Critical Power (CP): Why did ABB acquire a UPS manufacturer?
Remo Luetolf (RL): The UPS market is a highly attractive part of the overall power electronics sector, it represents one of the biggest opportunities available which however was not served by ABB up until now.
This market is large and continuously growing, so ABB has developed a strategy to enter this sector. Many of our current applications are centred on critical processes, which need power quality and power protection systems. ABB also recently started a global initiative to address the fast-growing, attractive datacentre market. UPS is absolutely key to this business, but it has been missing from our portfolio.
CP: Does the acquisition of Newave make up for the failure to acquire Chloride in 2010?
RL: We do not see it as a failure. ABB aims to make its acquisitions wisely, and we do not want to overpay for our acquisition targets. ABB stepped back from the Chloride bidding war since we believed the price was becoming too expensive, not generating value for our shareholders.
After we stepped back, we continued to look around. Newave is of course substantially smaller than Chloride, but it has got a full-fledged business with a solid reputation and excellent products and services.
CP: What is it about Newave that attracted ABB?
RL: Newave has it all to close the UPS gap ABB had in its product portfolio. We identified an attrcative target in Newave, which we decided to go for.
It is a very complementary acquisition in terms of Newave’s technology and products. Newave has been a leader in UPS for a long time now, setting the pace for innovation by launching first modular and transformerless designs. We are convinced that they are a very nice fit to ABB’s culture when it comes to technology leadership and quality.
ABB’s approach for datacentres is to provide solutions for both alternating current (AC) and direct current (DC) systems, including automation and services. Thanks to Newave’s UPS products and services, ABB will have a complete offer for such datacentre applications.
We have two partners joining forces with excellent technology and a reputation for quality and market leading products in key applications. With ABB’s global reach we can use our leverage on a company like Newave to take them to the next level of growth and success.
Vllaznim Xhiha (VX): When we started the company we didn’t want to launch a ‘me too’ product. When you start in a competitive market such as UPS you need a new technology. That was the so-called transformerless technology where you substitute the transformer function with new electronics to reduce half of the weight of the UPS.
This instantly increases the efficiency by almost 50%. We went from efficiency of around 90% with the transformer, to an efficiency of around 95% without it. In a big datacentre, of course, this brings a large energy saving. In addition transformer-less technology saves space and weight, thus lowering the footprint and office space costs.
In 1994 we were the first company to launch a three-phase, transformer-less UPS system, so we are a trendsetter in this market. Naturally, as newcomers, nobody knew about us and we needed to work harder, we needed to expand the product range. We developed Newave with technology and quality. As the size of the UPS became smaller the next step was to design a modular hot-swappable UPS, which is easy to service and maintain.
On average it can take six hours for a UPS to be repaired when it fails. Six hours is a very long time indeed for a datacentre. If you have a modular UPS system, it takes just 15 minutes to replace one module. We were the pioneers of modular three-phase UPS systems and today we are still leaders in this product range.
Of course, there are other manufacturers of modular three-phase UPS systems, but they do not have as much as a complete range as Newave. We have been in the transformerless UPS market for 18 years and for 12 years in the modular design market. We are still considered the trendsetters of this technology.
We produce very efficient, compact and very high quality UPS systems. This is, of course, a very good platform for ABB. We would not be able to extend our reach of our technology and service provision without the acquisition by ABB. We absolutely needed a way to expand and multiply these products into the market.
CP: How will ABB develop Newave?
RL: While Newave has been very successful in developing its business in the past 15 to 20 years it is obvious that ABB can help it substantially to achieve further growth on a global scale and more demanding applications, especially in the datacentre area.
We are present in more than 100 countries both for sales and service and I really believe we can leverage that presence to successfully sell UPS systems to all the various industries and markets ABB is active in. Newave is successful mostly in the central European countries surrounding Switzerland, but they only have small operations in the Nordic countries or in southern Europe where ABB has a very strong foothold.
We will help Newave to grow across Europe as well as to improve their market share in existing markets, by using our branding as well as our local sales and service centres.
Most interesting are the emerging markets in Asia. China is the single biggest market for ABB already today and we believe we can successfully introduce Newave’s high-quality solutions with our well-known brand name here.
India is another country with a big demand for power quality products and we think we can achieve substantial growth here as well, and in South America too. The US market also is a place where ABB will be able to foster the growth of Newave.
CP: Does ABB intend to enhance the product range of Newave’s UPS systems?
RL: ABB will support the growth of Newave in terms of technology and new product development. We especially want to push the power capacity for UPS systems in large data centres.
VX: Newave has always been present in the small- and mid-sized data centres market. Traditionally, we have offered stand-alone UPS systems that are non-modular as well as the modular products. Such offering of both ranges is fairly unique in the market. In the future Newave will continue to increase the power of its unit modules in order to satisfy demand for the larger data centre marketplace, for which a company like ABB will have greater access than a small company.
CP: Will Newave’s products carry ABB branding?
RL: We will continue to use the brand Newave in all the markets they are well established, mainly in Europe, but we will add a small slogan below the Newave logo: ‘A member of the ABB Group’. In new markets where Newave hasn’t been very active so far we will start using the ABB branding right away. This is mostly outside Europe.
CP: Will Newave’s manufacturing remain in Switzerland?
RL: All Newave’s manufacturing is currently done in Switzerland, which mainly is an assembly and testing operation. Part of the module supply is coming from outsourced suppliers, some outside of Switzerland.
We will continue to use Switzerland as an important base for product assembly and testing, especially for the European market, but we will leverage ABB’s purchasing power of power electronics, printed circuit boards and subassemblies from around the world.
Obviously, if we want to successfully act in emerging countries like China and India we will need to establish local operations. We will be moving to a more global and more balanced set-up in operations as our strategy demands.
CP: Will using ABB components alter the quality of Newave’s UPS systems?
VX: We used to source ABB power modules from the open market. Now that we are part of the group we have direct insight into the whole technology of ABB and we will investigate the synergies to further optimise the performance and cost of the product.
Using more ABB components might help improve Newave products. We will test them in the company and also in the field, so the quality can only improve.
CP: Is ABB still looking at acquiring more companies in the UPS market space?
RL: There are two main aspects of this business. The product and the technology itself, but the also the distribution and the service related to that are major value generators in the overall value chain.
The distribution side is a highly important part of the data centre industry. A significant part of the business is servicing data centres. There may be opportunities on that side and we are looking at that. While we can’t disclose our strategy, we likely will continue to look for potential add-ons, especially on the local distribution and service side.