Siemens 2012 Annual Report Download - page 146

1 A. To our Shareholders
21 B. Corporate Governance 49 C. Combined Management Report
50 C. Business and economic environment
64 C. Financial performance measures
69 C. Results of operations
82 C. Financial position
93 C. Net assets position
95 C. Overall assessment of the economic position
96 C. Subsequent events
97 C. Sustainability
111 C. Report on expected developments and
associated material opportunities and risks

The Industry Sector’s principal customers are industrial cus-
tomers in a broad range of markets, including transportation
and logistics, metals and mining, machinery, utilities and au-
tomotive. The Sector is active globally, including in emerging
markets, especially those in the Asia, Australia region, which
Sector management believes have a long-term growth poten-
tial. Apart from the Siemens brand, the Sector markets some
parts of its portfolio under different brand names (such as
Flender for gears or Winergy for wind turbine components),
depending on geography and technology.
The Sector sells its products primarily through dedicated per-
sonnel in Siemens’ worldwide network of regional sales units.
In addition, it uses original equipment manufacturers, solu-
tion providers, installers, general contractors, third-party dis-
tributors and independent agents.
The large size of some of the Sector’s projects occasionally ex-
poses it to risks related to technical performance or specific
customers or countries. In the past, the Sector has experi-
enced significant losses on individual projects in connection
with such risks. For additional information on these risks, see
.       ,
  .
The Sector has manufacturing locations worldwide, especially
throughout North and South America, Western and Eastern
Europe, and Asia, allowing it to stay close to its major customers
and keep shipping charges low. In recent years, material costs
have been negatively affected by significant price increases for
metals, energy and other raw materials. The Sector continues to
work on reducing the use of hazardous materials
(e.g., lead)
and to replace them in its products and processes. Sustainable
products and processes, such as coking coal free iron produc-
tion processes (COREX), energy efficient motors and energy
management play a major role in its innovation strategy.
Average product lifetimes in the Sector’s product businesses
tend to be short (typically ranging from one to five years from in-
troduction) and are even shorter where software and electronics
play an important role. The lifecycles in the solutions businesses
tend to be longer, as the Sector supports its customers with sig-
nificant services through the whole life of their infrastructures.
The timing and extent to which a Division of the Industry Sector
is affected by economic cycles depends largely on the kind of
business activities it conducts. Business activities that tend to re-
act very quickly to changes in the overall economic environment
include many of the business activities of Industry Automation
and those business activities of Drive Technologies that serve
customers in the manufacturing industries. Business activities
that are generally affected later by the changes in the overall
economic environment include those business activities of Drive
Technologies that serve customers in process industries as well
as in the energy and infrastructure sector.
The competitors of our Industry Sector can be grouped into
multinational companies that offer a relatively broad portfolio
and companies that are active only in certain of the geographic
or product markets served by the Industry Sector. The Sector’s
principal competitors with broad portfolios are multinational
companies such as ABB, Emerson Electric and Schneider Elec-
tric. In the industries in which the Sector is active consolida-
tion is occurring on several levels. In particular, suppliers of
automation solutions have supplemented their activities with
actuator or sensor technology, while suppliers of components
and products have supplemented their portfolio with comple-
mentary products for their sales channels.
Asian competitors are generally focused on large-scale produc-
tion and cost cutting. European competitors are focused on
high quality lifecycle service. Nevertheless, most major com-
petitors have established global bases for their businesses. In
addition, competition in the field has become increasingly fo-
cused on technological improvements and price. Intense com-
petition, budget constraints and rapid technical progress with-
in the industry place significant downward pressure on prices.
In addition, competitors continuously shift their production to
low-cost countries.
The main competitors of the Industry Automation Division are
ABB, Schneider Electric, Rockwell and Emerson Electric. Within
its product lifecycle management business, the Division also
competes with, among others, Dassault Systemes and PTC.
Competitors of the Drive Technologies Division include compa-
nies with broad business portfolios such as ABB, Emerson Elec-
tric and Mitsubishi Electric but also specialist companies such
as Fanuc and SEW. The main competitors of our Metals Tech-
nologies Business Unit are Danieli and SMS.
Infrastructure & Cities
The Infrastructure & Cities Sector offers a wide range of sus-
tainable technologies for metropolitan centers and urban infra-
structures worldwide, such as integrated mobility solutions,
building and security systems, power distribution equipment,
smart grid applications and low- and medium-voltage products.
    (  )
1 Commonwealth of Independent States.
Europe, C.I.S.,
Africa, Middle East: 60%
therein Germany: 17%
Asia, Australia: 14%
Americas: 26%
therein U.S.: 19%