The Siemens Success Story
Research and Development in China
Siemens, founded in Berlin in 1847 by Werner von Siemens with his design for the pointer telegraph, is now a global powerhouse focusing on the areas of electrification, automation, and digitalization. One of the world’s largest producers of energy-efficient, resource-saving technologies, Siemens is a leading supplier of systems for power generation and transmission as well as medical diagnostics. The company also plays a pioneering role in infrastructure and industry solutions.
Today, Siemens has around 377,000 employees in more than 200 countries/regions and operates in production as well as manufacturing plants worldwide. In addition, the company has administration buildings, warehouses, research and development facilities, or sales offices in almost every global region.
Electrification, automation, and digitalization are the long-term growth areas for Siemens. To take full advantage of the market potential in these fields, Siemens’ businesses are grouped into eight divisions as well as two separately managed business units:
- Building Technologies
- Digital Factory
- Energy Management
- Financial Services
- Power and Gas
- Power Generation Services
- Process Industries and Drives
- Healthcare (Siemens Heathineers, a publicly listed subsidiary)
- Wind Power (Siemens Gamesa, a separately managed business)
Pioneering technologies and business models developed by Siemens have always been regarded as the foundation of its success. According to a global innovation survey conducted annually by BCG, Siemens is among the 50 most innovative companies in the world. In 2018, the company spent €5.6 billion (13.3% of its global revenue) on R&D, recording over 7,300 inventions and making 3,850 patent applications. These ongoing efforts in R&D take place both on a corporate level and divisional level.
On the corporate level, corporate technology (CT), which is the central R&D unit at Siemens, ensures that all research activities and business strategies are closely aligned and that business units benefit equally and speedily from technological developments. Its primary role is to protect the company’s intellectual property and to maintain a contact network with leading universities and research institutes. Operating in 16 countries and collaborating with 27 leading universities around the world, CT stays close to customers and knows their requirements, provides a link between the worlds of industry and academia, and strengthens Siemens’ innovative power.
While CT works primarily on cross-sector or key technologies, R&D teams in each business unit focus on industry-specific applications and solutions. R&D has three times as many employees as CT and around 90 percent of all R&D expenditure is within the business units.
Siemens in China
Siemens has a long history of doing business in China. In 1872, Siemens supplied China’s first pointer telegraph, and by the end of the 19th Century, the company had manufactured the first steam generator and constructed the country’s first tram line. In 1985, Siemens entered into a comprehensive partnership agreement with the Chinese government - the first foreign company to do so. For over 140 years, Siemens has fostered cooperation with the country through its solutions, technologies, and products, and is known there for its quality, reliability, technological excellence, and innovation.
China is now Siemens’ second largest overseas market. In its 2018 fiscal year (1 October 2017 – 30 September 2018), Siemens generated revenue of €8.1 billion in China which contributed to nearly half of the company’s revenue in Asia-Pacific and almost one-third in all emerging markets. With over 34,000 employees in 100 subsidiaries in Greater China, Siemens is one of the largest foreign-investor companies in the country.
R&D at Siemens in China
Siemens develops the most promising products and solutions in China, for China, and for the world. The company combines global R&D systems and an extensive network of Chinese innovation centers with local business needs. By developing innovations to fulfill the needs of local customers, Siemens also serves customers in other emerging markets and sometimes even in developed countries with similar requirements. Siemens collaborates with leading universities and research institutes in China under the framework of open innovation to be part of China’s innovative power and, at the same time, to benefit from it. Since its businesses cover most SEI1 (Strategic Emerging Industries) areas, the company works closely with the Chinese government to upgrade and transform the country’s industrial sector.
Ideal ground for innovations
With diverse market needs and a large customer base willing to try new things, China is an ideal environment for world-class innovation. For decades, Siemens has been increasing R&D investment in the country. By the 2018 fiscal year, the company was boasting 21 R&D hubs, nearly 5,000 R&D and engineering staff, and around 13,000 active or pending patents in China.
