Morning and welcome to Atlas Copco Group's capital markets day 2025. Welcome all of you. Welcome to you participating via the web. Welcome to you here on site. Good to see so many of you here in Stuttgart. We will soon move into the agenda, but before that, as always, some safety. We have an emergency plan here in case of emergency and we need to evacuate. You will hear an alarm, I promise, two emergency exits in the back of this room there, one on each side of the stage. It's going to be a full day, so a bit of practicalities in the beginning. I start with this: please make sure those of you on site that you have checked out from the hotel, and if you haven't, please do so during the break. You will probably not have time during the lunch.
The Wi-Fi, if you haven't figured it out, it's MervinPick. There is no password required, and you can already now download today's presentation on our website. What are we going to do today? This is what we're going to do today. We're going to start off with a presentation about the group with Vagner and Peter, followed by a presentation of industrial technique, and then we will have a very, very short break because we want to be efficient, followed by vacuum technique, and then this session here with the question and answer sessions. We will serve you lunch outside this room until the buses leave for the innovation tour in Bretten, and these buses will leave 12:30 sharp. They will not leave 12:31, so please make sure you're on the buses.
In Bretten, we're going to walk you through an innovation tour, and we intend to end this day at 4:30. With those words, I welcome our President and CEO, Vagner Rego.
Good morning, everyone, and welcome to this capital markets day. I'm Vagner Rego, President and CEO of the Atlas Copco Group, and today we are going to talk about the group performance, but not only that, we will review our strategy to continue to grow, to continue our sustainable, profitable growth journey. Compressor technique is not here today, neither power technique, but we will also review their performance and also talk a couple of minutes about them. Peter will talk about the financials of the company, and I will come back on the stage to summarize our presentation. Before we start, I think it's always good to remind our journey because we are in a journey of sustainable, profitable growth. Over the years, we have been delivering quite a good organic growth in a quite sustainable way.
Of course, we see difficult times nowadays, but we are in a long-term journey, and we are well equipped to continue that journey. If you look to return on capital employed as well, it has been quite solid, and also the profitability. If you look over the years, our profitability remained quite stable. It doesn't mean that we cannot further improve the profitability. Our main target is to continue to grow organically, but I must say I have nothing against continuing to grow our profit level. Perhaps before as well, it's good to review our Q3 result.
I will not talk about vacuum technique or industrial technique because they will talk about their result as well, and I will just review on the Q3 orders of compressors were relatively flat, and we had negative organic growth in gas and process, but we have been saying that in the conference calls where gas and process is a bit bulky, we get large orders, and we might have a couple of quarters where we don't have those large orders. It is more the nature of the business. Also, it is good to see power technique continue to develop quite nicely. We see good development in infrastructure projects, not only that, they are also exposed to some market segments like in the industrial pumps. They are also performing quite well. Very good to see as well our service business continues to grow organically despite this long-term journey where we are.
The growth continues to come, and we are quite happy with that. When it comes to revenues, we see the revenues were up organically, not significantly, but slightly up, and the profitability has pressure, as you could see during our conference call. It was negatively affected by restructuring costs. We are right-sizing our organization when we feel the need. Also, we continue to do acquisitions, and the acquisitions, they come normally with a lower profitability. On top of that, we want to accelerate some synergies. We want to integrate these companies faster, and there are more costs at the beginning of the acquisition, but it's according to our plan to make for sure these companies, they are as soon as possible part of our ecosystem. Also, we had headwinds in tariffs. We continue to have quite solid cash flow that we are quite happy about that.
If you look to the regions, the picture here looks quite good in some regions. If you take North America, for instance, sequentially, and also year on year, we can see a good development for the entire group in North America. South America, the same sequentially is a bit more flat. Europe, we can see good growth year on year, but again, sequentially flat. Perhaps where we see more headwinds is in Asia, where we see modest growth and sequentially was also flat, mainly driven by the compressor business. I think the market size is not the same, especially in China, where we do not see the same number of projects like we saw back a few years ago with investment in lithium-ion battery production, solar panels, automotive industry investing quite a lot, and we do not see the same level nowadays.
If we go back to our growth journey, I think it's important to highlight the growth varies according to the time frame, according to how you look, how many years you cluster. Here you have a sequential sequence of 12 years, and you see 5% organic growth during this journey. You can also see that this is varying over time. You see 2010- 2014, 6%, then another time frame, 4%, then an acceleration to 8% between 2020 and 2024. If you want to slice in a different way, you can also find 30%. I think the message here is that the growth varies over time, and the most important is our long-term trajectory stays solid, and we will review the fundamentals of why we believe we can continue this growth journey.
Going now to our strategy and fundamentals to continue our sustainable, profitable growth journey. I think before we talk about more in detail, it's good to review our targets. When it comes to financials, we continue with our growth target of 8% over the business cycle. I think you have seen in a time frame of 12 years, we have delivered 5%, and then on top of that, we have done quite a lot of acquisitions that we will also review the impact in our result. We want to keep high return on capital employed, and we want to pay 50% of the net profit in dividend. It's also part of our targets. Also environmental, we continue to have targets around the environment. We will not change our strategy.
There are some changes in demand for this type of focus, but we will keep our focus on sustainability. Also, when it comes to our social targets, we will continue working on it. We believe we want to have access in the full talent pool, and for that, we will keep on investing and also having targets around that topic. Also, we want to do the business in the right way, and then it's very important to have some targets around governance compliance as well that we will continue to have. The world has quite, let's say, has changed over the last years, and there are some trends that do not change, and there are some new challenges that I believe can also be transformed in opportunities.
If we look in the past, we talked a lot about digitalization, but now the combination of digitalization and AI can create quite a lot of opportunities. On the semiconductor side, AI creates quite a lot of business opportunities, but the utilization of AI in our own company can also drive quite a lot of interesting, let's say, interesting growth levers, I would say even. Automation continues to be very important. During our innovation tour this afternoon, you will see some clear examples, very tangible examples where we can play a role in automation, but we are also in a world that is not as globalized as before. The globalization is real. It came and it will stay.
Once again, deglobalization can also mean some opportunity because we are a global company with a global presence, and we need to be flexible and exercise our agility muscles during these turbulent times. That is full of uncertainties for sure, but I also believe they are full of opportunities as well. One of the opportunities as well that is very important to highlight is the energy transition. I would say as well it's not only about energy transition, it's also about energy security nowadays. Nowadays, before people were not so vocal, I feel more and more people are more vocal to say that it is about as well energy security. Those actions to move to make the energy transition and also to have energy security also create quite a lot of opportunities.
If the transition is not fast enough, also some assets will need to be decarbonized, and we can also play a role there. If the energy transition goes fast, we have opportunities. If it goes a little bit slower and we have to do CO2 capturing, we are positioned to support customers on that journey as well. We see quite a challenging environment, but full of opportunities that can help us to continue to grow long-term. I think it is important to go through these steps on how I got also some questions yesterday evening. How do we analyze a business? What is our focus? I think it is a good opportunity to review the way we analyze a business and how we want to build businesses as well. Everything starts with a very well-defined market segment.
