Siemens announced its intention to separate its three-billion euro motor and drive business into an independent entity last November. This move both impacts the motor and drives market in general and further reveals business strategies now undertaken by large automation and controls suppliers.
Blake Griffen, senior analyst at Interact Analysis, writes, “The new motor & drives business would be an amalgamation of 5 current Siemens businesses/divisions. Large drives, Sykatec, Weiss Spindeltechnologie, and the low voltage motors & geared motor divisions from Siemens Digital Industries.”
He notes that what is included in the spin-off and what is retained are both indicators of strategy. He begins by looking at a little history.
Since their announcement of Mindsphere in 2017, Siemens has taken explicit steps to refocus the company away from being a hardware manufacturer in favor of being software and services provider. The move away from lower margin hardware businesses has yielded results for the company in terms of profit margin. Since 2017, Siemens’ gross profit margin averaged 35.5% compared to 28.8% in the previous 5 years.
For those of us who are close observers, we have noticed similar moves by other companies such as Rockwell Automation, Emerson, Honeywell, and Schneider Electric. Perhaps even ABB. One astute executive told me when I observed how these companies now self-identify as software and automation companies that this is what “Wall Street” expects. Financial analysts clearly believe this is the path toward growth.
Back to the Siemens announcement. Griffen writes, “We were expecting Siemens’ low voltage drive portfolio, SINAMICS, to also be a part of the new business. However, from what we can tell by the information publicly available, the low voltage drive product line will be retained by Siemens.”
I’m not surprised, and I agree with his explanation. Low-voltage drives have so much intelligence and networking power these days, I believe they should be considered part of the control system. Writes Griffen:
The drive represents the closest ‘smart’ device to a motor. As such, the device can be a powerful enabler of many digitalization strategies. VFDs have long had the ability to sense changes in the electrical behavior of the motor it is controlling. Many drive vendors, including Siemens, have begun offering condition monitoring and predictive maintenance services which employ this ‘drive as a sensor’ mentality.
As a customer, should you be concerned about the direction of your supplier, you’d do well to consider these thoughts.