By Alex West, Principal Analyst, IHS Markit
Early this month ABB; a supplier of robotics, process automation, and electrification components, acquired B&R Automation, an industrial software and automation hardware company. This is the latest acquisition that ABB has made in recent years. In 2012, ABB acquired Thomas & Betts for $3.9 billion, followed by Power-One Inc in 2013 for $1 billion. So what does the B&R Automation acquisition mean for ABB?
Product portfolio and OEM sectors
B&R Automation adds to the ABB portfolio, bringing established product lines in PLCs, industrial PCs, HMIs, I/O modules, servo drives, and servo motors. This gives ABB, one of the leading vendors in process automation, a step-up in terms of a discrete automation portfolio, which was an obvious gap in the offering. It also brings access to discrete automation sectors and an established business with over four thousand machine builders. By acquiring B&R Automation, ABB has expanded its ‘knowledge’ pool. They now have more expertise in discrete automation, which has strengthened their capability of providing products, and IoT solutions to OEMs in sectors like packaging machinery. There is certainly opportunity to expand their IoT solution business as the uptake of IoT technology has so far been faster in discrete sectors, particularly those that are consumer related.
ABB Chief Executive Officer Ulrich Speisshofer states that the combined global customer base will create huge opportunities for the Fourth Industrial Revolution, with an “installed base of more than 70 million connected devices, 70,000 control systems and now more than 3 million automated machines and 27,000 factory installations around the world”. It does sound impressive. Does this make the combined company a concern for other leading suppliers of industrial automation components?
Globally there is little change to the competitive environment in terms of supplier rankings. According to IHS Markit’s Industrial Automation Equipment Tracker, at a global level ABB show little advancement in the market share ranking. They will gain share for products such as industrial PCs, PLCs, servo drives and servo motors. The latter two product rankings show the greatest changes for the combined company. ABB was estimated to be ranked number 32 of servo drive suppliers and now moves to a top 15 position. For servo motors, ABB was ranked number 35 globally in 2015; the combined business is now estimated to put them at number 14. A significant change, but not enough to pose a threat to the leading suppliers to these markets.
This acquisition brings the combined company into more direct competition with Schneider Electric as they now have comparable global market shares for I/O modules, industrial PCs, position control hardware, servo drives, and servo motors. The greatest market share increase is estimated for the industrial PC market, with a market share increase of 3% to place the combined company as the seventh largest supplier in revenue terms. The market share increase is estimated at around 3% for the operator terminal and PLC markets. This puts ABB as the tenth largest supplier of operator terminals and sixth largest for PLCs at a global level.
EMEA market impact
ABB will also gain the ability to scale the machine automation business in Europe, where B&R Automation generates around 65% of global sales. In the EMEA region, ABB’s market share is estimated to increase by around 3% for I/O modules when using 2015 base figures. This moves ABB to second place of the leading suppliers to the EMEA market, above Schneider Electric. In EMEA the combined company is estimated to have gained market share of over 4% for operator terminals and PLCs, making it one of the top 5 leading suppliers for these products.
Another area of likely change is that of industrial communication protocols. B&R Automation’s POWERLINK and openSAFETY protocols could now become the standard for ABB’s automation products. According to IHS Markit’s Industrial Communications Intelligence Service, POWERLINK is estimated to be the seventh largest industrial protocol at a global level in terms of 2015 new node connections; sixth in the EMEA region. For openSAFETY, it is estimated to be the eighth largest safety protocol at a global level by new node connections. ABB’s acquisition of B&R Automation may see these protocols’ being more widely supported with a larger product portfolio, which could impact share of other leading industrial communication protocols.
An area that may be worth watching is the ABB Ability Platform and how it will develop over the next few years. With trends to IIoT and smart manufacturing it is becoming increasingly important for industrial automation companies to develop and support software portfolios. This may be a driver of further ABB acquisitions as Spiesshofer explained to reporters “There will be more acquisitions...as one of the drivers of growth going forward, but there is no 'must haves' we are desperate about.”
The ABB acquisition of B&R Automation will fill a gap in the existing portfolio and will give them access to an established and loyal machine builder customer base. This will certainly be a concern for other leading suppliers to these product markets and sectors. The combined company will likely represent more of a challenge to some of the leading suppliers of I/O modules, industrial PCs, servo drives, and servo motors. At a global level, the acquisition is estimated to have made marginal improvements to the supplier rankings for machinery automation.