Suzlon

Management of Technology

Group: A8 Abhishek Anand Amitesh Ravi Baranwal Sanjay Kumar

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Agenda
About Suzlon Strategy Intent of Suzlon Methods: Technology Benchmarking
Turbine Size Patents Filed Financial Benchmarking

Methods: Technology Capability Ladder of Suzlon Business Strategy, Sourcing Management, Business Model Internal & External
Strengths Risks & Concerns

Critical Success Factors Finding Technology Gap, RCD Suggestions

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About Suzlon
Suzlon Energy Limited, is an Indian wind power company based in Pune, India In terms of market share, in 2011 the company was the fourth largest wind turbine manufacturer by cumulative installed capacity worldwide with approaching 20,000 MW of installations in 28 countries Suzlon consists of Suzlon Energy Limited (SEL), India, (The Company) and 78 subsidiaries (13 Indian and 65 international). Suzlon is present in 33 countries across six continents: North and South America, Asia, Australia, Europe, and Africa With headquarters in Pune, it has several manufacturing locations in India. There are also locations in mainland China, Germany and Belgium. Suzlon is listed on the National Stock Exchange of India and on the Bombay Stock Exchange of India
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Strategy Intent of the company

To be the technology leader in the wind sector To be in the top three wind companies in all the key markets of the world To be the global leader in providing profitable, end-to-end wind power solutions To be the 'company of choice' for stakeholders Inorganic growth through acquisitions Providing cost-competitive solutions

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Methods: Technology Benchmarking

Associations exist between Technology Acquisition Mechanisms
Levels of Technology Upgrading (measured by increased turbine size) Catch-Up (measured by decreased distance to the world technology frontier based on turbine size).

*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADEOFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES? SNEHAL AWATE,1 MARCUS M.

Why Turbine Size for Benchmarking?

The output of a wind turbine is primarily dependent on two things
The amount of fuel available (wind resource) The size of the collector utilized to harvest that fuel (swept area of the rotor)

The amount of energy that can be extracted at a given wind speed is proportional to the size of the rotor

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Model

Capacity Blade hub ht total ht *length*

area swept by blades

GE

GE 1.5s GE 1.5sle Vestas V82 Vestas V90

1.5 MW 1.5 MW 1.65 MW 1.8 MW

35.25 m 38.5 m 41 m 45 m

Vestas Vestas V100 Vestas V90 Vestas V112 Gamesa Gamesa G87 Siemens Bonus (Siemens) Siemens Bonus (Siemens) Bonus (Siemens) Suzlon 950 Suzlon S64 Suzlon Suzlon S88 Repower MM92

2.75 MW 50 m 3.0 MW 3.0 MW 2.0 MW 2.3 MW 1.3 MW 2.0 MW 2.3 MW 0.95 MW 1.25 MW 2.1 MW 2.0 MW 45 m 56 m 43.5 m 46.5 m 31 m 38 m 41.2 m 32 m 32 m 44 m 46.25 m

64.7 m 80 m 70 m 80 m 105 m 80 m 100 m 80 m 84 m 78 m 80 m 68 m 60 m 80 m 65 m 73 m 80 m

100 m

99.95 m 118.5 m 111 m 125 m 150 m 130 m 150 m 125 m 136 m 121.5 m 126.5 m 99 m 98 m 121.2 m 97 m 105 m 124 m
146.25 m

3,904 m2 4,657 m2 5,281 m2 6,362 m2

7,854 m2 6,362 m2 9,852 m2 5,945 m2 6,793 m2 3,019 m2 4,536 m2 5,333 m2 3,217 m2 3,217 m2 6,082 m2 6,720 m2

rated wind speed 12 m/s 14 m/s 13 m/s 11 m/s 15 m/s 15 m/s 12 m/s c. 13.5 m/s 13-14 m/s 14 m/s c. 15 m/s c. 15 m/s 11 m/s 12 m/s 14 m/s 11.2 m/s
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Patents Comparison (Proxy for R&D investments)

70 60

50
40 30 Vestas Suzlon

20
10 0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
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*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES? SNEHAL AWATE,1 MARCUS M. LARSEN2, and RAM MUDAMBI1

Financial Benchmarking
COGS as percentage of Revenue
120.00%
100.00% 80.00% 2010 60.00% 40.00% 20.00% 0.00% Vestas Sinovel Goldwind Gamesa Suzlon 2011 2012

COGS as %age for Suzlon has decreased compared to other firms

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Financial Benchmarking
Revenue on Asset
120.00% 100.00%

80.00%
2010 60.00% 40.00% 20.00% 0.00% Vestas Sinovel Goldwind Gamesa Suzlon 2011 2012

Revenue on Asset has increased for Suzlon

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Financial Benchmarking
Return on Asset
15.00% 10.00% 5.00% 0.00% Vestas -5.00% -10.00% -15.00% Sinovel Goldwind Gamesa Suzlon

2010 2011 2012

Loss in recent years. Financially weak position

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Technology Capability Ladder of Suzlon

Technology acquisition mechanisms : Affects Technology Upgrading and Technology Catch-Up Production licenses from foreign wind turbine companies (associated with Lowest Technology Level) Domestic R&D: In-house R&D by firms Joint venture with a foreign manufacturer Joint design with a foreign design firm (associated with
Highest Technology Level)

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Technology Capability Ladder of Suzlon

Technology Adoption phase
1995: Technical collaboration agreement with Sdwind having considerable knowledge on the technology of the wind turbines to gain engineering knowledge and to sell turbines in India

