China automation demand shows K-shaped divergence, with local substitution continuing to squeeze Western vendors' share

Overview

The report compares Siemens AG, Schneider Electric, and ABB in terms of growth, product share, and end-industry exposure in China's industrial automation market in 2Q26. The overall market was nearly flat, but discrete automation maintained relatively rapid growth while process automation continued to contract. Demand was driven by batteries, semiconductors, electronics, industrial robots, and investments related to artificial intelligence and data centers, while Chinese local vendors continued to expand share in key categories such as PLC, HMI, CNC, and servo products.

Core views

China automation demand will continue to follow a K-shaped trajectory: artificial intelligence, data centers, and certain high-tech industries remain strong, while traditional industrial demand remains weak. Western vendors maintain competitiveness in traditional stronghold industries such as automotive and food & beverage through localization, but face sustained competition from Chinese and some Japanese vendors in areas such as electronics, semiconductors, batteries, logistics, photovoltaics, and packaging. Siemens AG's declining share in key products and unfavorable end-market mix may cause its growth to lag; ABB is constrained by weak process automation and high valuation; Schneider Electric's end-market mix and operational improvements are more attractive.

Analysis framework

Based on MIR Databank data, the report breaks down China's automation market by discrete and process automation, and by control-layer and motion-layer products, compares YoY share changes in 2Q26 and 1H26, and combines each vendor's end-industry exposure, product mix, operational improvements, and valuation to form relative rating judgments.

Methodology notes

• Industry AnalysisMarket Growth Breakdown

  Break down the industrial automation market into discrete automation and process automation, and compare YoY and QoQ growth rates.

  This method identifies the structural differences behind a muted overall market, namely that discrete automation is growing on the back of high-tech industries while process automation continues to contract.

• Competitive AnalysisMarket Share Analysis

  Compare share changes of domestic and foreign vendors by products such as PLC, HMI, CNC, servo, and low-voltage drives.

  Share changes are used to measure the pace of local substitution and the relative competitiveness of each European vendor in key products.

• Demand AnalysisEnd-Market Exposure Analysis

  Compare vendors' business exposure to end markets such as automotive, food & beverage, electronics, semiconductors, batteries, and data centers.

  End-market mix explains differences in growth and share performance among different vendors within the same market.

• Investment JudgmentRelative Rating Framework

  Rank covered companies on a relative basis by combining growth, market share, end-market mix, operational improvement, and valuation.

  Barclays assigns Overweight, Equal Weight, or Underweight ratings based on relative total return within its 12-month industry coverage universe.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Schneider Electric (SCHN.PA)

  Core covered name, maintained at Overweight and listed as the top pick

  Strengths

  Better end-market exposure such as data centers, operational improvement potential, and share gains in low-voltage drives and HMI.

  Weaknesses

  Servo product share declined slightly, and it still cannot fully avoid Chinese local substitution pressure.

  Comparison

  Compared with Siemens AG, its end-market mix is more favorable; compared with ABB, its growth exposure is stronger and it is not dragged down to the same extent by weak process automation.

  Risks

  Slowdown in high-tech industry demand, channel destocking, intensified local competition, and failure to deliver operational improvements.

• Siemens AG (SIEGn.DE)

  Core covered name, maintained at Underweight

  Strengths

  Has a foundation in traditional industries such as automotive and food & beverage, and can defend through localization and demand for artificial intelligence infrastructure.

  Weaknesses

  Shares in PLC, HMI, CNC, servo, and low-voltage drives are all under pressure, with relatively high automotive exposure and relatively low semiconductor and electronics exposure.

  Comparison

  Second-quarter growth may be slower than other equipment manufacturers, and both key products and end-market mix are weaker than Schneider Electric's.

  Risks

  Acceleration of local substitution, weak demand in traditional industries, further decline in core product share, and channel inventory adjustments.

• ABB (ABBN.S)

  Core covered name, maintained at Equal Weight

  Strengths

  Low-voltage drive share rose by approximately 1 percentage point in 2Q26, and motion control products performed relatively steadily.

