© ABB - Page 1 JB E x t e n d e d A u t o m a t i o n S y s t e m x A Automation Trends in the China Market Johan Bjorklund

© ABB - Page 2 JB Johan Bjorklund Started in ABB 1996 as trainee Half a year in China Västerås, Product Management Singapore as Technical Sales Support China, Shanghai as Area Sales Manager North East Asia and Technical Sales Support China, Beijing as Area Sales Manager North East Asia and Technical Sales Support

© ABB - Page 3 JB China Economy and Growth Total Economy About 10% GDP growth the last 10 years FDI About 60 BUSD Per Year Outgoing FDI 2004: $5.7 billion 2005: $12 billion 2015: $25-30 billion Sweden Bio Fuel in Sveg (2 BSEK) Market Place in Kalmar (1 BSEK) Engergy Efficient Paper Making Center in Karlstad Huawei About 100 people in Kista Compounded Annual Growth Rate from Refining 32.3% Oil & Gas 18.7% Petrochemical 41.4% Power 24.5%

© ABB - Page 4 JB China Economy and Growth Stocks Shanghai Stock Exchange Bubble Real Estate Has cooled down a little bit since tax regulations RMB Value / Trade Surplus Pork Pork prices 43% up since last year Telecom China Mobile gets about 6 Million Subscribers every month Beijing new cars every month

© ABB - Page 5 JB ABBs mile stones in China 38 sales/service offices 26 companies >10,000employees >$2.4bn revenue (2005) >$700m investment 1907Provided 1 st steam boiler to China 1974First office for China established in Hong Kong 1979Permanent office established in Beijing 1992First manufacturing JV established 1995China holding company set up in Beijing 2003Ranked among top 10 employers 2005Set up research center in Beijing and Shanghai 2006Moved Global Robotics HQ to Shanghai Hong Kong Beijing Shanghai Xian Hefei Xiamen Chongqing Xinhui Zhongshan Harbin Shenyang Dalian Tianjin Jinan Qingdao Nanjing Hangzhou Fuzhou Wuhan Nanning Kunming Guangzhou Shenzhen Dongguan Ningbo Wuxi Taiyuan Hohhot Urumqi Changchun Changsha Zhengzhou Yantai Zibo Shijia zhuang Hohhot Lanzhou Chengdu Guiyang NanchangWenzhou Suzhou Datong lLocal company lSales/service branch

© ABB - Page 6 JB Hebei Xinjiang Xizang Qinghai Gansu Ningxia Neimenggu Beijing Heilongjiang Jilin Liaoning Shandong Shanxi Sichuan Hubei Anhui Jiangsu Zhejiang Chongqing Yunnan Guizhou Hunan Jiangxi Guangxi Guangdong Taiwan Hainan Shanxi Tianjin Henan Fujian ABB companies stand for quality in China Hong Kong Shanghai

© ABB - Page 7 JB China DCS Industry Growth Sorted by CAGR

© ABB - Page 8 JB China DCS Market – Chinese Suppliers Chinese Suppliers

© ABB - Page 9 JB DCS Market Split by Type of Supplier 30% of the market is controlled by Chinese Suppliers (including Xinhua)

© ABB - Page 10 JB Domestic and International Suppliers by Industry

© ABB - Page 11 JB ZheJiang SUPCON Technology Group Founded in 1993 Based on ZheJiang 1200 employees 700 million contract amount, subsidiary companies 12 filial companies 3000 customers 30 Cities in China SINOPEC PETROCHINA ShouGang Group Bao Steel South Africa East South Asia Industry area Steel Oil & Chemical Electric power Active in Fairs in the US, India and Pakistan

© ABB - Page 12 JB Hollysys Originally a department of the Sixth Research Institute of the Ministry of China Information Industry Founded in March 1993 Now has become a group of several corporations including Hollysys Automation, Hollysys Information Technology, Hollysys Electric Technology, etc. 600 Employees (200 Engineers) Successful Projects Has the goal to be listed in the US Nuclear Power Technology

© ABB - Page 13 JB Xin Hua Full Name - Shanghai Xin Hua Control Technology (Group) Co., Ltd Found in Shanghai, Feb.1985 through a collective effort from DEH (Digital electro-hydraulic system) community led by concerned authority Started with DEH & MEH product development for Power Plant application Biggest DEH manufacture in the world Extended to DCS business Biggest local DCS vendor in China Headquarter based in Shanghai and consists of 12 daughter companies Sales in 2003: RMB 630M (US$ 76M) Utility Business Bought by General Electric 2004 The remainder of the company have developed a new DCS

© ABB - Page 14 JB Where are the Chinese Suppliers Today? Low to Medium end DCS Market Strongest in Power, Chemical, Cement Basic Technology They have started to adopt new technology They get helped by the fact that there is a trend towards more commodity technology

© ABB - Page 15 JB EPCs and End User expands internationally The Chinese Suppliers are following the EPCs and End Users expansion outside China They have good relations and experience Cement SINOMA invests in Middle East Oil & Gas PetroChina, SINOPEC and CNOOC are investing in Central Asia and Africa Power China finances Power Plants in India and South East Asia Suppliers are following the Chinese Boiler Suppliers Chinese Suppliers are very strong when following their EPCs and End Customers abroad

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© ABB - Page 18 JB Strengths of the Chinese Suppliers Large Domestic Market They can learn on their home land They have the latest technology in all fields Low Cost Labor Growing from simpler products to more advanced China is also trying to move from pure labor low cost labor jobs to higher added value jobs Hungry employees Preferred by government

© ABB - Page 19 JB How to beat the Chinese Suppliers? Industry Know-how Utilize the broad and long experience Advanced Technology and Applications Move towards the higher end of the value chain Advanced Foreign Technology and good Quality Suppliers can get a premium price Cost Focus You need to have cost focus in order to beat the competition Localization To better understand the market To lower the cost To take advantage of the local talent

© ABB - Page 20 JB Trends in China Environmental Protection Sustainable Energy Sources - Wind and Solar Energy Bio Fuel Water & Waste Water Treatment CO2 Emission Reduction Energy Efficiency China needs to increase the efficiency of its power generation and distribution since it is already building the generation capacity of UK every year Safety To prevent Coal Mines accidents To prevent Chemical and Petrochemical Accidents CFDA Regulations (Pharmaceutical and Food) Productivity Optimization of production

© ABB - Page 21 JB Johan Bjorklund