Siemens AG is starting a major reorganization to bring its digital products, industrial hardware and artificial intelligence (AI) capabilities closer together. CEO Roland Busch is leading the move as the German industrial giant looks to improve profitability and compete more closely with technology companies.
Starting October 1, four units within Siemens’ Digital Industries division will be combined into a single automation business. The restructuring will connect sales, technology and data across different parts of the company.
The goal is to make it easier for industrial customers such as Boeing and Volkswagen to access multiple Siemens products through a single business relationship. These products can include factory controls, grid connections, industrial software and systems used to design and operate machines.
Siemens Focuses on Industrial AI
Busch is using AI and software to strengthen Siemens’ traditional engineering business. The company believes its existing presence inside factories, buildings, power networks and transportation systems gives it access to machines, customers and operational data that many pure software companies do not have.
Siemens is also investing heavily in software and AI. The company has spent more than $15 billion on software companies Altair and Dotmatics and is developing an AI hub in Seattle led by former Amazon Web Services executive Vasi Philomin.
The strategy is designed to combine Siemens’ hardware, software and data into integrated industrial systems.
Siemens Targets Higher Returns
Siemens has already improved how investors view the company, but its profitability remains below some major industrial competitors.
Jasmin Wolfram of Union Investment said, “If Siemens can scale R&D and at the same time sell hardware, software and services together to customers as an integrated system, that creates both cost and revenue synergies.”
Wolfram also said, “That was something investors criticized for a long time: the lack of a companywide backbone.”
UBS analyst Andre Kukhnin said Siemens has reduced the valuation discount investors previously applied to the company.
“They have been successful in reducing it and commanding valuation that is more and more comparable directly to their pure-play peers,” Kukhnin said.
Siemens now needs to show that its new structure can generate faster growth and stronger returns. The company is betting that combining industrial engineering with AI and software can strengthen its position against US technology firms and Chinese automation companies.
