better with customer demand. I think that is a good fit. The areas of innovation are broad. They include environmental technology, industrialization and infrastructure. I think China is on a good track.
Q: China’s slower economic growth is now called the “new normal.” It has raised the bar for companies in terms of environmental standards and efficiency. Still ABB manages to generate remarkable annual growth. How is that?
A: ABB has been serving China for 108 years, and we are ready to serve for another 100 years at least. Whenever China changes, we reinvent ABB. We are today probably the most “Chinese” of all the multinationals. Close to 90 percent of our products are locally developed by our local R&D team, we have a full local value chain and we have local management, which is very important. If you look at our offerings, whether in infrastructure or the power grid side, we are ideally suited to help China to meet its needs. On the industrial side, our leading position in automation and robotics helps very strongly. We are helping China to decouple economic growth from environmental pollution. And that is ABB’s value proposition. We help to produce more clean energy and, at the same time, we want to help use energy more efficiently.
Q: What significance does localization by foreign companies bring to the Chinese economy?
A: When you have a large market like China, it’s very important that you have good local insight into customer demand and that you have local product management. You also have local R&D that understands the specific needs and requirements of customers locally. We are committed to driving a strong and sustainable, local value chain. We participate in local communities and play a major role in many cities in China.
Q: ABB this year expanded its investments with new plants in Xiamen and Zhuhai. Given the slower economy, what’s the basis for your confidence?
A: China is the second-largest economy of the world and will stay that for many years, I believe in the long-term growth of China. I think the underlying trends are absolutely intact and, therefore, our investments are not being hampered by short-term nervousness. We are investing in the long-term and we are committed to that.
Q: China was the second-largest contributor to ABB’s revenue last year. Do you think that will be the case again this year?
A: When a country goes through a development phase, like China is now going through, from an investment-led to a consumption-driven economy, we realize how market opportunities shift. With that, we need to look at the entrepreneurial class that is ramping up, we need to look at the midsize companies that are investing very strongly, and we need to go west and build infrastructure there. I think if you are smart about adapting strategy, if you are smart about aligning your penetration of a market by going with the flow of the country, then there is still a lot of opportunity and prosperity to be tapped. We are very strong along the coast. I think in the western areas of China, ABB still has tremendous growth prospects. I remain optimistic on China.
Q: ABB has cited four provinces in China’s western and southwestern regions as key business areas, exemplified by the most recent launch of a huge project in the Xinjiang Uygur Autonomous Region. What is your strategy for tapping China’s remote regions?
A: The “One Belt, One Road” strategy of China’s suits us very well. We are mirroring it basically in our own activities. ABB has grown very strongly along coastal areas and now we are moving toward the west. We have invested significantly in local hubs in those provinces, and we are bringing in not only sales but also a strong service network. We work with local customers and distributors. For us, this is an opportunity as growth in China shifts westward. ABB will be a strong partner.
Q: In practical terms, what opportunities do you see in the “One Belt, One Road” initiative?
A: If you take the key element of development, you need reliable power infrastructure to power up local industry and homes. We are very strong in building and expanding the power grid of China. There are more renewables coming in, providing new power generation sources. There, too, ABB is in a strong position. On the industry side, we see many smaller companies coming up as very strong entrepreneurs, and they want to leapfrog by investing in automation. There we can be a great partner.
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