We want to be in niche markets where we can be profitable, that you see you can find growth and we can have the right profit level. I think we spend quite a lot of time analyzing markets and looking to what are possible opportunities. Are there new niches, new adjacent areas where we can have good growth, good profitability? Good profitability and growth only comes if we have a leading position in that selected market segment. The main driver for a leading position, in my view, is differentiated technologies. We said that we are a technology company and we really live on that. I think we acquired several assets. We acquired good technologies, and when we are not happy with the R&D pipeline, that's one of the first things we try to fix is to make sure we have a good R&D pipeline.
Because if you have leading differentiated technology, you can also solve bigger problems to our customers, and then you can become a little bit, you can become more critical for our customers' operation. The combination of these can really drive your price up, and then you can have good margins. I think that combination, I think it's important. We also want to be in markets where we can play a global role. If a market is only important in one country or in one region, maybe it's not the technology that we will select to be part of our portfolio. We also want to have a diverse customer base because that is, again, brings resilience. We need to have these fundamentals that bring the growth, but we also need to think about resilience. We also try to attack or to penetrate the market in different ways.
We do not have a fixed way to market. I know that some companies, they have, no, in our company, we only go direct or we go indirect. The way we work, our divisions, our 24 divisions, they are the ones deciding what is the best way to increase our penetration in the market. It is more direct, more indirect. It is up to the division. We have a full range of tools and examples that can be used, including as well our approach when it comes to different value propositions. We have several brands in the portfolio. Those brands, they have different value proposition, and I think they are very important because with one brand, you cannot satisfy the customer base. Also, we see in some markets, the customers, they evolve over time.
Their requirements are also different depending on their phase, if they are growing, if they are mature or not, which technology they are entering. That is good to have this portfolio of brands that allows us to come with different value proposition. Of course, nothing can happen without people. I think this afternoon, you are going to have a very good example of passionate and committed people that we have in the group. Better to show than to talk about it. I think this afternoon is going to be very interesting. Also, our decentralized model is another keystone of our strategy, and I think we keep on nurturing that model. We also want to be in markets where we can be resilient and asset light. Another point, operational excellence is also extremely important in our strategy.
Within our 24 divisions, they are in different stages when it comes to operational excellence because some of the assets we have acquired, we have combined them together in a division. I still do not see them where we want them to be. There is still a journey to really drive operational excellence in some of our divisions, and we are definitely focused on that. More than ever, nowadays it is important to have speed and agility in our organization with a lot of uncertainty in the market. We need to be able to adapt, to scale up in some regions, scale down in other regions. I think that is a very important part of our strategy. We want to be in business that can offer a very good service opportunity.
The way we want to attack the service opportunity is by having leading service offer. It's not by selling spare parts and labor. I think we are past that phase. We want to use technology to further penetrate the aftermarket business and build service offers around that. We see quite a lot of, quite a lot of steps that we follow to make sure we are in the right market segment and we can play a significant role with a differentiated technology. As a result, we have a presence in several market segments. As you can see, general industry and process industry are quite important. Electronics is also important. Automotive, 9% also important for us. That also translates to a good service penetration of 39%.
Talking about service, I think one thing that I'm very happy about is today, I think in the past, we talked a lot about the compressor technique service division, and I think we were quite happy with their development when it comes to connectivity, data collection, and what do you do with the data. I'm quite happy to see now that the same platform is used in vacuum technique, for instance, vacuum technique service. The same platform is used now in power technique service. The same technology, of course, is the same landing zone technology. Of course, power technique and vacuum technique will build their own dashboards and their own application layer because they have different customer needs. Like in power technique, they have a lot of rental companies. Rental, they already have their systems.
This connectivity is more about API first, that you can exchange data with the rental companies. They build their application around that. Vacuum technique, they have other needs. They build application around their needs. The layer, the technology to upload the data is the same. The platform to receive the data is the same. We gain quite a lot in scale. I'm quite happy with that development as well. Also, semiconductor service, I think there will be a dedicated station this afternoon, and you will hear more about how they are using now data to drive their business forward. Quite happy with that development lately. You can see the growth in equipment is what we miss lately. On the other hand, we are extremely happy with the development we can see in the service.
We are developing, we are delivering more machines to the field, and we manage to capture the aftermarket potential. We all have the feeling within the company that we can continue to drive the aftermarket further. Of course, in challenging times, like I said before, it's extremely important to exercise our agility muscles. If you don't have the orders received and the revenues, it's important to reduce our variable cost and also working capital. That's what we have been doing. I would love to do that once, one announcement, and it's done. Of course, the market is full of uncertainties. We don't want to restructure too much. We have been quite careful in the way we have adapted the organization because we have worked in management layers.
We see that maybe we could combine companies, reduce the number of managers, and we kept the sales force almost intact. Of course, we always do adjustments with low performance, but our ability to sell and grow, we don't want to touch. We want to keep that because if the market bounces back, we will be very well prepared to capture the opportunities that will come. I explained quite a lot in detail last Capital Market Days about our divisions and how we work. An update on that one, we are always looking to how to optimize as well, not only the product portfolio, but the way to market of this product portfolio. We have decided in 2025, since January 2025, we have created two additional divisions, and we also have consolidated one division. We added two, and we consolidated one in another division.
You see air and gas applications as a new division of the group because they are more application-driven than it's a bit of different sales process than only air compressor. Air compressors, it's a bit more simpler sales process. For some of the products that we have now in air and gas application, you need to understand the application. You need to be organized to support our customer centers in terms of application knowledge. I think it's a better way to be organized, and we believe that this will allow us to continue to grow. The same thing for industrial flow. We have dewatering pumps. That is a completely different market segment. It's portable pumps. We now have subtracted that portfolio from the flow business, and now we only have a cluster of companies focused on industrial flow.
Those divisions, their main responsibility is to drive their product portfolio, to develop solutions around this product portfolio that will cover our customer needs and sell solutions, solving, like I said before, bigger problems for our customers. Also our decentralized model, we say a truly decentralized model. We have now 650 companies that we follow up on a monthly basis, the P&L. I explained last time as well the concept of the business line. It's basically actually 5,000 business line, P&L. To simplify, we say 650 companies, but underneath these 650 companies, we have another 5,000 P&Ls. That structure gives us the granularity to find issues, to keep our balance sheet clean, and to make sure we have the right level, we know the right level of detail. Not in a centralized way. This is decentralized, but we have our organization to follow up.
Our culture as well, we continue with our culture of freedom with accountability. Those words, they go together in our view very nicely. We give freedom to the people to come with ideas, to organize their business in different ways, but that has to come with accountability as well. In a decentralized model, it does not mean that everybody does whatever they want. There are a lot of common processes. If you take the financial reporting, it is a fully standardized way of uploading the data, producing the reports. We are even now creating a better way to follow up on all these financial KPIs. There are a lot of common processes. We also have several process councils, like purchase, like logistic council. They sit together and they try to combine volume as much as possible to reduce costs. There are a lot of things that happen in that direction.
It doesn't mean that everybody decides. The same from IT. IT infrastructure, it's a big volume of things that we buy. We buy it together to really minimize the cost. I think it's good to highlight that the fact that we are centralized doesn't mean everybody goes in any direction in any topic. There are several topics that we try to combine to make sure we have the right scale. In Atlas Copco, we do believe that leadership is about achieving sustainable results by nurturing our people, growth, and enabling them to reach their full potential. Now changing a little bit gears and talking about our global presence and footprint in a world with a lot of uncertainties, it's very good to have the production footprint that we have with more than 100 production units worldwide.
