Siemens will continue to invest, hire more in India to increase market share: Global CEO

This is your 20th trip to India since 2010, your second trip in less than a month. Why is India so important for Siemens?

India’s development is gathering pace. Particularly in the last three years, there's been a lot happening in India. You see a lot of infrastructure being developed, a lot of new products being manufactured in the country. The government is committed to bringing more value-addition to India through its ‘Make in India’ programme.

There is a transformation in terms of going more green, reducing carbon emissions, and going more digital; this is a tailwind for us. In the next five years, among our top markets, India may grow the fastest. So there are a lot of reasons why we are here again. Including the fact that we’ve won a Rs 26,000 crore order for locomotives.

The International Monetary Fund slightly lowered its outlook for the global economy amid economic and geopolitical concerns. While they have said that most countries will avoid a recession this year, what’s your assessment of the situation based on the feedback from the 190 countries that Siemens is present in?

People were predicting a recession in Europe, Germany, and other markets. It is not that bad. I didn't expect that for Siemens, because we're sitting on a huge order backlog. With the huge order backlog, easing supply chains, and a very low unemployment rate, I am not so concerned about 2023 at least.

If inflation stays high in 2024, that might have an impact on private consumption, which will have a knock-on effect in some markets.

But Siemens is more in the direct investment space. So even if a car manufacturer sells fewer cars because of high inflation, they still have to invest in a manufacturing line for their latest electric car and invest in battery manufacturing. That’s where Siemens comes in. So I am not too concerned about our markets.

When you're talking to clients here in India, what’s the sense you get? Is the private sector confident about investments?

Customers here are talking about anything but a recession. It's really about growth using fewer resources. Using less energy and using less critical material, because that’s part of the energy transition. There is quite a positive perspective on the growth rates for India going forward. Customers are trying to figure out how to grow with higher productivity. This is where Siemens comes in as we’re automating and digitising manufacturing sites and buildings. This is the technology that our customers are looking for.

In February, Siemens AG raised its revenue guidance for the year at a time when there were recessionary concerns. What’s giving you the confidence to do that?

The confidence is coming from a huge order backlog, which is exceptionally high, particularly in short-cycle businesses. The supply chain has been easing from the first quarter (October-December for Siemens). At the same time, while growing very fast in our short-cycle businesses, digital industries and smart infrastructure slowed down by 15 percent in Q1.

Despite that, our backlog for digital industries increased. Which means there are still orders coming in. That gives the confidence that we will be able to keep up that pace for the fiscal year. Hence, we increased our guidance.

You said earlier this month that the share of software and digital business in the group will increase to around 20 percent in the long term. What kind of growth are you seeing in the business globally and in India?

We want to grow our digital business by more than 10 percent, outgrowing our other businesses. Our software and digital services are a combination, as in they’re complementary. We believe this is on a very strong growth trajectory, due to high demand from the market. Why is that? Because you are transforming and reducing energy consumption, transforming for higher productivity.

What Siemens can do is combine the physical and digital worlds. We bring IT (information technology) and OT (operational technology), and we bring software and hardware together. We leverage the capabilities which you have in the digital world, and in the virtual world, and bring them to hardware.

Before Covid, people were talking about digitisation but were slow to adopt. Did the digital business get a boost from the pandemic?

My take is that Covid accelerated a trend which was already there. We could see that some customers were extremely happy when they saw that they had our technology in place. They couldn't access their sites but could do so many things remotely. We could deliver when others couldn't because we had fully digitised solutions.

You have invested quite a bit in the digital business globally. What are the future investments looking like? And how does India fit into the larger scheme of things?

In the last 10-plus years we have invested more than $10-12 billion in our software portfolio. This makes us one of the largest software companies in the world, when it comes to industrial software, maybe even the largest one. We are also continuously investing in our hardware to make it more connected to the digital world, so we can get data from the shop floor.

We are investing $6.5 billion — 8 percent of our revenue — in research and development. This, in absolute and relative terms, is more than our competitors because we believe in technology. You will see this going forward too.

It's not only software that we are investing in. We are also investing in hardware, R&D and M&A (mergers and acquisitions), preferably in software and connected hardware. We are investing more and more in R&D and local R&D, and bringing this technology to the Indian market.

Your industrial business has performed well globally. How has it performed in India and what is the outlook?

We are firing on all cylinders. We have a very strong digital industry business. In manufacturing, there is a pull from traditional industries like steel, automobiles, healthcare, and also new industries like batteries. There are more complex, higher-value products coming to India which need a higher level of automation. We see a hike in government spending on rail infrastructure and rolling stock. So all this is good for India.

