Siemens Outlines Plan for China

BEIJING -- With its “Twelve-Point Program for Profit and Growth in China” launched in May2004, Siemens boosted business results in fiscal 2004 (ended September 30,2004). The company’s China operations showed substantial growth rates andgains in market share. New orders increased 34 percent from 31.3 billion RMB to41.8 billion RMB. In the same period, sales climbed from 30.1 billion RMB to 38.4billion RMB, an increase of 28 percent over fiscal 2003. In Euro terms sales infiscal 2004 reached 3.8 billion EUR, an increase of 15 percent year on year, andnew orders climbed to 4.2 billion EUR, a rise of 20 percent in the same period.Local manufacturing, engineering, R&D, software development and purchasingactivities also were substantially expanded. Siemens recruited some 4,000 newstaff for its local operations. “Our Twelve-Point Program for Profit and Growth inChina is becoming a real success. Overall, we gained market share and provedthat we can win against both the global and local competition,” stated Dr.Heinrich von Pierer, president and Chief Executive Officer of Siemens AG.

In fiscal 2004 (October 1, 2003 to September 30, 2004), Siemens was able tostrengthen its leading positions in all of its business areas including information andcommunications, automation and control, power, transportation, medical solutions andlighting. In order to further increase local content and develop products more closelyoriented toward market needs, the company significantly expanded its localmanufacturing, engineering and R&D capacities. At the end of fiscal 2004, Siemenstotal long-term investment in China amounted to 1 billion EUR.

One of the major growth drivers was the company’s further penetration of the localmarket by building up its network of regional offices. In 2004, Siemens added 11 newlocations to bring its total number of regional offices to 38 and also strengthened allexisting key locations. In 2005, Siemens plans to add another nine offices to be evencloser to its customers. Under the Siemens One umbrella, the company also initiatedmore than 40 projects to provide best-in-class, technically integrated systems andcomplete solutions in a variety of infrastructure and industry fields, harboring a multimillionEUR sales potential. “Overall, new orders received through Siemens Oneexceeded our expectations” commented Pierer.

With 31,000 local employees, Siemens already is one of the largest employers amongforeign invested enterprises in China. The company’s excellent reputation helps toattract and retain some of the best talent in the market. In fiscal 2004, Siemensrecruited some 4,000 new staff for its local operations and plans to add another 5,000people this fiscal year to help reach the company’s ambitious growth targets in Chinaand enable the local operations to become a more significant part of Siemens’ globalvalue chain.

China is not only a key strategic market for Siemens, but also offers many advantagesthat the company wants to utilize in a mutually beneficial way. To sustain its innovationleadership, the company will substantially expand its local R&D and softwaredevelopment centers this fiscal year. This includes building up a global R&D center forbroadband technology and an application-oriented research center for information andcommunications, automation, and automotive technologies. In addition, China will play agrowing role in global purchasing activities and become a key strategic procurementmarket. Through the newly established Procurement Office China, the purchasingvolume in fiscal 2004 reached about 2.1 billion EUR. This fiscal year, Siemens plans afurther major increase in its local purchasing and is aiming at eventually reaching anannual procurement volume of about 5 billion EUR in China.

As excellent leadership is crucial for giving Siemens a sustained boost in the Chinesemarket, Dr. Richard Hausmann assumed his new role as President and Chief ExecutiveOfficer of Siemens Ltd., China on January 1, 2005. “I am confident that under hisleadership our Siemens China operations will become a cornerstone of our globalbusiness,” commented Pierer. Hausmann brings with him a proven track record insuccessfully growing the Siemens medical solutions business globally and in Chinathrough a relentless focus on customer benefits, innovation and cost competitiveness.“It is truly a privilege to be a part of China’s future development,” said Hausmann. “I amtotally committed to driving the growth of our local organization and, together with ourlocal partners and customers, to building lasting partnerships for joint success.”

China has the world’s third largest and fastest growing electrical market. Major eventslike the 2008 Olympic Games in Beijing and the 2010 World Expo in Shanghai and theAsian Games in Guangzhou will be a further stimulus. To participate in this growth anddevelop all opportunities offered by the Chinese market, the company formulated afuture-oriented strategy called the “Twelve-Point Program for Profit and Growth inChina” and launched it in May 2004. Key pillars of the strategy are further marketpenetration, ambitious growth plans for the company’s Operating Groups, the increaseduse of China’s talent potential, and expanding China’s role in the Siemens global valuechain. As part of the strategy and to underscore its long-term commitment to thecountry, Siemens plans to invest 1 billion EUR in China, including 100 million EUR forthe new company headquarters being built in Beijing.

Siemens AG