We also have customer centers in more than 70 countries with our own people analyzing what is happening in the markets. A lot of activities in that area to scale up, scale down production according to the market needs. The last topic here is about digitalization, leverage on digitalization. To talk about digitalization, maybe I will go back some Capital Markets Day some years ago. We did present that strategy we had around digitalization. We decided in the past that we would not have a digital officer or digital change officer. We decided that digitalization should be part of every business unit. Everybody should have a good strategy, not a good strategy, should embed digitalization in that strategy. Then we create a cluster of activities around digital for customer value, digital for customer engagement, digital for operational efficiency.
If you translate that now, considering AI, Atlas Copco as a group will not have AI strategy because AI should be part of every strategy that we have. We should use AI to power our strategy, to deliver our strategy. I think that the focus will be similar. We will have AI for customer value, AI for customer engagement, AI for operational efficiency. There are some areas that I will really push to make sure we get it right, like AI in R&D. I think that's, I would say, a kind of non-negotiable for me. We need to make sure we are using the latest simulation tools. We have already experimented and we found that you can definitely increase the performance of our products by using AI.
I think I'm fully supporting the organization to really explore these new possibilities that we have by the utilization of AI. Another area that I see a lot of potential is to use data in service. I think we did a lot in compressor technique service, but now I will push to have a more uniform approach across all the BAs to make sure that everybody is using data to drive their service business. There are a lot of things going on in all business areas, in all service divisions, but that is an area I want to double down because service, you have a lot of tickets, a lot of small ticket items, and AI can help us to gain efficiency, to understand the behavior of the machines, to do service, to provide good quality service for assets where the value is not so high.
If we use AI, I think we can untap some potential there. Another area that is important for us, it's the R&D. I think we keep on investing in R&D even during tough times. You see that in absolute value, it's more or less the same, but in relative terms, it's growing. The R&D is spent because I believe this is about the future. We cannot compromise our long-term growth, and we will keep on investing. Also, R&D can drive organic growth if you come with a new solution, but also can drive if you come with good features, you can drive the price up. If you even are very good on the design, smart simplification, you can come with features, but your cost can also go down. I think it's a very important part. We will continue our investment in R&D.
Another area that is important here to talk about is our addressable markets. Today, through innovation, we can grow the core business. I think here you can see why we can do a lot of transformation through more efficient products. We can increase productivity. I think you can read it through. We can also transform the market. We can also, through R&D, make our market bigger. There are several examples from ITBA, for instance, where you can transform your market. Instead of selling a tool of EUR 20,000, you can sell a solution, an automated cell for EUR 200,000. This is through innovation. You can transform your market. Another example from ITBA is the electrification, but Henrik is the specialist on that. He will talk. Those examples are present as well in compressor technique, in vacuum technique, and in power technique as well.
Another important point from my side when it comes to R&D is not only about the budget. We put a lot of focus now to increase the output and to increase our speed because the value we spend, of course, is significant, has a lot of importance, but we also need to pay attention. We spend a little bit more time to make sure we have the right output here. We came with fantastic innovations. I mean, VSD compressors that can save up to 60% of energy compared to previous generations. In dispensing technology, for instance, we have decreased the process time by 50%, and we just released this solution and we started to present for our customers. The same for these chillers that are in the vacuum business area, 20% improved in efficiency.
Today, we can generate oxygen on-site generation of nitrogen, sorry, with 99.999% of purity, which is really high. Normally, you only get there if you have a cryogenic process in an air separation plant. Today, with on-site generation, we can reach very high levels of purity. Leybold as well, a recently acquired company, continues to innovate and are now developing some products that can also go into the marine business. Here are some other examples of technologies that we have added in our portfolio that we believe that we can expand the total addressable markets. I put some examples here, like low pressure over the years, a CAGR of 9%, liquid ring pumps, also a nice CAGR, electronic dispensing, and industrial pumps as well have been developing quite nicely. We do those developments sometimes organically, but also through acquisition.
If you look over the last 10 years, we have acquired 160 companies. Over the last five years, we have acquired 100 companies. Here we have our process, our sweet spot analysis. The way we do all our 24 divisions, they do have an acquisition strategy so that we activate or not according to the needs of the market. Also here, I would like to highlight one thing. Acquiring so many companies in the last five years requires quite a lot of efforts. What we have done, we are upgrading our post-acquisition process because we believe there is some upside there to integrate the companies faster and to get synergies faster as well. We have dedicated training programs. We are building pilot talent pools, and we are also investing in an organization just to support the acquired entities to get the synergies as fast as possible.
It's an area that I believe we can do better. We can integrate these medium and small-sized companies faster. Switching gear again, now talking about compressor technique, it has been a quite good development. Of course, we believe we can continue to grow because there will be investments in industrial production. Energy efficiency will remain very important, driving total cost of ownership down, and it's something that we are good at in compressor technique, is to drive the cost of ownership down. We also see quite a lot of possibilities to improve efficiency, to optimize our customers' utility room. I already talked about the service opportunities, and there are some focused new divisions that can bring quite a good growth. You see the development has been quite good, 8% on equipment over the years, also 8% in service and very high, very good profitability.
Here's one example of how they will tackle, how they want to tackle the utility room challenge. Atlas Copco has always been at the forefront of innovation and efficiency, supporting our customers with first-in-class solutions that help them take their business into the future. We take the lead, driven by our vision to be first in mind and first in choice and setting the standard through innovation, trust, and Atlas Copco excellence. With every expansion of our portfolio, our solutions raise the bar for performance and reliability across the industry. Today, we go far beyond air and gas. We are the innovators behind the world's first smart utility solutions. Our smart solution is powered by over 15 years of industry-leading data, enabling customers to better understand and integrate their processes, boost energy efficiency, and fully seize the potential of Industry 4.0. Why go smart?
Because it is everything your operation needs in one intelligent package. A single source of supply ensuring system optimization, continuous monitoring and control for peak efficiency. AI-enabled predictive maintenance to foresee and prevent issues. Reduction in downtime and lifecycle costs. Digitally connected technology that adapts to various conditions. Atlas Copco Smart Utility Solutions. Level up to the Atlas Copco experience. You will continue to hear more about that when we talk about compressor technique. Power technique as well has growth drivers connected to the industrial productivity, industrial production. With our industrial pump business, also infrastructure is another drive for power technique. The need to increase in productivity and CO2 reduction, especially in some construction sites. They want to decarbonize, and we see a lot of opportunities for portable or mobile electric compressors. Electrification is also present in power technique.
Profitability of power technique, it's something that we believe we can do better over time. We want to first bring at 20% EBITDA, excluding the amortization of intangibles. Over time, I think that is the aim to bring the BA also to 20% profitability. If you look to the service business, also good development as well helped by our penetration in the rental equipment business as well. Here I would like to share a video on how they have built a portfolio of industrial flow assets that is now part of our industrial flow division. Our solutions and services are the cornerstone of many industries and sectors. Our ideas and technology empower our customers to grow and drive society forward. Even if we go unnoticed, we are present there for you when you need us. That is how we transform the future.