Siemens received a big bang (Rs 26,000 crore) order to manufacture electric freight locomotives for Indian Railways. The government is keen to scale up as we don't have enough rolling stock. How big is the opportunity for you? Could there be delays?

India is a rail market and it's a rail country; the government is committed to really building on that. The Rs 26,000 crore order for locomotives was awarded in record time; it took six months from tendering to awarding the contract.

It is moving fast and good people are handling it. You see a lot of momentum in the ministry; they're really dedicated to getting things out of the door and investing, and that in turn is good for us. We have traction in manufacturing here in India, we are building up our supply base as we speak. And therefore we are looking for more.

What would be the key growth drivers for the Indian market in 2023 and 2024?

Everything that makes the economy more green and sustainable will be key in India. You need more renewables, but you need the distribution grid as well, and energy efficiency. The government is very clear on ‘Make in India’ for both basic products and more complex ones, which need different ways of manufacturing and a whole value chain.

There is a lot of growth coming from the industrial space and also from infrastructure. Buildings are another area of growth, where customers are asking for solutions to reduce energy consumption.

Clearly, you are very upbeat on India. What would be the investment plans for India? Are there any gaps you need to fill here? Would they happen organically or inorganically?

Simple answer is — whether it's organic or inorganic — we do what's good for Siemens, what’s good for our customers, and what drives our growth and competitiveness. We want to increase our market share in India. We have recently acquired C&S Electric (in 2021), which is into electrical equipment. We are very happy about it. It's developing very well. We are also investing organically.

We have a lot of capacity since we have invested over the last seven years. We have invested more than a billion Euros (Rs 8,000 crore) in India. So we have the capacity, we can deliver. And if we keep on with the growth rates that we have, there is more to come.

Given that we’re in the era of high-interest rates, what’s the biggest challenge you foresee for India?

The biggest challenge is getting the right people with the right education, so that they can use new technologies, in hardware, software, the digital space, the real world, in mechatronics — not only on our side, but also on the customer’s side. If you have the technology, but the customer doesn't have the capabilities to implement it, that’s a problem.

So the biggest challenge would be to bring the right competencies together to really take advantage of the technologies Siemens can provide.

A lot of tech companies are looking at a larger base in India. Are you looking at increasing your manpower in India?

Yes, we are. For example, take the mobility space. A couple of years back we decided to bring more engineering capabilities to India, and we ramped up in this area.

We are very happy about that strategy because now we have a huge order backlog here which we are going to execute with local engineers. The same holds true for software development. We have a very strong foothold in Bangalore, and we keep adding to our engineering capabilities in India.

You also have a training facility, but you said getting the right people can be a challenge. With Indian and international companies expanding their digital business, how difficult has it been for you to get people?

It is a war for talent. If you ask who wins the war, no question, that talent does. We have apprenticeships and vocational training for people working on the shop floor, to train them in using new technologies and programming robots. We also train software developers and even high-end systems architects. Many companies are looking for such skills. It’s a tight market but we have it a little bit easier because Siemens is still a strong brand.

Of course, Bengaluru is the hotspot for talent, but it's getting hotter each day. There may be other places as well, and we have to see how to branch out. That's happening as we speak.

There are a lot of young people coming into the market, and if we train them properly, I think we have a good thing going. We can show the people we hire that we create an impact in society, we do something good, and we transform the every day lives of billions of people. That's what people like and why they join us.

You met Prime Minister Modi some time back. What is the one suggestion you will give him to help companies align with the kind of aspirations India has?

I don't know whether he needs any advice from me, but I’d say keep going the way you have been the past few years because it’s really made a big difference. We see a lot of traction in the market thanks to government investments.

I believe this strategy is right — to invest in energy and infrastructure. Because energy and infrastructure will help other industries grow.

I would suggest that you extend ‘Make in India’ and manufacture more high-tech products in India. I’d add that it's very good to have good-quality people in the ministries, they make a difference.

Apple chief Tim Cook was in India recently. Besides work, he tried local food and met film stars. What are you doing here, other than visiting the Siemens Kalwa campus?

I am enjoying great food. But I'm really here to interact with customers, to meet our people. It is really energising to see what our people are doing, what they’re learning, and how proud they are of seeing a 50-year-old manufacturing site going full steam. Its digital model is something I can showcase at the Hanover trade fair.