ARC VIEW

MAY 21, 2009

India and China Appear Prominently on Yokogawas Growth Strategy Radar Screen
By Rajabahadur V Arcot

Summary
Several days ago, Noriaki Hirose, Managing Director, Yokogawa India, and I discussed the current economic crisis and its impact on India and China, with specific focus on the automation market. Hirose-san observed that the economies of China and India will emerge relatively less affected and continue to post growth, although the global financial turbulence has partially slowed down growth rates. He added that increased manufacturing growth in both these countries will contribute to growth in automation markets in the coming years. Yokogawa is also focusing on emerging as a major supplier of automation systems for the electric power industry, where India offers excellent opportunities for the company to establish the necessary track record.

Yokogawas Growth Strategy Includes Increased Focus on India and China

ARCs analysts regularly interact with industry thought leaders, especially those representing automation system and enterprise solution suppliers and manufacturing companies. A couple of days ago, I had a stimulating dialogue with Noriaki Hirose, Managing Director, Yokogawa India. Given our common concern about the current economic crisis and its aftermath, our discussions centered on the impact of the economic downturn on India and China and the automation market.
India and China Will Be Less Affected by the Current Economic Downturn

Hirose-san observed that the economies of China and India will emerge relatively less affected and continue to post growth, although the global financial turbulence has partially slowed down growth rates. According to him, both countries will contribute to increased growth of the manufacturing industry and automation markets in the years to come. With Yokogawa

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India making a positive contribution to the corporate automation business last year, the trend is becoming discernible. We both agreed that the stimulus package announced by China will rev up the infrastructure investment and spur domestic consumption in China, which is good for the revival of global economic growth. In India, while some industries, such as textiles, are severely affected because of dependence on exports, negative sentiment is primarily inhibiting consumer spending. Indian consumers and industry executives alike have become extremely cautious and are in a wait and watch mode. Hirose-san pointed out that India, which is driven more by domestic demand, is likely to weather the global storm relatively better than China, which is more export-driven. Hirose-san also observed that while many industry verticals in India such as chemicals, metals, and oil & gas have just enough production capacity to meet the demands of a growing but emerging economy, China has built production capacities in excess of its domestic demand in many industry verticals, such as chemical and steel. This situation would facilitate adding new production capacities in specific industry verticals in India.
Yokogawas Growth Strategy Includes Focus on India and China

Hirose-san spoke at length about the imperative for the growth of Indias electric power industry, which is the largest user of DCS in the country. The demand for electric power in India outstrips the existing generating capacity. The Indian State has taken various initiatives to escalate investments in the electric power industry, including signing agreements with numerous countries for constructing nuclear power plants. Hirose-san confirmed that Yokogawa would focus on emerging as a major supplier of automation systems for the electric power industry. He cited the recent project wins in India in the electric power industry, which included the prestigious order from National Thermal Power Corporation, the countrys largest utility company. Yokogawa's order is to supply automation and control systems for a supercritical coal-fired power plant of three units of 660 MW generating capacity each in the coal-rich Bihar State. Yokogawa India is providing instrumentation systems for the boilers and other utilities. Yokogawa is also supplying an operator training simulator (OTS) to NTPC.

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What emerged out of our discussions is the companys resolve to adopt specific growth strategies to enter new markets. With electric power industry contributing close to 30 percent of Yokogawas revenues, Yokogawa is confidently looking forward to the Indian automation market opportunities. Another industry sector not adversely affected in India is upstream oil & gas, where Yokogawa India is well-positioned. My discussions with Hirose-san made it evident that China and India markets are central to Yokogawas future growth strategy. The strategy of thinking globally and acting locally seems to be rewarding the company well.
About Yokogawa

Established in 1987 as a joint venture company, Yokogawa India has stateof-the-art engineering and manufacturing centers in Bangalore. In 2006, the company became a wholly owned subsidiary of Yokogawa, which has a global network of 19 manufacturing facilities and 85 companies that span 40 countries. Since its founding in 1915, the $4 billion company has been engaged in cutting-edge research and innovation, securing more than 8,000 patents and registrations, including the world's first digital sensors for flow and pressure measurement. businesses of Yokogawa. For further information or to provide feedback on this article, please contact your account manager or the author at raja@arcweb.com. ARC Views are published and copyrighted by ARC Advisory Group. The information is proprietary to ARC and no part of it may be reproduced without prior permission from ARC. Industrial automation and control, test and measurement, information systems, and industry support are the core

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