We take on a new challenge to unleash our full potential in the industrial pump business. With a clear differentiation in technology and application knowledge, these pumps are critical to customer operations under the highest efficiency standards. They offer a healthy return on investment versus competitive offerings and strong aftermarket business potential, setting a clear pathway for sustainable, profitable growth. In 2016, we started our journey in the industrial flow segment with Verisco. During 2022, Wangen and Leybold joined this exciting venture. In 2024, First Crop and then CPC Pumps and Pomac Pumps became part of the organization. Most recently, Kremann was welcomed to the Atlas Copco Group. Individually, these brands hold a fruitful and rewarding track in their respective fields of action. Together, we have a unique opportunity to become market leaders in targeted verticals by leveraging our technology and expertise.
Good, now it's time for our CFO, Peter Kinnart, to talk about our financials.
Good morning to you all, also from my side. Very happy to be here and very excited to talk a little bit more about financials. As you will see, I think sometimes ingredients change a little bit. Maybe things get a bit more hectic in the kitchen, but the recipe remains the same. Digging into our three financial group targets. First of all, the growth target of 8% on average over a business cycle. Here, the goal is to reach 8%, as you know, measured over a business cycle. We also, at the same time, want to make sure that we keep our market-leading position.
If 8% is not enough, we might try to do a bit more, but we also want to make sure that we stay ahead of our competitors while we are growing the business. As you know, primarily, the growth should be coming from organic growth. The reason of this is, of course, that we believe that organic growth is the least risky. It requires the least investment, and it delivers the highest return. There are different reasons why we either want to go faster, why we want to add new technologies to the portfolio, which would take a long time maybe to develop, or to build new adjacencies in which we have not been present for a long time and where we want to build a new footprint. Selective acquisitions are a perfect fit to add to the organic growth path that we are on.
As you can see, of course, divisions are acting a little bit differently. Sometimes some divisions are growing faster from an organic point of view. Sometimes there's a bigger focus on acquisitions. Overall, again, organic is the main focus, and we like to top it off with acquisitions. The second target is the sustained high return on capital employed. Here, of course, the basis is to begin with the growth, the 8% growth that we want to achieve. Because with significant growth and with stable profitability, thanks to strong operational excellence and very good execution, we are able to deliver this profitability at a sustainable level.
While we at the same time are an asset-light type of business with limited investments in plant property and equipment, but also a high part of our cost of sales being outsourced with external suppliers, we are able to use the means in the company and not spend too much in strong investments. As a result, the return of the capital employed within the company remains on a sustainably high level. The last target is then the final result to the shareholder, where we promise to deliver 50% of our net earnings to our shareholders in annual dividend.
We do that partly by being cost-efficient and have a strong funding setup where we have low interest costs, also limited external funding requirements, combined with good cash generation to the business, which is partly helped also by the asset-light setup that we have so that we don't need to spend too much of the cash we generate through the operations into our own facilities or other types of projects. These are great targets to have, and we've had them for a long, long time, as you know. How are we currently doing compared to those targets? First of all, on the long-term growth, I think here it's very easy to see that we are delivering according to the expectations with a growth, as suggested, over a long period of about 9%. It also clearly shows that the growth is not a constant.
That is hard to deliver, to be honest. Different businesses are in different cycles. And as you know, currently, there are a couple of segments that are maybe struggling a bit more. There is a lower appetite for capital investments at this point in time due to a lot of uncertainties across the globe, markets being in different conditions and shapes. The growth of 8% on average is expected to be there, and we aim to get there again, but it might be going up and down from time to time, and it might be lower like it currently is. That in itself does not scare us too much. We know that we are working on the right things, on focusing on the product portfolio, making new technologies, adding adjacent businesses.
We are confident that the growth over time will continue to be at this 8%, and we still believe that there's a lot of potential to do so. The second target was the sustained high return on capital employed. I think in itself, the graph doesn't need too much explanation. I think we are reaching roughly around 25% at current, and we have been higher. We have been lower at occasions, but always at an above 20% level for the group. I think that is something we can refer to as high. It's, of course, based on the growth, again, but secondly, also on the execution and the fact that we have a good, agile, and resilient business model, thanks to service, amongst other things, to be able to continue to deliver sustainably.
Even when things are maybe not as bright on the growth side, we are still able to deliver a similar return on capital employed over time. The basis for this return on capital employed is the operating profit. Here, operating profit per share. I think the message I want to give here is that on the one hand, it's the operations that make it happen. They are contributing by far the biggest part, if not the whole part, of the entire value that we create in the operating profit. The impact of our financial net cost is really extremely limited, thanks to a well-balanced portfolio of external funding. Given the fact that we are a highly cash-generative company, also limited external funding, that, of course, then also results in a lower net financial cost for the group.
The second part of the return on capital employed is, as I mentioned earlier, based on the balance sheet. We are an asset-light company. We have very limited investments in plant property and equipment. You can see on the graph here in the red color what those investments have looked like over the past 10 years. Even though you can see that in the last three years or four years, even, they have been quite a little bit more substantial compared to the early days of the decade, they are still very limited compared to the overall operating profit that we generate in the group. Secondly, we also see that the company is quite cash-generative.
Due to the fact that we do not need as many investments in our capital, in the capital, in the fixed assets that we have, we are able to finance that entirely easily from the cash we generate through the operations. Not only are we able to finance all of those different assets that we need to keep our operations at the best possible shape, we also are able to use this cash flow to actually fund basically all of the acquisitions we have done. As Farmer has explained, there is quite a lot of them, as you saw, over the last five years, last three years. We have been able to finance those basically with our own generated cash flow. That, of course, makes us also quite strong and resilient.
The result of all of that, of course, is that as we have limited needs for external funding and now we are able to keep the cost low and we are a good deliverer of profitability from our operations, we have actually a low debt ratio, as you all know. We do not have really a target for the debt ratio, not where we are today. Considering that we are cash-generative, we do not see any real immediate change to this ratio either. The benefit of having this structure, on the other hand, is that we have freedom to act. That means that we have done a lot of acquisitions, but you also know that most of the acquisitions are relatively small, some very small, but let's say medium-sized type of acquisitions.
This means that we have quite a lot of firepower in-house to be able to also perform bigger acquisitions should we want to. I say carefully, should we want to, because this is not a firm promise that we will, because with bigger acquisitions come bigger risks. Of course, we will act if we see targets at the right price, with the right business model and the right added value for the group. I think the main point here is that the capital structure and the balance sheet of the company allows us to do so when we want to. I would say the proof of the pudding is in the eating. The third target is then the cash generation that is going then to the shareholders.
First of all, when we generate cash, of course, our first priority is to make sure that we continue to invest in the company's future. We do that through enhanced R&D to increase expenditures, but also efficient expenditures in R&D. We do it through the acquisition path we are following. We are constantly looking at how we can change or improve the business model slightly. Of course, we use the cash generation basically to fund all of these initiatives. Once that is done, we promise to our shareholders that we will deliver 50%. I think this slide shows to you that we deliver on our promises. It also shows that in terms of our targets, we are a stable, growing, but also predictable company. You can count on these kinds of targets when you plan for the future.
Of course, it would not be possible if we did not have the high growth delivery on our first target, and if we would not have the high profitability and the resulting high cash generation that is then linked to the return on capital employed. This, I think, is then the ultimate measure of success, you could say, being able to give a solid return in terms of dividends to our shareholders. With that, I conclude the unsurprising report on our financial targets and our performance. I would like to give back to Vagner for a short summary. Thank you, Peter.