  Weaknesses

  Process automation demand remains weak, valuation is relatively high, and the target price is below the current price listed in the report.

  Comparison

  Its low-voltage drive share performance is better than Siemens AG and Schneider Electric, but demand mix and valuation make it less attractive than Schneider Electric.

  Risks

  Delayed recovery in process industries, valuation pullback, M&A-related uncertainty, and disclosure of potential conflicts of interest.

Key data

• China automation market growthUp 0.2% YoY and down 4.6% QoQ in 2Q26The YoY growth rate was lower than 2.7% in 1Q26.
• Discrete automation growthUp 8.0% YoY in 2Q26Higher than 7.4% in 1Q26, supported by industries such as batteries, semiconductors, electronics, and industrial robots.
• Process automation growthDown 4.4% YoY in 2Q26Further weakened compared with flat YoY growth in 1Q26.
• Siemens AG control product share changesSmall PLC -1.1 percentage points; medium/large PLC -1.1 percentage points; HMI -2.2 percentage points; CNC -0.7 percentage pointsAll are changes in 2Q26 versus 2Q25.
• Inovance PLC share changesSmall PLC +4.2 percentage points; medium/large PLC +2.7 percentage pointsReflects significant growth by China's local automation leader in Siemens AG's core product areas.
• Motion control product share changesSiemens AG servo -0.6 percentage points, low-voltage drives -0.2 percentage points; ABB low-voltage drives +1.0 percentage point; Schneider Electric low-voltage drives +0.3 percentage pointsMarket share changes for 2Q26; Schneider Electric's servo share declined by approximately 0.1 percentage points.
• Estimated Siemens AG China automation hardware sales mixPLC approximately 40%, CNC systems approximately 10%Share declines in key categories could have a significant impact on its China business growth.
• Schneider Electric valuation snapshotTarget price EUR 355.00, current price EUR 300.60, potential upside approximately 18.1%Current price as of August 6, 2026; target price from the latest rating record listed in the report.
• ABB valuation snapshotTarget price CHF 78.00, current price CHF 82.32, potential upside approximately -5.2%Current price as of August 6, 2026; target price from the latest rating record listed in the report.
• Siemens AG valuation snapshotTarget price EUR 235.00, current price EUR 273.10, potential upside approximately -14.0%Current price as of August 6, 2026; target price from the latest rating record listed in the report.

Impact & implications

Overall market growth is limited, but high-tech end markets still provide structural opportunities for automation suppliers. Benefiting from end-market exposure such as data centers and potential operational improvements, Schneider Electric offers a better risk-reward profile among the three companies. Siemens AG's high reliance on PLC and CNC amplifies local substitution pressure, while its high automotive exposure and lower semiconductor and electronics exposure also limit relative growth. ABB's share performance in low-voltage drives is strong, but weak process automation and elevated valuation weaken upside potential.

Risks

• Chinese local vendors continue to expand share in key products such as PLC, HMI, CNC, and servo.
• Demand in traditional industrial, automotive, and process automation remains weak.
• Advance purchases triggered by second-quarter price increases may lead to distributor inventory buildup, followed by channel destocking.
• Investment momentum in artificial intelligence, data centers, batteries, semiconductors, and electronics may slow.
• Vendors' localization strategies may fail to offset price competition and local substitution pressure.
• ABB's valuation is high and Barclays is acting as sole financial adviser for its potential acquisition of ROTORK P.L.C.; related conflicts of interest need to be considered.

What to watch

• Whether discrete automation can maintain high-single-digit growth in the second half of 2026.
• Whether process automation demand bottoms out and returns to growth.
• Channel inventory formed by advance purchases before price increases and the extent of subsequent destocking.
• Siemens AG's share changes in PLC, HMI, and CNC.
• Delivery of Schneider Electric's data center exposure and operational improvements.
• Whether ABB's low-voltage drive share gains can continue and offset weak process automation.
• Further penetration by Chinese local vendors in electronics, semiconductors, batteries, logistics, photovoltaics, and packaging.