Industrial Automation August 2022

Acquisitions by WEG and ABB Reveal Strategies Amongst Motor Suppliers

Blake Griffin
Blake Griffin

Blake is an expert in automation systems, industrial digitalization, and off highway-electrification. Since joining Interact Analysis in 2017, he has written in-depth reports on the markets for low voltage AC motor drives, predictive maintenance, and mobile hydraulics.

The top three suppliers of low voltage AC motors made waves in the motor and drives space with a string of acquisition announcements in early August. First, WEG announced its acquisition of Gefran’s motion control business. Then, on August 11th, ABB announced its acquisition of Siemens’ NEMA motor business. Both developments are significant within the motor and drives market and serve to highlight portions of each company’s industrial automation strategy. In this insight, we’ll unpack both of these acquisitions and explain their implications on the broader motor and drives markets.

ABB Acquires Siemens’ NEMA Motor Business

ABB has long used acquisition as a tool to bolster its motor portfolio. In 2011, the company finalized its acquisition of Baldor Electric. At the time, Baldor Electric was the largest supplier of electric motors within North America. The acquisition of Baldor Electric not only gave ABB the title of market leader within low voltage industrial motors, it also meant they were now the largest supplier of NEMA frame motors.  

Within the motor market, there are two sets of standards for motor frame size and efficiency: NEMA (National Electrical Manufacturers Association) and IEC (International Electrotechnical Commission). NEMA is a North American standard, with the rest of the world abiding by IEC standards.  

Despite being the second largest motor manufacturer in the world, Siemens’ presence in the Americas, a predominantly NEMA frame market, is relatively small. While Siemens is the market leader in Europe, an IEC market, our estimates suggest the company holds only the 6th position in the Americas market. By our estimates, the NEMA portion of Siemens’ business only represented ~6% of its total low voltage motor business.  

While only a small portion of Siemens’ overall motor business, the sale of its NEMA division does lend perspective on the direction Siemens is headed. For years, Siemens has taken steps to transition its focus away from being an industrial components supplier towards being a provider of industrial digitalization software and services. Over the last year, Siemens has announced several initiatives aimed at building out its capabilities in this area including a partnership with NVIDIA and multiple acquisitions in the predictive maintenance and asset management space. All the while, Siemens has stated its intent to refine its portfolio to become a technology focused company.

The sale of the NEMA division represents an effort by Siemens to exit markets non-essential to this strategy. The motors business is still important for Siemens as it generates a significant amount of revenue (~1bn), however it would appear that this business is moving more towards cash cow status as opposed to being an area of focused expansion. This move allows Siemens to focus on maintaining this cash cow status in its core IEC markets as opposed to trying to compete with WEG, NIDEC, and ABB for expansion within the NEMA space.

ABB on the other hand, continues to build upon its share of the NEMA market with this acquisition. We estimate this acquisition would put ABBs share of the NEMA market between 35 to 40% which is significantly higher than the nearest competitor. This acquisition also gives ABB additional capacity from a manufacturing facility in Mexico which will bring welcomed flexibility amongst supply chain woes.

WEG Acquires Gefran’s Motion Control Business in Opportunistic Move to Acquire Local Capacity

WEG announced on August 6th, that the company would be acquiring Gefran’s motion control business for €23mn. Gefran, an Italian supplier of automation equipment, had reclassified the motion control business as ‘disposal group held for sale’ in a board meeting on June 30th of this year. According to the press release regarding this board meeting, the motion control business was performing poorly relative to the rest of Gefran. While the revenues for Gefran as a whole were up 17.2%, the motion control business posted growth of only 5.6% which resulted in net loss for the segment.  

The business was quoted as having €44.8mn in sales in 2021. Given the sale price of just €23mn, the acquisition appears to be a fire sale on behalf of Gefran to rid itself of an underperforming business in an effort to improve its overall financial performance. WEG likely viewed this as an opportunity to improve its drive offering (which is currently lacking outside of the Americas) and increase its manufacturing capacity abroad. As part of the sale, WEG will receive 4 factories: one in Italy, Germany, China, and India. Given the talk of reshoring amidst the supply chain crisis that has persisted for the last two years, this certainly must have been an attractive notion from WEGs perspective.

WEG has grown significantly over the last year, adding more than 27% to its gross revenues between 2020 and 2021. As such, the business was well positioned to take advantage of an opportunity like this. As drives and motors become more integrated over the next decade, it will be advantageous for vendors to have significant offerings for both. While WEG has been selling drives in the Americas market in decent volumes for years, its European and Asian drive business is insignificant. With this acquisition, perhaps that will change.

Posted in: Industrial Automation.