Siemens Says Industry’s Demands Keep It Safe From AI Disruption
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Siemens AG sees artificial intelligence as less of a threat to its software business than some peers because it’s difficult to meet the high standards of industry processes covered by its products.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Siemens AG sees artificial intelligence as less of a threat to its software business than some peers because it’s difficult to meet the high standards of industry processes covered by its products.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.Buyers of Siemens’ industrial software and AI offerings — including automakers or drugs companies — don’t have room for error on products they make, which will ensure long-term demand, according to Cedrik Neike, who heads the firm’s Digital Industries unit. The division is one of the world’s largest automation businesses, spanning machine controls and factory simulation software used to create digital twins.“AI can and will change everything — some changes will happen very quickly, while others will take longer,” Neike said in an interview with Bloomberg News. Factory software that needs to meet quality and reliability certifications will continue to foster demand for high-end products, he said, citing Siemens’ chip design software.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.“If you’re off by just two nanometers — smaller than the width of a human hair — you can end up scrapping a huge amount of chips,” he said. Siemens is among the three largest makers of software used to design microchips.Germany’s industrial stalwart, with diverse clients including Heineken, TSMC, Johnson & Johnson and Toyota, has been pushing deeper into software through major acquisitions. That’s left the company more exposed to sweeping fears on how AI will upend business models. Europe’s largest software company SAP SE has lost about a quarter of its market value since the beginning of the year. Siemens has declined around 10%.Fears center on AI allowing companies to write their own software instead of relying on expensive offerings from vendors such as Siemens. Examples of Siemens’ suite of products include automakers using the so-called Teamcenter software to manage the design and manufacturing of a car’s battery pack. “If we look at the customer groups like aerospace and defense or automotive or consumer electronics, the cost of error is too high,” said UBS analyst Andre Kukhnin. “There’s no point saving a few tens of thousands of dollars here or there on software licenses at the cost of having to run more prototypes or real life simulations.”For now, integrating acquisitions and making changes to its sales model has weighed on the Digital Industries division, which generated some 22% of the group’s overall revenue during fiscal 2025. The unit has nearly completed moving to a subscription model, Neike said. The process crimped revenue, as customers switched from upfront license payments to recurring fees.With the shift largely complete, software updates can now be delivered via the cloud rather than through individually installed packages. “Now even smaller companies that previously couldn’t afford to buy the full software package or didn’t have access to it can do so,” Neike said. While the pricing system needs to evolve from the current user-based to consumption or enterprise models, it will continue to operate on a subscription basis, he said.Under Chief Executive Officer Roland Busch, Siemens — still a major manufacturer of trains and industrial equipment — has accelerated its push into software by buying Altair and Dotmatics for a combined roughly $15 billion in recent years. The company is seeking more acquisitions in artificial intelligence, life sciences and operations software, Busch told Bloomberg Television in January.One of the oldest major industrial companies still operating today, the global engineering leader has repeatedly reshaped its portfolio, spinning off businesses including Osram, chipmaker Infineon Technologies AG and more recently gas turbine manufacturer Siemens Energy AG and medical equipment maker Siemens Healthineers AG.The Munich-based company’s software reinvention dates back to its 2007 acquisition of UGS Corp. Software now accounts for more than a third of Digital Industries’ revenue.“Siemens already owns factory floor automation and has a very strong position in engineering software,” said James Moore, managing director and head of European Capital Goods at Rothschild & Co Redburn. “If Siemens is successful at capturing the emerging Industrial AI layer, where there will be new competition from tech companies, then it may well enjoy even faster growth than in the past.”Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.