ABB hopes to double sales in China by 2008
5 Nov 2004
Power and automation technology giant ABB has revealed plans for a huge expansion of its operations in China and said the country is on course to become its most important market.
ABB will recruit 5,000 new employees in China and aims to double its sales there to $4bn (£2.2bn) by 2008, said chairman Jurgen Dormann.
The Swiss-based group, which employs about 4,000 people in the UK, currently has a 7,000-strong workforce in China. The country is already ABB's third-largest market behind the US and Germany.
Dormann said the group expects to grow by 20 per cent a year in China until at least 2008, when he predicted that it would overtake Germany as ABB's number two market, eventually going on to take first place.
The group's most recent contract win in China is a $60m order to supply further power systems to the country's Three Gorges hydroelectric project. ABB has secured Three Gorges-related orders worth more than $1.3bn over the last five years.
Dormann outlined the steps ABB is taking to realise its Chinese ambitions. The group has already sunk $600m into China and plans to invest a further $100m in setting up new product lines and factories between now and 2008.
Dormann stressed cost-migration as part of ABB's strategy - an emphasis likely to prove uncomfortable for some of the group's suppliers in the West.
ABB is establishing a special team to buy materials locally and use them to build complete product lines 'rather than importing certain components from Europe as it has done in the past,' said Dormann. 'Coupled with using China as a base for global sourcing, there is an obvious cost advantage.'
A new R&D centre in Beijing would 'drive local innovation levels higher and allow ABB to better meet Chinese customer needs,' said Dormann.
As well as the opportunities provided by the rapid expansion of China's economy, ABB also expects to benefit from the one-off investment boosts provided by major events such as the 2008 Olympics and World Expo 2010, the giant global innovation exhibition that will be staged in Shanghai.
ABB underlined the importance of China to its future a few days before its third-quarter financial results revealed a mixed performance.
Of its two core operating divisions automation technology was the star performer, notching up 50 per cent growth in large orders - those worth more $15m - and an equivalent boost to profits.Power technology enjoyed a less happy quarter, with profits and margins under pressure due to issues in the company's power lines business.
