Siemens looks to digital twin, IoT to drive growth
Siemens has launched a new growth strategy to make the most of recent digital acquisitions. It sees a key capability in combining data from the real and digital worlds, with digital applications for specific industries and pooling resources from across the company.
This covers software and automation solutions and a leading IoT platform, plus core technologies in areas such as artificial intelligence (AI), digital twins, 5G, industrial edge and cybersecurity to support the core business of industrial, medical and transport equipment. This will drive growth rates of 10 percent over the business cycle until 2025 says Roland Busch, the recently appointed President and CEO (above).
Following the spin-off of Siemens Energy in 2020, Siemens is focused on technology for industry, infrastructure, transportation, and healthcare. The addressable markets for Digital Industries, Smart Infrastructure, Mobility and Siemens Healthineers amount to a volume of €440bn and growing 4 to 5 percent per year until 2025.
“Our customers benefit from our ability to combine the real and digital worlds. This unique capability enables Siemens to support its customers in a way that no other company can,” said Busch. “Digitalization, automation and sustainability are growth engines for our business. Here, our core business and our digital business reinforce each other in a virtuous cycle. This effect forms the foundation of our growth strategy for achieving more profitable growth. As a focused technology company, we want to strengthen our position in all our markets and enter adjacent profitable markets. And we’re now making our commitment to sustainability clearer than ever. Thus, in times of major global challenges, we’re creating clear added value for our customers, our stakeholders and society.”
The company is also looking at adjacent markets with an additional volume of €120bn, pointing to the pending $700m acquisition of Supplyframe for its global marketplace for electronic components and the $16bn acquisition of cancer care specialist Varian.
Software will be a key part of the growth. From next year the Digital Industries (DI) begin will begin a fundamental business model transformation as it transitions a significant part of its software business to Software as a Service (SaaS) and reporting annual recurring revenue (ARR), or subscriptions. DI Software plans to introduce SaaS products with greater accessibility, effortless collaboration and unlimited scalability to help customers accelerate digital transformation in new vertical markets.
Siemens is also raising its target profit-margin range for Smart Infrastructure and Mobility. Despite temporary burdens from its transition to a SaaS business model, Digital Industries is retaining its ambitious target profit-margin range of 17 percent to 23 percent. For the future, Smart Infrastructure is aiming for a profit-margin range of 11 percent to 16 percent, up from a range of 10 percent to 15 percent. Mobility is targeting a margin of 10 percent to 13 percent.
The company sees the favourable business development continuing this quarter, with income of €5.7bn to €6.2bn.
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