Challenges key to ABB's China success
Updated: 2011-08-19 13:58
By Li Fangfang (China Daily)
Claudio Facchin clearly remembers arriving in Beijing as the new president of ABB China Ltd and head of ABB North Asia region in January 2009.
"It was cold, but China, in particular Beijing, had changed in such a fast and positive way, it really impressed and excited me, though I had seen many changes during my previous visits to China before I took the position," says Facchin, who has been working for ABB Group for 16 years, in Italy and Switzerland.
ABB has invested on average more than $100 million a year in China over the past seven years, says Claudio Facchin, president of ABB China Ltd. [Provided to China Daily]
In contrast with the old Chinese saying "Easy to attain and difficult to sustain", Facchin feels that challenges and difficulties provide opportunities for a successful company to grow into a new stage and are necessary for maintaining momentum.
"ABB has been growing steadily in China, in line with China's strong economy, for many years. China has been ABB's top revenue market since 2006," Facchin says. "During the past five years, ABB kept its pace a few percentage points above China's GDP growth of 11 percent, even despite the global economy's big dip in 2009.
"The success reflected from the robust market growth here during China's 11th Five-Year Plan (2006-2010) period. And we see a continuous strong economy in the coming 12th Five-Year Plan (2011-2015) period, which gives us confidence we will sustain double-digit growth in the coming years," he says.
Although he foresees China's GDP growth slowing, compared with the past five years, "it's still higher than any other major economy's on the globe. And we at ABB will keep growing at a higher pace than the GDP in China".
Officially entering China more than 30 years ago, the Switzerland-based company has been the leader in most areas in automation and power industry technologies in the country and the leader in energy efficiency, industrial productivity and power grid reliability.
"The key factor driving our success is that we moved into China early, and did not just leverage the low cost of labor, like many companies did at that time. We started from the beginning to localize engineering, research and development (R&D), manufacturing and the whole value chain in order to serve the local market," Facchin says.
Since adopting this philosophy in its first joint venture, ABB has expanded to have "31 local companies following the same strategy", he says.
Eleven of those 31 companies are ranked among China's top 100 electrical companies.
In 2010, ABB won $4.5 billion (3.13 billion euros) in orders in China, representing year-on-year growth of 10 percent and 50 percent growth in exports. In the first quarter of this year, it reported year-on-year growth of 70 percent in orders it got in China.
According to Facchin, ABB has invested on average more than $100 million a year in China over the past seven years, around $500 million in the past three, establishing new companies and expanding and refining the existing ones.
"ABB has made China one of our key hubs, not only for manufacturing, but also for research and development, local purchasing, and exports. We are now expanding exports and annual purchases," Facchin says. "Also important, we will focus on developing products and manufacturing processes to serve our Chinese customers who are expanding outside China."
This illustrates Facchin's ambition of expanding ABB's strategy of "in China, for China" to "in China, for China and for the world".
"Actually, 85 to 90 percent of the products and solutions that we develop, produce, and provide with support services in the Chinese market can also be supplied to other places around the world," he says.
Impressed by his employees during his 20 months on the job, the 46-year-old Italian told China Daily that he has learned a lot that will benefit him in his career.
"The learning cycle in China is extremely fast. I see amazing changes in positive trends in all ways, almost every day," he says. "And the Chinese people's motivation and willingness to learn also inspire me."
However, he regrets that he cannot find enough time in his busy working schedule to learn Chinese.
"My wife and children are dedicating time to learning the language. And I believe the life here, living in Beijing and traveling around the nation, will greatly enrich life for my family, especially for my children," he adds.
Digging into opportunities
As ABB has been the leader in automation and the power industry, providing energy-efficient products and solutions to almost all industries and major Chinese programs, Facchin said he has to find more business opportunities in emerging areas or expand ABB's business in its existing segments.
"Energy efficiency and environmental issues - including leveraging innovation and new technologies in new areas like e-mobility, high-speed trains, and renewables - are focal points in the Chinese government's 12th Five-Year Plan," he says. "These topics are also what ABB Group in China always focuses on."
Growing with China's development in recent years, ABB has established itself as a leading player in emerging renewable energies and express rail lines.
Renewables have been the key focus of China's development. Under the nation's renewable development plan, non-fossil fuels will make up 15 percent of energy consumption by 2020.
As a leader in wind power, ABB is the largest supplier of electrical components for wind turbines and for equipment to connect power to the electrical grid.
ABB is also a leading smart-technology provider in the hydroelectric field and contributes to China's solar power industry with a full range of solutions. It has engaged in a number of large-scale solar photovoltaic projects in China and throughout Asia.
"Tapping renewables has become a pressing task to maintain the sustainable development of China's economy. With ABB's leading technologies in these areas, we hope to play an active role in bolstering the country's infrastructure construction," he says.
"We are also expanding our approach in the mid-segment market," he says. "Of course, we will keep our presence in the high-end market, but we'll also start to work in the mid-segment to make sure we address the huge potential the market requires.
"Because in China, the so-called 'good enough' technologies are no worse than the high-end technologies. It's just that some local customers don't need the applications with all the features that the high-end has," Facchin says.
He says that ABB's recently developed medium-voltage products and solutions, which are tailored to the Chinese market, can also be exported to Middle East markets.
Facchin says ABB will also keep an eye on improving energy efficiency in traditional industries - in addition to emerging ones - and that it sees huge potential to save energy there.
"Electric motors, for instance, the single biggest consumer of electricity - they account for about 45 percent of global power consumption and two-thirds of industrial power consumption," he says.
"But as you have probably realized, electric motors rarely form part of the intensive debate on our energy future. Thousands of words and column inches are devoted to topics such as nuclear power and electric vehicles, but rarely, if at all, do we discuss the fact that the majority of electric motors are inefficient, oversized or running when they don't need to," he says.
In June, however, ABB welcomed the European Union's introduction of minimum-efficiency levels for low-voltage motors, as the new requirements are in line with ABB's focus on providing customers with high-efficiency motors.
"Any regulation to improve the energy efficiency of motors will have a significant impact on energy usage and help reduce carbon emissions," Facchin says. "And we are happy that China is also implementing similar regulations."
Today, most motors are controlled mechanically in China, which consumes a lot of energy. However, "using electric drive, a smart and small device, can help reduce consumption up to 30 percent".
He says that if the regulatory incentives were implemented for most of the motors in the US, Europe and China, "in the next 10 to 15 years, we could save as much energy as the total energy that could be produced today by all nuclear power stations in the world.
"The benefits are quite obviously huge," he says.
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