Schneider and Siemens buy more software as ABB focuses on equipment

In short: Europe’s biggest industrial companies are splitting into two camps, with Schneider Electric and Siemens buying more software businesses while ABB focuses on physical equipment.

What's going on

Europe’s three largest industrial groups, Schneider Electric, Siemens, and ABB, are benefiting from heavy spending linked to AI, especially the wave of new data centres. Data centres are large buildings filled with computers, like warehouses for the internet.

Schneider Electric recently announced a near $24bn deal to buy PTC, a US company that makes engineering software. Schneider says the combination will help customers design, build, and maintain products and factories, using more software and AI tools.

Siemens has been making a similar bet for years. Last year it completed a $10bn purchase of Altair Engineering, another maker of engineering software used in industries like cars, planes, and energy.

ABB is taking a different approach. It agreed to buy UK industrial components maker Rotork for $5.5bn, leaning into equipment used for electrification and automation. ABB’s chair said the company prefers to build software itself instead of buying software or AI companies.

All three companies are also targeting the basic needs of data centres, such as power supply, control systems, and cooling. Investors are watching how much demand continues, and whether “industrial AI” becomes a big business. Industrial AI means using data from factories and machines to run them better, like using a car’s dashboard warnings and history to predict a repair before a breakdown.

What to watch

The key question is whether customers want one combined package of equipment and software, or whether hardware makers can keep winning without paying top prices for software companies. Another risk is whether AI-related spending slows, which could hit demand for data centre gear.

Source: Financial Times