If I then try to summarize this first part of our presentation today, we are in a diverse business with several niche markets where we try to focus to be market leader in that niche market through technology, through our products, offering differentiated technology that can solve bigger problems for our customers and then have as well the right margin. We want to be present in businesses that offer quite a strong service opportunity, but to tackle these service opportunities, it's not about selling spare parts. It's about delivering, packaging a nice service offer. In Atlas Copco, we have several product managers for service that they will package our service offer in different ways according to the customer needs. That's what we mean with strong service offer. It's not about spare parts and labor. It's really about using technology to find new ways to do our service.
We have a consistent strategy, as you could see today, and those new elements like digitalization and AI will support us to deliver our strategy. I am a true believer that we cannot switch all the time the strategy, but we can use everything that is coming now into the market in terms of technology to support us to deliver on our strategy. We continue to be committed to innovation with tangible customer value creation. I think that is extremely important, and that's our main focus is to make sure we exist. We are here as a company because we have customers that they like what we develop for them. We cannot lose our eyes, not forget that, because that's why we are here. That is why we need to continue to focus on it from my side and also the entire organization.
We have to deliver value to our customers. When we deliver value and the customer appreciates, we can have good margins, good profitability. Part of that profitability, like Peter explained, we are going to reinvest either in more R&D, either in more acquisitions, or we will release more to the P&L. Like I said at the beginning, I have nothing against operating in higher margins, but if we see our priority is to continue to grow the 8%, that is the number one priority. We want to continue to reinvest in these topics, and if we see an opportunity to further expand margins, that will happen. We also have new areas for growth. I think that's important to highlight. These new areas for growth, we have organic investments and acquisition as well. Our financial strength, like Peter has demonstrated, allows us to do both.
We want to keep on doing both. We also need to have a global presence, and it is part of our strategy to have global presence and also flexibility. I think agility muscles, I think that needs to get stronger because we will use a lot in the years to come. Have an asset-light operation with variable costs. We are very proud of our decentralized model because that has been a key, let's say, pillar of our strategy to make this business model scalable. That is why I believe we can add new adjacent markets. Those new adjacent markets can become bigger. Maybe they can also become a division in the future or so on and so forth. The model that we have allows us to deliver on that. Thank you very much for your attention.
Thank you, Vagner. Thank you, Peter.
Now we will have listened to one more presentation before the break, and that's about industrial technique. So welcome on stage, Business Area President Henrik Elmin.
Good morning. I am very excited to be here to talk about the world of industrial technique. My name is Henrik Elmin. I've been 18 years with the group and eight years in this current role as responsible for the business area. We start with some short facts, then a bit about the business, the fundamentals, but most of the time I will talk about our strategy for long-term growth. Let's start. If we start to look at the right here, you can see the latest quarters. I would say after several years of very good growth, we have seen a bit more challenging market situation over the last year, I would say. Of course, this is partly also due to currency, but we also have a small organic decline.
On the profit side, we've also been under pressure, challenged here, and it's of course due to the top line decline, but also impact from currency, also tariffs, some dilution of recent acquisitions as well. I would say here the main short-term focus is to get back to historical operating margin levels, but then also to improve further on the relative level from there. We've also had some restructuring costs in Q3, very much also due to the uncertainty in automotive, and we have adapted our cost structure in line with market demand, as we always do. On the left here, a few things about what drives our business. I think here the main point is that the equipment part of the business is very much driven by CapEx.
When customers invest in new products, need to produce new products, need to do more advanced manufacturing, or they need to increase capacity, that drives CapEx, which drives our equipment business. The service business is driven much by industrial production volume. With much volume, our installed base of equipment is used a lot, and we then provide relative services. In general, we can say manufacturing technology changes is good for us when things change like battery electric vehicles or the way you manufacture. That's normally a good thing for us because that means we need to innovate to find new solutions. If we take the geographic split of industrial technique, on the top, we have 39% in America, so quite a big portion, 27% in Asia, but as you can see, we are very global.
If we look at the different markets, if we compare with last year and we look at the third quarter, the biggest challenge is in Europe. If we talk about the biggest market, minus 6% organically versus last year. If you look at the arrows, it's the sequential development, and it's relatively flat if you look at Q3 versus Q2. Let's then talk about what we do and the fundamentals of our business. It is really about advanced manufacturing or we say smart manufacturing solutions. A lot is about assembly technologies, putting things together. It's about tightening solution, drilling, dispensing of adhesives, sealants, mechanical joining like self-piece riveting, but we also have industrial tools for maintenance and material removal applications. We also have the vision systems to help customers automate and check quality.
If you look at the customer base, more than 50% is automotive, but then we also have many other customer segments. Out of the other part, we have a lot of business in electronics, aerospace, energy, but almost every industry where you need to put something together, need to assemble something. Our business model, for our business model to work, it's really critical that we are, I would say, market leader, innovation leader in the decided niches. In general, in most areas, I think we have a very strong position where we have, let's say, decided to play, if you look at the left side here. What is it then that we do for our customers? If you want to summarize it for the whole business area, you can say that we really help customers and we deliver for them quality in their production and productivity.
We talk about critical manufacturing methods that are really important to them. We do that by offering standardized solutions that are very much integrated, often with software, into the customer's production systems. I will explain a little bit how we do this. To simplify our quite broad offer, we can group the offer in four different types of solutions. We start here on the left with what you can call industrial tool solutions. Here you have an operator in the work cell using the equipment. Then we have on number two, automated assembly solutions. Here it's often a robot, no operator, fully automated. We do not provide the robot, but we provide the process solution when it comes to assembly or joining technologies. The third is about inline quality solutions.
Almost in all customers and businesses, customers have separate stations where they only check quality to see that the component or product is correct before it moves further downstream in the production flow. Here vision systems is a very important technology, and we focus on inline quality solutions. The service offer. Let's take a look at the automotive part. Here we have a very broad offer, and we are present throughout the value chain, starting with sub-suppliers or tiers, for example, making seats or electronics components. That's a big part of the business. Also when we assemble the battery packs for EVs, also in body shop, paint shop, and very much in final assembly of the vehicle. We are really broad here.
If we say automotive is relatively few, big customers, you know, the plant, maybe a thousand plants globally that are very important for us to cover. We say the rest of the potential, we call that general industry. Here we have millions of different small, medium-sized, but also large customers across industries. Here it is a little bit different in terms of the number of segments and customers. Here you see some of the big areas where we help customers to assemble and check quality. We have an important slide here explaining a little bit our business model. We can say in industrial technique over time, we have moved quite a lot from selling more products into more solutions. A lot of our business is project-based. We deliver a full solution of a process, etc., into the customer's production line.
One very important point here is that we standardize very much this solution by modularizing the offer. It's more and more software. Half of our R&D team is actually software engineers if you look at the total, but it's also, of course, a lot of hardware. When we provide these solutions for customers, we talk about make standard, but sell special. Also, it's a lot of integration into the customer's production line. We don't do any big engineering projects, build production lines or complex automated cells, but really stay to the standard, with some customization around. This works across the different divisions for industrial technique, and it is really a quite strong differentiator in the market. Before we go into the future, let's look at the historical revenue development. I think we've had very good growth over here we have 12 years.