Technology Transfer and Absorption phase

1997: Acquisitions and licensing agreements with different European companies whose knowledge and competencies encompassed the technology frontier in wind turbines - Suzlon accessed and integrated the required industry expertise 2001: Acquisition of AE-Rotor Techniek BV provided Suzlon with specialized knowledge in the design and manufacturing of rotor blades Suzlon established a licensing agreement with Aerpac B.V., gaining access to expert knowledge in rotor blade design Manufacturing and marketing rights from Enron Wind to produce different varieties of rotor blades in India and to have state-of-the-art production line and technical support (Lewis, 2007)

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Technology Capability Ladder of Suzlon

2002: Acquisition of the German company AX 215 Verwaltungsgesellschaft mbH to establish an R&D unit in Germany 2004: Joint venture with Austrian company Elin Motoren GmbH to manufacture generators in India (Red Herring Prospectus, 2005) 2006: Acquisition of the Belgian company Hansen Transmission International, the second largest gearbox manufacturer in the world in to gain knowledge on manufacturing of gearbox and drive trains for wind turbines. An arrangement with Winergy AG, the leading gearbox supplier in India, which allows for the use of domestically manufactured gearboxes, while it continues to work to advance its own technology. 2007: Acquisition of Repower Systems AG, for its broad product portfolio, which included the larger offshore wind turbines.

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Technology Capability Ladder of Suzlon

Design & Engineering - R&D phase
Suzlons R&D center in Rostock, Germany, develops mechanical and electrical systems incorporated in the wind turbine nacelle, hub, and tower In Netherlands, the companys R&D center focuses on aerodynamic and rotor blade structure development as a continuation of the acquisition of AE-Rotor Techniek BV and Aerpac B.V The R&D center in Belgium focuses on gearboxes in accordance with the acquisition of Hansen Transmission

This combination of licensing arrangements with foreign firms and internationally based R&D and other facilities, has created a global learning network for Suzlon, customized to fill in the gaps in its technical knowledge base*
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*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES? SNEHAL AWATE,1 MARCUS M. LARSEN2, and RAM MUDAMBI1

Business Strategy

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Business Strategy
A fast-follower strategy of catching up to the technology frontier of the industry A generalist output-oriented knowledge strategy by acquiring target firms whose competences and capabilities are of direct application to the production of the wind turbines (both wind turbine manufacturers and subcomponent suppliers) Vertical integration strategy by either setting up Greenfield manufacturing facilities, or acquiring different critical component manufacturers and technology providers so as to have complete control over the supply chain Most of Suzlons manufacturing facilities are still located in India, where the company has increased access to capital, and to low manufacturing and labor costs, giving it an edge over competitors manufacturing turbines in higher cost regions such as Western Europe.
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Sourcing Management
Vertical integration provides strong control over critical components, but implies the art of balancing different capacity requirements throughout the supply chain

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Business Model

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Internal Factors
Strengths
A global production platform and access to an integrated manufacturing base Delivering enhanced value chain in wind energy markets In house technology and design capabilities Acting as a market leader in India and significant presence in other high growth markets

Risks and Concerns

Supply bottlenecks due to demand outpacing supply Widespread global operations could impact operational efficiency, especially if quality sites are depleted or scarce Large scale acquisitions like that of Hansen Transmissions and Repower Systems AG exposes Suzlon to financial risk in form of additional leverage and challenges in form of integration and management of business operations and systems, in retention of select personnel, and in coordination of sales and marketing efforts
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External Factors
Strengths
Extended coastlines that are ideal for harnessing wind power Highly competitive wind energy cost in India due to the strength in developing new technology while maintaining low labour costs

Risks and Concerns

Decreases or eliminations of government subsidies relating to wind energy in key markets Competitors with longer industry experience who may be able to react faster to trends and changes in customer demand. Emergence of other sources of energy that are comparable to wind energy in form of reduced cost and generation efficiency may also pose risk to wind industry in general and Suzlon in particular Competition from China, both in terms of securing sales in China and keeping up with rival Chinese producers

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Critical Success Factors

Technology
Capacity, Lifetime, Efficiency

Manufacturing
Vertical Integration, Scale

Brand name
Quality

Access to capital
High initial investment
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Finding Technology Gap

Global Annual Wind Installed by Rated Turbine Capacity: 20102025

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Finding Technology Gap

Wind Energy Investments (2000 2030)

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Finding Technology Gap

Technology Curve: Turbine diameter growth with time

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Finding Technology Gap

Problem Statement/Gaps
Lack of high generation capacity blades and off-shore capability

Root Causes
Strategic focus on improving efficiency and driving down costs instead of cutting edge design* Shallow and narrow knowledge base: Lagging behind in innovation capabilities Focus on own R&D and Technology Import via purchase production license over Technology R&D Collaboration

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Root Cause Analysis

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Suggestions
Options
Joint Design and R&D collaboration with other wind turbine manufacturers

R&D and product development: Direct Drive Wind Turbine Design Vs Gearbox Design *
Technological investment in
High generation capability turbines Offshore wind turbines
*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES? SNEHAL AWATE,1 MARCUS M. 28 LARSEN2, and RAM MUDAMBI1

References

http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=60 1558:CH http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=60 1558:CH&dataset=balanceSheet&period=A&currency=native http://www.goldwindglobal.com/upload/files/201209/201209100925996.pdf http://www.gamesacorp.com/recursos/doc/accionistas-inversores/informacionfinanciera/memoria-anual/english/annual-report-2011.pdf http://www.moneycontrol.com/stocks/company_info/print_main.php

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THANK YOU !!

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