You have been talking about the India growth story. But while this creates the necessary marketing hype for ABB, the fact is your the business in India is still minuscule compared to the size of your operations in China.
It's true that our business in China is miles ahead of that in India. Our turnover in China is $3 billion. In India it's not even $1 billion. We have set a target of a billion dollar turnover in India by mid-2007. But things are changing fast. The electricity policy document is fascinating. It facilitates ultra-mega-power projects and we are sure India is in the take-off stage. Please remember we are not starting from ground zero here.
Our profits in India last year grew by over 25 per cent, and this is big. There are lots of greenfield projects coming up. India is a locomotive that has not only started moving but is gathering speed. We would have obviously liked the pace to be faster, but the most important thing is stability in economic policy.
ABB has talked about greater co-ordination between its operations in India and China. How and why do you want to do this?
The answer is simple: A co-ordination between our operations in the two manufacturing hubs globally will help us to fully exploit our competitive edge. Our efforts are geared towards breaking the boundaries so that the group as a whole can optimise, and not duplicate. Global sourcing is our mantra and productivity is today the key. The increased synergies between our Indian and Chinese arms will enable us to achieve greater economies of scale. ABB operates in 140 countries and our aim is to optimise our global presence. Countries like India and China have to play a key role in this quest. Our assessment is that while China is well poised to be the manufacturing hub, India has its inherent strengths in complex integration projects, which are hi-tech and intensely R&D-driven. Ravi Uppal (ABB India's MD) sits in the ABB China board and the ABB China chief is on the ABB India board.
But where are the similarities? China is already a mature market while India figures nowhere in terms of infrastructure.
India is great for infrastructure companies of the world. The emerging trend in China and India is that both these countries are witnessing world-class, world-scale global projects and therefore consolidation is happening at the expense of hundreds of smaller-scale suppliers. Acceptance of products made in India and China are great worldwide and what has helped this cooperation is the thawing of relations between the two countries and increasing cross-border trade. It will help if free trade, or at least some sort of free trade agreement is worked out between the two countries.
Where does India figure in your global R&D activities?
Even during difficult times, we had a sustained focus on R&D and continued to invest more than 5 per cent of our revenue base, into R&D. This is a significant investment for the kind of portfolio that we have. Fundamental research is thinking five to eight years ahead and developing ground-breaking technologies, which might not be ready for the market, today, but have potential in the future. We have such centres in the US, Germany, Sweden and Finland and we have one corporate research centre in Bangalore. Applied research is not just software development, but helping customers improve productivity and quality. Applied R&D for oil and gas, pulp and paper is being done in India and China.
That's too general. Could you be more specific in terms of your India plans?
In products, ABB India is already the global sourcing hub for three product lines: high voltage circuit breakers, medium voltage outdoor circuit breakers and magnetic actuators; all ABB markets source transformers from India and China. By leveraging our global optimisation philosophy, we are moving away from the traditional Made in India or Made in China concept to "Made in ABB". Our top 30 customers like GE and so on want one global supplier and one global solutions provider; they don't care whether the solution or the products come from India or China.
ABB had very good focus in the early-1990s and then lost some of it in the late-1990s. What happened, and how did you recover?
That was a bad dream and we have managed the reality quite well. We have been restructuring since 2002, when the company faced tough times under a multibillion-dollar debt mountain. Yes, we in the late-1990s, we moved away from our core strengths to areas like building airports and information technology software that appeared as high growth at one point of time. Probably, we wanted to give the Microsofts of the world a run for their money [laughs]. But since then we have sold off non-core assets around the world and have not only recovered but have been posting fabulous growth. We are back on course "" focused on power and automation technologies.