Local design and local manufacturing for local customers
Siemens is constantly striving to design and develop the right products locally and provide solutions for the Chinese market to meet local consumer needs. In 2006, Siemens announced the SMART (simple, maintenance-friendly, affordable, reliable, time-to-market) program. In this program, Chinese R&D teams are heavily involved in developing low- and mid-end products and creating solutions for low-income customers. Siemens Healthineers produced the first computer tomography scanner (CT scanner) within the framework of this program in 2007. The overall cost was significantly lower because 80% of the components were procured in China. It then sold for a much more competitive price than a high-end, four-dimensional spiral CT scanner and achieved the largest sales volume of any Siemens CT scanner.
China as an innovation hub and reverse innovation
Know-how gained in the Chinese market is now flowing into products and solutions for other markets – emerging countries such as India and Brazil as well as developed countries. For example, the SOMATOM Emotion 16 CT scanner – a product developed, manufactured, and managed by the Chinese team – is now 70% exported to the global market. Another product, the Magnetom Essenza MRI system, is 90% exported to the global market.
Innovation of cutting-edge technologies in China
As already mentioned, Siemens runs a central R&D unit that works primarily on cross-sector or key technologies in 16 countries. China is one of these countries. Operational in 1998 and opened officially in 2006, Siemens China Corporate Technology (CT China) is now the company’s largest research facility outside Germany.
Research scientists at CT China work on the cutting-edge technologies of electrification, automation, and digitalization2. For example, the Siemens Qingdao Innovation Center was set up in March 2016 with a focus on special robots, industrial robots, and intelligent equipment. This was Siemens’ first innovation center for intelligent manufacturing outside Germany. In September 2016, CT China opened an R&D hub in Suzhou with a focus on big data, industrial IoT, connected cities solutions, cybersecurity, and autonomous robotics.
Meanwhile, CT China is leading the company’s global research in autonomous robotics with a focus on the R&D of new mechatronics systems, human-robot collaboration, and the application of artificial intelligence in robotic controllers.
Upgrade and transformation of China’s industrial sector
In China, the manufacturing industry has experienced a significant transformation from “Made in China” to “Innovated in China.” Siemens contributes to this process by helping manufacturers enhance production efficiency, flexibility, and security, improve product quality, and shorten the time-to-market for new products.
In July 2017, Siemens and China’s National Development and Reform Commission signed an MoU that specified cooperative activities in areas of innovation and the application of digital technologies based on their existing cooperative framework. Siemens opened its first Asia-Pacific “Digitalization Experience Center” in Beijing. The Center comprehensively exhibits the company’s leading digital enterprise concept for “Industry 4.0”. By the 2018 fiscal year, Siemens had provided digital enterprise solutions to hundreds of Chinese companies covering dozens of industries, thereby enabling quality developments in Chinese industries.
China is becoming an increasingly important location for innovation to Siemens, and the company has invested a lot of time and effort in developing an open-innovation ecosystem in China. The company consults with local authorities, leading enterprises, medium, small and micro-sized enterprises, as well as start-ups universities, and scientific research institutions to develop future-oriented innovations and create a win-win situation for all stakeholders.
As one of the most innovative companies in the world, Siemens considers China a crucial market. With diverse market needs and a large customer base willing to try new products, China offers an ideal environment for world-class innovation. Besides a large number of R&D activities taking place in all its business units, Siemens also runs a central R&D corporate technology unit in China. Not only low- and mid-end products, but also cutting-edge technologies are developed in China. Products made in China and for China are now supplying other emerging markets and even some developed countries as well. The company collaborates with leading Chinese universities and research institutes to promote open innovation. It also works with the Chinese government to provide support for the transformation and upgrading of national industries.
1 China’s nine SEIs – 2016 Edition (Released Feb. 2017): 1. Next generation information technology (IT); 2. High-end equipment manufacturing; 3. New materials; 4. Biotechnology; 5. New-energy vehicles (NEVs); 6. New energy; 7. Energy efficient and environmental technologies; 8. Digital innovation; 9. Related services。
2 Electrification: generation, transmission, distribution, and efficient use of electricity. Automation: automatic operation of equipment and facilities like factories and grids. Digitalization: intelligent collection, analysis, and the utilization of data