You can also here see that we are quite cyclical. When there is uncertainty in the market, further back, financial crisis, but also COVID, and now with the current uncertainty, we see also that we have an impact on demand. We are used to that and adapt for that, as I discussed. The most important thing here is to look at the long term to continue this growth over the coming, let's say, 10 years. We can also say that this growth here in 2022, 2023, quite a lot is related to electric vehicles, new production lines, but also what I mentioned that we have moved from products into solutions, more software, more content, more scope. This has also increased differentiation. I would say long term, we stay with the ambition here to continue to grow 8% over the longer term.
Let's move into the future. What's happening and what are we doing to continue to grow? If we start with some of the trends, let's start in the middle here. We have many industry-specific trends. This is automotive car production that you see on the bars here. As you can see, the peak in terms of car production volume globally, 95 million cars, was in 2017, and we are still not up to the same level this year. Actually, the forecast is 2029-2030, we will be back to 95 million cars. Of course, this is not a great market when you look at it like this, but still we have been able, I think, to grow extremely well, and that is because of what I discussed, the changes in the products, manufacturing, and CapEx is what drives our business. On the left, we see a big trend.
You can summarize it by digital manufacturing or smart manufacturing, and almost all customers want to automate more of the production. There is a lot of new technology. It's vision systems, robots, sensors, software, and one of the big challenges for customers is to integrate these things, these technologies together. Coming back to our modular approach, providing solutions, this is a great opportunity for us to help customers in this area. We have the geopolitical development. We see many Chinese companies and customers being very innovative, going global, building plants also outside China. I think the deglobalization is a clear trend right now. Of course, on the negative side, short term, it's maybe uncertainty. People or customers are replanning their portfolio and production footprint.
If you think about it a bit more long term, if we have more regional supply chains, we need more manufacturing capacity in each region. It could also be something that over the longer term drives the need for CapEx and could be good for us. I will now go through seven points around our strategy to grow for the future. It's actually four points that are linked to the four groups of products that I talked about: industrial tool solutions, automated assembly, the vision and inline quality, and the service. I have two points that are linked more to the automotive and general industry, what we are doing there, and one last point around more of the geopolitical and, let's say, the production and R&D footprint that we have.
Let's start with industrial tool solutions, and this is where we have an operator still very much in the center of things. If we look here at the left, one of the main growth areas is that we transform in tightening to smarter tools. In automotive, most of the customer has already taken that step to go to smart and electric tools. In general industry, still, if you look at the number of tools we sell, 50% are pneumatic tools, and here we have a big potential to transform to smart tools. Why hasn't this happened before? Obvious question with all the advantages. If you take electronics with very, very small screws, or you take aerospace with very specific solutions, or you have energy with maybe big bolts, you need to adapt the products and the smart tools to fit into those applications.
Over the last years, we have invested in R&D and developed this offer, and now we see that we can transform also general industry to smart and electric tools. The times two to five here means that if you transform one pneumatic tool to a smart tool, it can be between two times the value or revenues up to five times depending on the tool. It is quite a good growth generation there. We should also say that sustainability is a driver for this. It is more energy efficient to go to the electric tools. On the right side, we have workstations. When you have a human in the center, it is very important to make sure there is productivity and quality. We also provide workstations standardized with operator guidance, but also other things like sensors that know where the operator is working, etc., to secure quality.
Here we talk about integrated workstations, and it's a lot about software, but also hardware that we add on here. This is really for the most critical applications where nothing can or should go wrong. Also on the potential, times three means that if we transform one tool into a workstation, it can be a lot of value and revenue. Three times just, let's say, selling a tool. Here we have, over the last years, also done some smaller M&A and also developed internally the solution to be able to offer this, and it's very good feedback from customers. If you look at tightening applications, it is a lot about automation. Still, many of the operations in the industry are done by humans, and customers want to automate.
This is a very exciting story because this used to be a threat or a weakness for us. Because instead of selling an ergonomic advanced tool with the software in the station, the customers only needed a standard tool to put on the robot, and then the integrators did the rest. For us, it was harder to differentiate. It was harder; it was also smaller revenue potential. Over the last five to seven years, we've really now developed a differentiated portfolio of automated assembly solutions in tightening to be able to be part of this and help customers do this. What is it then? You see upright, you see a tube, and this is where the screw is fed. When you have a human operator, you place the screw manually and tighten it.
When you have a robot, no human, you need to automatically feed the screw and the bolt to the robot and the tool. Here we have done both M&A and internal developments. From starting at zero, I would say we are now market leaders in screw feeding, selling thousands of these per year. Also, the vision systems, you have seen how you guide the robot in the application to the right place to do the tightening. There is also a lot of mechanical solutions. Bottom right, you have the software integration. When you have all these technologies, you want to make sure they work together and that you have easy integration of the different components. A standardized approach helps automation. This is a big upside and potential for us. An example here is a standardized cell to assemble seats.
If you look at the smart tool, it's 10 times the value or revenue if we get this business. We see very good sales of exactly these standardized cells as we see here. We have, over the years, also expanded into other assembly technologies: dispensing of adhesive sealants, mechanical joining, electronics dispensing, and in line with customer demand and new materials in the industry. We have had very good success to innovate on the process together with customers. How do you apply the adhesive? What is the real application? We constantly innovate and upgrade these solutions. One of the challenges has been more this modular approach of standardization, adding more standardized software around the core product. You see an integrated vision system here.
What we have done over the last years is to develop one controller platform for all these four process technologies called the 8000 platform. That both creates scale, cost benefits, but also it creates this platform to build this modular software approach around the different products. Here you see an application in the paint shop where you first measure and find the location of where to apply the bead, and then you see the very accurate application of the bead. Moving to the third, it's about expanding our scope, going into vision systems and these inline quality solutions. As you have heard, we sell integrated vision, a lot of vision systems together with assembly technologies, but we also focus on this direct business selling vision for inline quality solutions. What is then our focus?
If you take a door on the production line, customers want to make sure that all components are correct before it moves to the next stage of production. You have metrology where you want to measure the tolerances, or you have the surface inspection where you make sure that there are no scratches, etc., on the door before it moves to the next stage of production. These quality gates or inline quality solutions are the main direct focus for the vision business. The fourth is around service. We've heard a lot about that today. We focus very much on the customer's product lifecycle. Today, it's very much, if you look here at the top in R&D and production engineering, a lot of focus on speed to short time to market for new products for our customers.
We work here early on with them as partners to find the right solutions at the same time as when they are actually designing the vehicle or the product they produce. We help with installation, commissioning. We also take care of production and maintenance, or maintenance, not the production itself, but also optimization and upgrades. If we look at the industrial technique service business, I think it has developed very well over the longer period. We see that our service ratio for service, including some consumables, is close to 30%. We continue to see a big upside here. How do we do this? We work with this service ladder where you start, of course, with reactive and proactive service and maintenance. One of our biggest, you can say, growth drivers is what we call tool management centers.
That means that we have an on-site team of our service technicians inside the customer's production plant working in a workshop or on the production line, helping on a daily basis. Here globally, we have 392 last week of these contracts where we have tool management centers. Last time I presented three years ago, I think it was 270. Continue to grow here. We have the data-driven optimization. We still see that many customers are not using data enough to optimize maintenance and production processes, and we have both on-prem and cloud-based solutions to enable this value, and we can really help them with that. Moving into automotive after the four product areas, it's a lot of things happening in automotive. We have, of course, the electrification, the battery electric vehicles, but we also see new ways of making more simplified.
