Siemens, Europe’s largest industrial manufacturer, has likened global supply chains to a “roller ride” like material prices for its products such as metals and resins due to the uneven economic recovery.
“At least for the next two quarters, we’ll see this [price] CEO Roland Bosch told the Financial Times. “The markets are very volatile.”
The physicist, who took over the German group’s presidency in February, said the speed of the global recovery had had a “delaying effect” on Siemens suppliers, who were still struggling to meet demand.
The sudden boom in orders last fall, in the wake of the sharp drop caused by the epidemic, is like “V very sharp . . . in China, the letter V was very sharp,” Bush said.
“If it happens in the big markets, you are running the roller coaster in your supply chain . . . you have this slowdown effect, and that is exactly what we see.”
Bush’s comments came as the latest Purchasing Managers’ Index, published by IHS Markit on Wednesday, showed that disruption to global supply chains – particularly shortages of steel, copper, lumber and plastics – was driving up input prices for eurozone firms as quickly as possible. rate for more than a decade.
PMI data, including the biggest rise in average prices for goods and services since 2002, suggests pressures are likely to continue after inflation in May rose above the European Central Bank’s target below 2 percent for the first time since year 2018.
However, central bankers such as Christine Lagarde, president of the European Central Bank, have predicted that the recovery in inflation will be “temporary” and have said supply constraints will fade by next year.
In the June PMI report, there were the first signs that restrictions might ease in Germany after “a slight decrease in the number of companies reporting longer lead times on materials and components”.
For now, Siemens’ Busch said, the group has been able to pass on higher material prices to its customers, without losing business.
“Our competitors are sitting in the same boat, buying from the same suppliers,” he said. “As long as we have innovative products, we also have a certain pricing power.”
Siemens, which has undergone a deep restructuring and has replicated its health and energy businesses, is preparing to unveil the next step in its transformation from a conglomerate to a more focused group of companies, complemented by software expertise.
“Our customers benefit from our ability to bring together the real and digital worlds,” Bush said.
He added that the group’s core businesses, which focus on factory automation and digitization, operating buildings, power grids, building trains and infrastructure, would continue acquisitions in “very attractive neighboring markets”.
Bosch cited the recent purchase of California-based Supplyframe, an online marketplace for electronic components, for $700 million as an example of the type of acquisitions Siemens will look to make in the future.
Siemens said it expects its software revenue, which amounted to €5.3 billion in 2020, to grow at a compound annual rate of about 10 percent over the next four years.