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Market Avenue

UPDATED: May 31, 2010 NO. 22 JUNE 3, 2010
Winning Markets and Customers
Siemens shows its confidence in the Chinese market by continuing investment and focusing on developing local ties


 Tim Dawidowsky

Two days before the Fourth Siemens VAI Media Summit Metals and Mining Technologies held in Essen, Germany, from May 9 to 12, a report jointly released by Deloitte China and the China Steel Industry Development Research Institute said that steel producers in China would face "tremendous cost pressures" in the future due to "a wide range of internal and external factors."

Those factors include mounting material costs, declining profitability, demand instability, the move toward a low-carbon economy and rising environmental costs, as well as more stringent corporate governance and regulatory requirements.

However, top managers at Siemens VAI who attended the media summit still showed their interest and confidence in the country. "China is 'the' market and will continue to be the market," said Tim Dawidowsky, former General Manager of Industry Solutions Division of Siemens Ltd., China, who is now responsible for the Siemens VAI global casting and rolling business.

After being the General Manager for Marketing & Business Development as well as for Oil & Gas and Marine within I&S China, Dawidowsky was appointed Senior Vice President and General Manager of Industry Solutions Division of Siemens Ltd., China, in May 2007. Since October 2008, he has additional responsibility as General Manager of Industry Solutions Division for Northeast Asia.

At the media summit, emerging markets, China and India in particular, caught much attention. They were considered "the strongest growth drivers." Siemens VAI figures show 54 percent of the company's new orders in fiscal year 2009 came from Asia. Dawidowsky estimated that all growth over the next five years would take place in emerging markets.

Global crude steel output fell by 8 percent in 2009 to 1.2 billion tons, said the World Steel Association. But China was one of the few exceptions. According to the National Bureau of Statistics, last year China's crude steel output and steel output reached 568 million tons and 696.26 million tons, respectively, growing 12.9 percent and 15.2 percent. In the first quarter of this year, China's crude steel production rose by 24.5 percent to 158 million tons.

Li Xinchuang, President of the China Metallurgical Industry Planning and Research Institute, said the country's crude steel output is expected to reach a record 640 million tons in 2010, up 10 percent year on year, according to a report in Shanghai Securities News on May 15.

At a keynote speech, Dawidowsky said Siemens VAI should increase its local value in emerging markets driven by China and India, which currently produce more than half of the world's steel. He also outlined four reasons: to participate in the growth potential, have a say as a local market participant, develop technologies that meet specific market requirements, and remain competitive.

China business

Innovation has been and will remain his company's backbone, said Dawidowsky. The challenge now facing China is not how to transfer technology and train people, but how to change the way of thinking.

"We are able to cope with complexity, and sometimes it's hard to start thinking simple," he said. "That is the reason why we are not simply transferring technologies to China and making them Chinese, because that will not work. What we have to do is to understand the market requirements—we are continuously doing customer interviews in order to understand what is being requested."

The key to success in the Chinese market, in Dawidowsky's eyes, is "becoming local," which means "close to customers and local requirements."

"We need to be open-minded," he said. "The way to stay another hundred years in China with our business is being able to compete as a local company on the local market."

Currently, Siemens VAI has three manufacturing facilities in China, including one joint venture with the Shanghai-based Baosteel, China's largest steelmaker. The other two are in Shanghai and Taicang, Jiangsu Province, with approximately 1,600 employees in sales, engineering and manufacturing.

When the Corex C-3000 plant, an iron-making facility jointly operated by Siemens VAI and Baosteel, was put into operation in November 2007, it drew attention from the whole industrial sector, as it was the first plant of its kind in the country and also the largest in the world.

According to Siemens VAI's website, the Corex process was developed in the late 1970s and its feasibility was confirmed during the 1980s. Following the first industrial application of a Corex C-1000 plant, with nominal production of 1,000 tons of hot metal per day in South Africa, four C-2000 plants with nominal production of 2,000 tons of hot metal per day were subsequently put into operation in South Korea, South Africa and India. The first Corex C-3000 plant was started up at Baosteel with a nominal annual production capacity of 1.5 million tons of hot metal.

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