For example, you have the giga castings when customers replace several parts with one casted part. You have more centralized electronics, and you also have more focus on automation. Here we are really following very closely the big trends. Also, if you look at the middle here, we see now with the geopolitics, many customers are going for a more regionalized footprint, need to produce more products in their more car models in the same plant. That drives the need for flexibility. Again, labor shortage and the focus on automation is important. Chinese OEMs going global is, of course, a big, big trend. If you summarize it, I think we see we have a little bit more content for battery electric vehicles than combustion engine, but it's not in both types of powertrains. We have a lot of business.
I think we see when we look at these innovation leaders that we are well positioned with our type of technologies. Also, the focus on innovation, the focus on the quality control, the software, how we help customers with solutions is really important. We also invest further in our R&D and operations and supply chain in China. I will come back to that a little bit later. Moving over to general industry or other industries outside automotive. First of all, as you remember, we have adapted very much the offer for tightening. Actually, the same thing applies to drilling also in aerospace. We have now a very strong offer adapted for other industries like I talked about. We also, of course, look into the future. What could be really big potential for us?
If you start here in the middle, humanoids, here we're working with the companies here starting production now, and let's see how it goes. If it works and this becomes a big volume, you can say we have more than 500 screws typically in one of those humanoids we see, but also a lot of dispensing applications. That would be very good if this is a big industry. Here also, we work on putting a tool, industrial tool in the hand of humanoids to also make sure we are part of that development. We have the EV tolls. Also, of course, a lot of now tightening, critical tightening and dispensing. Here we're also working with companies that are starting to produce. We have the energy segment. We see we've heard the need for electricity.
We are in solar checking the quality of solar panels, but also throughout the energy supply chain. If you think about it, AI is driving a lot of this, the need for electricity, but also enabling humanoids and EV tolls, for example. Let's talk about the last growth focus here, talking about presence and geopolitical resilience. Here you see our global footprint for industrial technique today. We can see we have the majority of plants in Europe with seven, three in America, and already a significant production in Asia and China with two. We have these application centers. That's a type of light production unit, which is very, very global that we have from Brazil to Korea to India, but also in other markets. We are very, very global. I think we are well positioned.
What we are doing is to further strengthen R&D and operations supply chain footprint in China. See a lot of innovation happening there. We also are building R&D, for example, close to customers in aerospace in the U.S. to be closer to those trends there. Talking about presence, I think we are quite present. We are quite global. For us, it is more about how to optimize presence with digital tools and a different way of working. We talk about the physical presence. We want to free up the time for our field salespeople to help with the complex sales, with the project sales, the transformation. With digital tools and inside sales, we want to optimize more the standard part of the business. We call that transformation program customer center of the future, really important to feed the strategy and enable the strategy.
We also continue to evaluate the footprint linked to everything that is happening. Where and how will the growth long-term happen then? To explain a little bit how we think about it, let's look at the full potential of the business, as we call it. If you take today the number of customers we have on the Y-axis and we have an average sales per customer on the horizontal level here, you can think about our business today. Actually, we are very present with something at many customers. Of course, there are new customers like the winners of tomorrow where we can gain new customers. The bigger portion and opportunity for us is to sell more product lines, more solutions to the existing customer base.
Maybe we are selling one type of product and we can expand into other solutions to cross-sell and sell more to the same customer. Increasing customer share is an even bigger potential. The next one is about creating the market that we are doing and we want to continue to do. We call it transformation. Very much this modular approach, more software, more intelligence in the solutions. Automation is one great example. Data-driven service also for existing customers. This is both a differentiator that creates a lot of value. It also generates extra revenue for us with existing customers, really important part. At the end, of course, M&A.
We have done some smaller M&A, more technology bricks, but we are also reviewing more adjacent businesses, but very much focused on the existing customer base because we have a lot of room to grow and we have a lot of value in these relationships and business today with our customers. At the end here, it is also another way to look at our business model. It is so much about people. You will this afternoon come to one of our innovation centers here in Germany, and then you will understand this. The theory here is more how it helps us to grow the business. If we think about selling a product and we do not know so well the customer, what they will do with it, we get to a certain level.
If we understand the customer's application, we say we own the customer process, really understanding the application, then we can generate more value for them. We also see that our hit rate goes up a lot. If our customer is in our innovation center, we have a very high likelihood of getting the business. It differentiates us a lot. Profit goes up, and then you get this bigger square of profit pool, let's say. It is really about competence, collaboration with customers and internally, and innovation. At the end, just a summary to recap a little bit. I talked about these four types of solutions. You have the operator-based solutions. You have the automated assembly, inline quality, and service. We talked about the short term now, a little bit more challenging with uncertainty, getting back on the historical operating profit margin.
I think we really have a strong focus on the long term, about growth in the long term. It's a lot about this from product to solution, more software, but also then to work with the leading customers, both in electric vehicles or automotive and also in the other industries where we are present. Thank you very much for your attention.
Henrik, you can bring. Before the last presentation of today, we will have a short break, a short break, only 15 minutes. Coffee is now being served outside this room. In case you're looking for the restroom, it's downstairs. See you here at 10:15 A.M. sharp where we start the next presentation. Welcome back, everyone. Now it's time for the last presentation before the Q&A session, and that will be about vacuum technique. Let me introduce you to the Business Area President, Koen Louwers. Welcome up.
Thank you, Daniel. Good morning, everyone. My name is Koen Louwers. I'm the President for Vacuum Technique. I'm very happy to share with you today some insights about the developments that we see in our vacuum technique business area.
We have the same agenda structure as my colleagues, and I have quite some materials to cover, so let's dive immediately in there. According to the market researchers, the end markets in semiconductor have recovered quite well, running this year around $700 billion, and expected by 2030 to grow north of $1 trillion. This is mainly driven by the AI trends that we have seen, the rise of the data centers, and this despite a much softer conventional bulk of the market in PC, mobile, and automotive. High bandwidth memory and advanced node adoption is fueling our business at this moment. This type of chip does require a lot of vacuum and abatement, and in order to produce this type of chip, vacuum and abatement is critical. The service demand is rising with better FEP utilization.
When we talk about FEP utilization, there is a bit of color there. All the FEPs working towards AI data center needs, they are fully booked even already for the next year, so they are fully utilized as well. Although the FEPs, which operate in the more conventional side of the market, we have seen there that the utilization has been going up, but we're not yet at these triggering points for new CapEx waves. Needless to talk about geopolitics, semiconductor is very much subject to geopolitics, and of course, the regional push for chip self-sufficiency. Interestingly, we see that we are able to continuously expand our total addressable markets with our vacuum solutions, especially in the space of scientific and industrial applications: quantum space commercialization, electrification trends, energy, energy conversion, energy distribution are opening up our total addressable markets.
I'll come back to that in a later phase. On the customer side, I think nothing changed too much there. Customers still prioritize on the lifecycle cost. They want the sustainability on the product, and of course, they want our products to be digitally enabling their control algorithms and their controls and their plans. If you then look at the graph with the previous quarters on orders and revenues, this very much reflects the sentiment, and it very much reflects that there is still quite a bit of excess capacity in many FEPs that operate in the conventional nodes. Looking at the global order distribution, it's not surprising that for vacuum technique, the picture looks a bit different than for the Atlas Copco Group in general. 64% of our business this year is coming out of Asia.
