China loses top market spot for ABB

BEIJING - China has lost its position as the top revenue market for ABB Group for the first time since 2006.

The lowered status is the result of the Swedish-Swiss company's heavy investment in the United States during the past year, said the China president of the Zurich-based company.

Claudio Facchin, chairman and president of ABB China, said that the US has outgrown China, becoming the company's largest market in 2011 after the group made a large acquisition in the US in the past 18 months.

Facchin said that "it is not a shift of focus" for the group to invest heavily in the US because ABB has consistently invested in China and will continue to do.

The leading player in power and automation technology, which on Thursday reported record revenue of $38 billion for 2011, has invested an average $100 million in China annually during the past seven years. However, in 2011, the group spent $4.2 billion to acquire the US-based industrial motor manufacturer Baldor Electric Co.

The US will probably remain the top revenue market for ABB in 2012 after the group announced in January an agreed offer to acquire US low-voltage equipment manufacturer Thomas & Betts Corp for a total cash consideration of around $4 billion.

Facchin said "it does fit better" because, despite China's rapid growth, the country's economy is around half the size of the US'. "If you just put GDP into perspective, I have no problem to be in the second-largest market," he added.

He refused to elaborate on the exact proportion that China contributed to ABB in 2011, or the company's business performance in the country ahead of the official publication of its financial report on its China business in early March.

The company's previous financial reports showed that China contributed around 14 percent of ABB's global revenue in 2010 with average annual growth of 13 percent between 2006 and 2010.

"With China being the largest market for ABB for so many years, the equation triggers some questions. Why are we so successful in China rather than other important markets?" asked Facchin, a 46-year-old Italian, who is also the head of ABB North Asia.

ABB attributes its success in China to its wide portfolio in the country and its "In China, For China" strategy.

Therefore, the group has enhanced the strategy and used the cash it has accumulated to extend its portfolio, covering under-performing markets, such as the US.

This strategy has worked well for ABB, which announced a 24 percent increase in net income year-on-year in 2011 on Thursday.

According to the presentation by ABB's CEO Joe Hogan on the same day, order growth in the US rose 21 percent organically from 2010 to 2011, compared with 17 percent growth in China during the same period. The order intake in the US will also be much bigger if the newly acquired Baldor Electric's contribution is taken into account.

Facchin said that size is only one criterion. The profitability, the quality and the way the customers perceive ABB are also crucial for the company's success in any given region.

"What we need to focus on is being the second-largest successful market in ABB's portfolio," he said.

Facchin said that he has strong faith in his company's development in China in the years to come, with the goal of seeing the company's China business growing well above the country's GDP growth during the period of the latest Five-Year Plan (2011-15). The company has no concerns that China's slowing economic growth will drag on its business performance in the country, he said.

"The 12th Five-Year Plan looks tailor-made for ABB, because it mainly focuses on energy efficiency, industrial productivity and a lower environmental impact. All the key drivers in the key areas in the plan fit very much with what we can do across our technologies," said Facchin.

The company has announced a plan to invest $500 million in China between 2011 and 2015 and Facchin said ABB will benefit more as China moves from "quantity to quality".

China Daily

(China Daily 02/18/2012 page10)