Siemens 2006 Annual Report Download - page 104

Management’s discussion and analysis
100
Worldwide economic environment
Based on estimates of Global Insight, Inc., gross domestic product (GDP) in 2006 will grow
3.9% on a global basis, much faster than expected. Despite rising oil prices and higher interest
rates, most major regions of the world will record favorable GDP growth in 2006 compared to
2005. The Americas and Europe will grow more slowly than the global rate, at 3.5% and 2.9%,
respectively. In contrast, Asia-Pacific is expected to record 5.2% GDP growth, and aggregate
growth for Africa, the Middle East and the Commonwealth of Independent States (CIS) will be
even faster at 6.0%.
Among major national economies, China is expected to post growth of 10.6% in 2006 and
India will not be far behind at 7.6%. Siemens’ two largest national markets, the U.S. and Ger-
many, will grow at 3.3% and 2.5%, respectively. Resource production and resource consump-
tion play key roles in the distribution of national GDP growth during the year. High oil prices
fuel infrastructure investments by cash-rich, oil-producing nations in the Middle East, CIS
and Latin America and dampen growth in oil-dependent economies.
Market development
The market for electronics and electrical engineering solutions remained strong, with parti-
cular interest in advanced technologies that could provide cleaner and more efficient energy,
increase manufacturing production efficiency, improve diagnostic and preventive healthcare,
and enhance transportation.
Siemens’ portfolio focus positioned the company well to meet customer demands in all
these areas. Increased infrastructure investments e.g. by oil-producing nations expanded the
opportunities for Siemens’ Groups in power generation, power transmission and distribution,
transportation and mobile networks. Rapid industrialization continued in Asia-Pacific, driven
by China’s economic expansion and increased off-shoring of manufacturing by companies in
the U.S., Europe and Japan. This in turn fueled demand for Siemens’ offerings in factory and
process automation and electronics assembly. In developed nations, trends such as aging
populations, healthcare and homeland security concerns and rising energy costs played to
Siemens’ established strengths in medical diagnostics and building security, as well as to new
capabilities in alternative energy and automobile safety.
Market trends
Within the broad macroeconomic trends discussed above, there are numerous technological,
geographic and customer demand trends that affect our business. Important trends that we
are monitoring closely for risks and opportunities are discussed in the paragraphs that follow.
In the Information and Communications business area, information technology (IT) in
general and web-based solutions in particular continued to penetrate virtually every industry,
and wireless telecommunications infrastructure continued to expand rapidly, primarily in
emerging economies and regions lacking established ubiquitous landline infrastructure.
While the market for corporate IT services also continued to expand on a global basis, growth
rates lagged in Europe.
In the Automation and Control business area, demand for factory and process automation,
as well as infrastructure engineering solutions continued to rise, particularly in Asia-Pacific
countries that are expanding manufacturing capacity to meet the demands of their outsourc-
ing customers in other regions. In the U.S. and Europe, demand for automation and control
solutions was strong in sectors focused on exports. In the building market, customers contin-
ued to seek technology enabling more secure, energy-efficient structures. In all regions, there
is a growing trend toward reduced use of raw materials and more energy-efficient production
processes.