Automation Localization Survey (II): Siemens, ABB, and Schneider Electric Achieved Record Profits in 2025—So Why Has Growth Stalled in China?

But in China: Revenue declined by 4% in 2024 (down 2% in local currency terms; note ABB’s fiscal year differs). Schneider Electric: Free cash flow of $500 million—new all-time high. ・2025 fiscal year revenue exceeded $4.34 billion (≈€4.32 billion) for the first time, with organic growth of 8.9%. ・Free cash flow: $500 million (new record high). ・Digital business now accounts for 62% of total revenue; target is 70%. But in China: Low single-digit growth in both Q1 and Q4 of FY2025; discrete automation has recovered, yet process and hybrid markets remain weak. Contrast: Record global profits vs. stagnant growth in China—where is the money coming from? A shared trait among these three giants is that all achieved record-high global profits and free cash flow in 2025—yet China, once their primary growth engine, is clearly under pressure. So the question arises: If China—the former ‘cash cow’—is no longer growing, where *is* this money coming from? II. Where Is the Money Coming From? The Three Pillars of Global Profitability Pillar 1: High-Margin Software + Digitalization Siemens’ 2025 industrial operating margin: 15.4%; ABB’s operating EBITA: 19.0%; Schneider’s adjusted EBITA: 18.7%. These margins rank among the highest globally in manufacturing. What supports these margins is not hardware—but software ecosystems: ・Siemens TIA Portal: Fully integrated automation platform. Once customers adopt the S7-1200/S7-1500 + TIA Portal combo, migration costs become prohibitively high. Software business gross margins typically exceed 60%. ・Schneider AVEVA: Following its industrial software integration, digital business now accounts for 62% of revenue. AVEVA’s software licensing and services revenue functions almost like a ‘money-printing machine’. ・ABB Ability™: Though its ecosystem scale lags behind Siemens’, service-based revenues—including predictive maintenance and energy management—are growing rapidly. China’s industrial automation hardware (PLCs, servo drives, inverters) is no longer the core profit driver globally. What truly generates profits is software, services, and ecosystem lock-in. Pillar 2: Energy Management / Data Centers—The Unexpected Windfall Driven by AI Compute Schneider holds a 22% share of global hyperscale data center infrastructure. In 2025, surging AI compute demand triggered exponential growth in power capacity, thermal management, and energy management requirements for data centers. Schneider’s 2025 energy management revenue reached $3.58 billion (+10% organic growth), with data center–related contributions being particularly significant. In 2025, Schneider also acquired Motivair (liquid cooling), further doubling down on the AI data center thermal management赛道. ABB’s electrification business similarly benefited from data center expansion and broader energy transition trends, posting 12% growth in Q4. While Chinese manufacturing grapples with inventory destocking and price wars, global AI compute infrastructure construction delivered a massive incremental windfall to foreign multinationals. Pillar 3: Electrification + Automation Bundles—Strong Demand Outside China ABB sees robust demand in data centers, rail, and maritime/port sectors; Siemens maintains growth in mobility (rail, urban transit, smart infrastructure); Schneider’s energy management business continues expanding across Europe and the Americas.

How AI Is Reshaping the Semiconductor 'Smile Curve'—and the Underlying Logic Behind the Global Distributed Bull Market

Meanwhile, Taiwan’s story revolves around TSMC and advanced packaging. Only TSMC can mass-produce 3nm and 2nm chips globally. All three of TSMC’s CoWoS backend fabs are fully booked, with lead times stretching from 52 to 78 weeks. NVIDIA alone has locked up 60–70% of CoWoS capacity. TSMC is ramping monthly wafer output from 35,000 wafers at end-2024 to 130,000 wafers by end-2026—a near fourfold increase. Yet even with this massive expansion, capacity remains extremely tight. Taiwan’s server OEM ecosystem—including Foxconn, Quanta, and Wistron—is scaling up in tandem with AI server shipment volumes. South Korea’s narrative centers entirely on memory. SK Hynix commands ~50–55% of the global HBM market; Samsung holds ~19–35%; Micron ~5–20%. HBM differs fundamentally from conventional DRAM: it relies on 3D stacking, through-silicon vias (TSV), and specialized packaging processes—each layer representing technological barriers built over more than a decade of sustained R&D investment by Korean firms. Japan and the Netherlands also play indispensable roles. Tokyo Electron manufactures semiconductor equipment; Shin-Etsu Chemical and SUMCO supply silicon wafers; Ajinomoto produces ABF substrate materials. While Japan long ago exited competition in chip-end products, its dominance in materials science and precision manufacturing remains irreplaceable today. The Netherlands’ role is even more direct: ASML monopolizes EUV lithography systems. In January, Morgan Stanley significantly raised ASML’s target price to €1,400, forecasting 2027 as ASML’s peak profit-growth year—with EPS projected to surge 57% year-on-year. This outlook rests on three drivers: faster-than-expected expansion of advanced logic foundry capacity; large-scale DRAM capacity ramp-ups; and overall demand outperforming expectations. Dutch packaging-equipment firms such as BESI are likewise securing substantial orders amid the AI chip packaging boom. China and Europe pursue different entry points—but follow similar logic: each has established either cost advantages or delivery capabilities in specific segments of AI infrastructure. China’s Innolight and Accelink lead globally in volume shipments and pricing power for 800G and 1.6T optical modules. Yet Photon Capital’s analysis highlights an important timing window: current high module profitability stems from temporary pricing power driven by short-term 800G capacity shortages. Once 1.6T production ramps up in H2 2026 through 2027—and second- and third-tier vendors catch up on capacity—price pressure on the module side will intensify rapidly. In Europe, companies like Schneider Electric, ABB, and Vertiv—specializing in power distribution and thermal management—have received orders far exceeding expectations, fueled by surging electricity demand in data centers. Wedbush estimates hyperscaler AI infrastructure spending will reach ~$725 billion in 2026, up 77% year-on-year—with power infrastructure being one of the fastest-growing subsegments.

ABB Orders Surge Past Expectations, Data Centers Fuel Jump

18 hours ago

ABB reported third-quarter orders surged 40% to $12.1 billion, exceeding estimates due to demand for electric components in data centers and utilities. It advanced acquisitions, including a Mitsubishi joint venture, capitalizing on the AI infrastructure boom.

bloomberg

2026-10-19

ABB Orders Surge Past Expectations, Data Centers Fuel Jump

ABB Orders Surge Past Expectations, Data Centers Fuel Jump

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