Swiss manufacturer ABB will become the first multinational company to move the global headquarters of one of its major businesses to China next month. The company will establish this new base in Shanghai to serve as a regional operations centre for the production and sale of robotic equipment to China and other world markets. Anders Jonsson has been chosen to head the new offices.

This unprecedented move reflects the importance of the China market, not only for automation technologies but also for the entire range of ABB's products and services, says Peter Leupp, chairman and president of ABB (China) Ltd. China is the company's third largest market after the United States and Germany.

"We expect China to take over Germany as our second largest market in 2008," Leupp says.

Automation products are one of ABB's five core businesses (the others are power products, power systems, process automation and robotics). With three manufacturing plants throughout the country, China ranks third after Norway and Sweden as ABB's main bases for the production of industrial robots. Its 100th robot rolled off assembly lines in Shanghai last July.

ABB also opened a research and development (R&D) centre in Beijing last year. These facilities, according to Leupp, are part of a global network of R&D centres focusing on power transmission and distribution, manufacturing technologies and robotics.

The Beijing R&D centre is one of four innovation centres ABB operates throughout the world. It also has three other such facilities in the United States, Europe and India.

"These moves show that we see localization as one of the key pillars in ABB China's strategy. It is a fundamental part of our business practice," Leupp adds.

ABB Group is a leading producer of power and automation technologies. These help utility and industrial customers to improve performance with minimal environmental impact. The company has a presence in 100 countries and employs 102,000 people throughout the world.

Investment first

Leupp says a localized corporation such as ABB needs to firmly establish itself in China to be as close as possible to its customers and the market. This requires capital, an investment in technological innovation, and clearly defined development targets.

ABB China has generally always achieved double-digit growth rates, and expects to expand by 20 per cent annually until at least 2008. It expects sales revenues of US$4 billion in 2008.

"This means we are in a good position to employ new people and pay competitive salaries," Leupp adds.

ABB China accepted US$2.6 billion in orders in 2004, an increase of 62 per cent from the year before.

"We had a golden opportunity to win a big US$390 million order from State Grid Corp of China to supply a 3,000 megawatt high voltage direct current (HVDC) link between the Three Gorges Dam and Shanghai. This expanded our power technologies division by 98 per cent," says Leupp.

"But we can't secure large orders like that every year, so we want to maintain an annual 20 per cent growth rate until 2008."

ABB has already invested more than US$600 million in China. It plans to invest at least US$100 million more in new product lines and factories by 2008.

Several new production lines were completed or under construction last year. ABB's branch offices increased from 23 to 30, and it has even opened offices in cities such as Hohhot, capital of North China's Inner Mongolia Autonomous Region and Urumqi, in Northwest China's Xinjiang Uygur Autonomous Region, to support the Chinese Government's "Go West" development plans.

"We also launched a new US$30 million joint venture in Jiangjin, a city near Southwest China's Chongqing Municipality. These investments in the western part of the country are essential to improving local living standards," Leupp tells China Business Weekly.

Localization plans

ABB China's special teams buy materials locally and use them to build products in China.

"The company can deliver products quickly because these suppliers are close to ABB's factories and customers," says Leupp.

"And by transferring technology and know-how to China, we are helping to improve the overall skills base. We are working with our suppliers to ensure they meet our rigorous quality, health and safety standards."

Leupp emphasizes that every product manufactured by ABB China is of exactly the same quality as products manufactured in any of ABB's facilities in other countries.

"We don't distinguish between products made in Sweden, Germany and China, for example. All of our products share the ABB name," says Leupp.

A 10-year joint venture in Xinhui, South China's Guangdong Province, for example, has been improving ABB China's technology through local innovation. A new push-button technology developed in Xinhui will be used throughout the country.

"More than 90 per cent of our products are for the Chinese market, so we need to be a well-localized enterprise," says Leupp.

ABB China announced the launch of its Electrical Wiring Accessories (EWA) solo series on the Chinese market late last year. It is its first consumer product in China. The company sees this development as a milestone, and as a clear signal of its entry into China's consumer market.

The EWA series is positioned at the top of the market, similar to ABB's other business segments.

"We see the demand in the consumer products market, and I believe this will cement our relationship with consumers and promote our localization efforts," says Leupp, adding that ABB will launch more consumer products if the demand is there.

Leupp says personnel localization is just as important as product localization.

"We hired more than 1,000 people this year, which means we are well on our way to employing 12,000 people in China by 2008."

ABB now employs 8,000 people in 24 factories in 30 cities throughout China. Nearly 98 per cent of its employees are Chinese. Only 200 of its mainland employees are foreigners.

The company offers local employees a range of benefits, including competitive salaries, performance incentives and a commitment to ongoing training. ABB promises to provide every employee with at least 40 hours of training per year.

Its employees voted ABB as one of China's best employers last year in a survey jointly conducted by Watson Wyatt Worldwide, Fortune China and Sohu.com.

(China Daily 03/13/2006 page3)