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Schneider Electric – electrifying future

1 March 2024

Alex Martin
Schneider Electric – Electrifying future

A brief history

Schneider Electric has a rich history that spans almost 190 years.

The company was founded in 1836 by the Schneider brothers, who took over an iron foundry in Le Creusot, France. It initially specialised in the production of steel and heavy machinery.

The company later chose to focus its efforts on the electrical industry. Its current name was adopted in 1999 to express its new identity as a producer of electrical equipment.

Schneider Electric is now a global leader in the fields of energy management and industrial automation. Its success has been powered by its flagship international brands, Merlin Gerin and Square D, which have existed for over a century.

Business segments and product categories

Schneider Electric has two divisions, Energy Management and Industrial Automation.

The Energy Management division sells low and medium voltage equipment to customers, as well as secure power solutions.

Low voltage products include switches, sockets and power management systems. This equipment serves as the main control centre for electrical systems in buildings and provides safeguards against electricity overloads.

Medium voltage products include switchgear and transformers used to distribute power to industrial businesses and cities. This division also offers grid automation solutions to enhance the efficiency and reliability of electricity infrastructure. These solutions are needed for electricity networks to handle intermittent energy sources such as solar and wind.

The Industrial Automation division provides a vast range of products, systems and software to help customers automate their manufacturing processes.

The COVID-19 experience, environmental changes and geopolitical risks have put global supply chains in the spotlight and are leading to greater reinvestment in domestic manufacturing. This will accelerate the use of automation as industrial businesses try to overcome labour shortages and rising wages in their home country.

Given power is needed to enable automated production processes, there is significant crossover between Schneider Electric’s two divisions. The company has said two-thirds of all Industrial Automation sales pull through from the Energy Management business.

Scale, reach and brand reputation are key strengths

Schneider Electric is the world leader in low and medium voltage electrical equipment. It has twice the scale of its nearest competitors and has enhanced its leadership through innovation, digitisation and a strong brand reputation.

To illustrate its scale, the company manufactures over 500 million circuit breakers every year and has established a global network of 650,000 electrical contractors and partners. This vast distribution network provides a competitive advantage in an industry where product safety standards differ between countries and sales channels are highly fragmented.

Ensuring installations are safe and meet regulatory requirements is of the highest importance, which means customers place significant value on brand reputation. Contracts often specify the use of Schneider Electric’s products, which is a testament to their quality.

Digital leader

Digital services present an exciting growth opportunity.

Schneider Electric has successfully combined its product expertise in electrical equipment with leading digital capabilities. This combination helps it provide customers with comprehensive solutions that improve energy efficiency and drive cost savings.

The company’s digital offering is delivered through EcoStruxure, a global software platform that connects, monitors and optimises the performance of its products and control systems. A recent acquisition of AVEVA has further enhanced its leadership in this area.

We expect these digital capabilities will augment Schneider Electric’s competitive advantages and support market share gains over time.

Energy transition provides significant growth opportunities

Today, electricity represents just over 20% of the world’s energy consumption. This is set to change with electricity usage forecast to double over the next twenty years, according to the International Energy Agency.

A major expansion and modernisation of electricity networks is needed to support the energy transition.

According to Bloomberg research, the world needs to invest US$21.4 trillion in electricity infrastructure by 2050 to meet the net zero emissions target. This translates to US$871 billion of annual spend, which compares to US$274 billion in 2022.

Bloomberg also projected that investment in digitisation will grow from 10% to 24% of annual spend by 2050.

Schneider Electric is well positioned to benefit from this megatrend and wave of new spending. The company will play a key role as an enabler of the energy transition.

This is an excerpt of an article published in the latest edition of our flagship publication for clients only, News & Views. Craigs Investment Partners clients can view News & Views, including the full version of this article by logging in to the client portal.

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Alex Martin

Alex Martin

Senior Research Analyst (International Equities)

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Keep up to date with our fortnightly Market Insights enewsletter. Our research team provide timely and regular commentary and analysis on market developments, understanding investment jargon, and the impact of current events.

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