AI-enabled solutions help Siemens improve margins, says Global CTO

The German company, with a revenue of €77.8 billion in fiscal ended September 2023, is also exploring the development of large language model-based interface for its industrial solutions that will help its clients simplify industrial design and automation, according to Peter Koerte, who is the chief technology officer, chief strategy officer and a board member at Siemens AG.

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With these solutions, engineers can give natural language inputs for creating a design of their products instead of manually making designs in computer-aided design (CAD) software, Koerte said. “Think about the amount of time saved, but also the many different variations you can create because of the saved time."

Siemens’ recent acquisition of industrial simulation and analysis software maker Altair Engineering will form the basis of developing these solutions, he added.

“Today, we are all fascinated by ChatGPT but show me where has it really transformed industry yet. And this is where Siemens comes into play," he said. “We take those models, and we apply them and put them to productive use, for energy management, for resilient supply chains, whatever that is."

Siemens, which has a listed subsidiary in India, is bullish on the market for the adoption of its AI-enabled smart industrial products.

The Indian arm, Siemens Ltd, has seen its profit margin improve 1.6 percentage points year-on-year to 11.6% in the April-June quarter. This has been partly attributed to higher margins from delivering more AI-enabled solutions than simply selling industrial products and equipment.

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“In the last three years, since we introduced Siemens Xcelerator, there has been a margin expansion. And a large part of that margin expansion is because of providing solutions as against providing dumb boxes," said Sunil Mathur, the managing director and chief executive officer of Siemens Ltd.

Siemens Xcelerator is a digital business platform that includes a portfolio of software and services to help industries in their digital transformation.

“Almost every single thing that we sell today is somehow connected," Koerte said. “Our customers say, ‘You know what, don't send me just the box. Send me the use case. Tell me how much energy I can save. Show me how much productivity I can get.’"

The smart hardware that the company sells collects large volumes of data. The company then uses software including AI to analyze this data to optimize the output of its customers.

In India, Siemens Ltd has seen revenues from its digital industries segment shrink in recent quarters. The company, which reported a top-line of ₹17,965 crore in the year through September 2023, makes industrial automation and digitalization solutions using smart hardware that captures data and then uses software to help industries optimize their manufacturing processes.

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Koerte attributed this to a normalization of demand post a surge during the Covid-19 pandemic. Cooling of inflation in prices of automation products has also resulted in a shrinking of revenues, he said.

“In our distribution chains, there's a lot of stocks that have to come down. But the automation trend is here to stay."