Again, I think not surprisingly, given the fact that most of the chip makers that operate for the AI industries are producing out of Asia. I think we are in a very good position there to capture that AI demand, given that we have driven our local for local policies with local leadership in the Asian countries, with local footprints both on factories and service centers. On top of the semi business we were able to pick up, we see also that on the general vacuum, we have good business in Asia. Business is thriving in Asia. This is unlike what we see on the vacuum technique side in Europe, where we see that there is a lack of investment appetite both in general vacuum and in the semiconductor industry. Looking at the U.S., you see that we have a negative growth this year of -8%.
I think that we can almost fully attribute to one of our key accounts in the semiconductor atmosphere who is operating on a very tight and very strongly reduced CapEx budget. If we look at the general vacuum side in the U.S., we do see good business in the U.S. for general vacuum operations and markets. Our semi operations are growing everywhere in the world. I think that's the resilient part of the business. We support customers in all industries, and of course, we're very strong in our traditional industries in the electronics with the semiconductors. We also enable a lot of new technologies and very advanced technologies that require very advanced vacuum systems and solutions in the scientific atmosphere, such as, for example, high energy lasers, nanotechnology, quantum space simulation. You'll see a lot of that in the afternoon session in one of the innovation stations.
On the industrial side, with the industrial division, we also operate from very advanced vacuum systems for process industries, chemicals, pharmaceuticals, to the more straightforward type of applications in food and pack and canning, bottling, and so on and so forth. We operate through six divisions in vacuum technique business area, and that's a good model. The six divisions all have their own products for their own segments, and they can operate somewhat independent from each other, and they can operate at multi-speeds. If some markets are thriving, one of the divisions can be in investment mode and capturing growth, whilst if another market is subdued, the other division might be in cost restructuring mode and fitting cost to purpose. Let's talk a bit about the market and the business fundamentals.
It is no surprise that most of our business we do in vacuum technique is in the electronics segment, where we have a clear market leadership position both for vacuum and abatement. We are strongly positioned to capture that business that is coming from the chip makers that serve the AI markets, and we see some increased momentum coming back in the flat panel markets. In order to open up further and increase our total addressable markets, we are continuously strengthening our global and vertical reach in some of the adjacencies of these markets, such as, for example, working further towards our cryogenic solutions and as well moving further into the leak detector products and portfolio.
29% of our business is in the process industry, where we have a clear leadership position in many segments, as for example, in coating, metallurgy, electrification, energy, but also in the analytical and R&D vacuum market segments. We're well positioned, and I'll come back to that in the presentation, to capture some of these new emerging technologies, disruptive technologies that require a significant amount of vacuum, such as quantum computing and space simulation. We're continuously advancing in the chemical and pharmaceutical markets through some of the acquisitions we did, mostly the liquid ring pump type of products that we needed with a more vertical setup to support our penetration in these markets.
8% of our business is in the general manufacturing space, and there we have seen great success using the Atlas Copco compressor channels to reach this very diffused market, and as well using some of the Atlas Copco compressor concepts, meaning centralizing vacuum, providing centralized vacuum installations rather than having point-of-use vacuum all across the factories and the plants. That, of course, allows for energy efficiency, better controllability, better serviceability, and so on and so forth. These proven compressor concepts we have applied in vacuum over the past 10 years since we acquired Atlas, and that has served as well to open up the total addressable market also in the general manufacturing space. We keep adding new products into that portfolio as well.
I feel, and I still owe you probably a bit more color on our expectations when it comes down to the electronics market, what's going on in the electronics market. To do so, I'd like to talk a little bit about the different stages of the chip production. Stage one, of course, is the design of a chip, and that's done without vacuum, right? That is Nvidia, AMD, and the likes, and there is no vacuum needed there. Once the chip is designed, it has to be produced. It needs wafers, and we're at the heart of the wafer output. Wafers drive vacuum need. We have the wafer testing. There is not a lot of vacuum in play when it comes down to the wafer testing phase.
There is this interesting trend as well of packaging of chip moving from the back end to the front end into the fab. There we start to talk about advanced packaging and more advanced tools as well. Those advanced tools might also need vacuum. Often they do need vacuum, and often vacuum is, again, critical to enable those advanced tools, although those advanced packaging tools are not going to have the same vacuum intensity as the tools that you need in order to produce the wafer. We have the final testing and shipping. What is important, I think, for everyone to understand is that wafers drive our semiconductor vacuum business.
This is really important to understand that the wafer output and the WRV, the wafer and the tools that support the wafer output, those are the critical ones, and those are the tools that are going to need a lot of vacuum in their vacuum chambers. One of these wafers stays typically two to three months in a fab. It's being continuously built up, goes through all these phases: lethal, deposit, etch, some controls, some measuring, and keeps going. Basically, it's most interesting to understand then what do the market researchers expect when it comes down to this wafer output. We believe that the wafer demand now is set for a sustained expansion into 2030, where you see that the total wafer output is expected to grow with a CAGR of 7%.
Yes, the discussions around the hype of AI provide for bigger CAGRs on the high bandwidth memory type of chip on the leading edge with 32%, with 18%. What is also really important, I think, is to understand and fully acknowledge that the bulk of the market still sits with DRAM, NAND, and advanced and mature nodes. It is really important to acknowledge that we also see a positive CAGR in the future there, where we have seen that in the past years, the growth there was stagnant or even negative. If we can believe the market researchers, the wafer output, which is set to grow, will also drive, again, the vacuum needs in the next years. We have talked now about the CapEx, but also let's talk about OpEx. Let's talk about what it will do with service. This time, I will use a different metric.
The metric is millions of square inches output, which is similar as the wafer output in the previous slide. We correlate our service models and our service capacity needed and our service activities typically very much to this metric of millions of square inches produced in the year. We have a very strong correlation in place between our service business and this metric. Looking at the expectations of the market researchers, the yellow curve, the millions of square inches produced will steadily grow again into 2030 as the semiconductor end markets grow to $1 trillion. If we then apply that correlation into our service business, we see that our service business will become a very healthy business and a backbone of resilience for the vacuum technique business area in the future.
Having talked about CapEx and OpEx, let's see whether we're ready to capture that growth when it comes. In all divisions, we continuously work on our core products, and our core products are a wide portfolio that cover all kinds of applications within these divisional segments. We work on these core products through product lifecycle management. Continuously, these products are innovated and upgraded in order to have the market lead and provide these features that customer needs. One of these features is, of course, to add sustainability in our products. What is sustainability? Reduction of PFAS, lower energy consumption, and so on and so forth. On top, our products need to be digitally enabled. We have that all available, so when markets pull, we feel we're ready to capture that demand.
On top and beyond, we're continuously looking at expanding our total addressable markets as well so that we can grow both with tailwind from markets, but also when markets are slow. We do that through new products for new applications. There you see some of these new products for the new applications that we have been launching and are launching. I will come back to those in the coming slides. You will also see some of those in the afternoon's innovation stations. Let's talk a bit about our strategy for sustainable, profitable growth. For vacuum, we typically enable our customer that are disruptive technologies and disruptive ideas. We do that by being early in the design processes with our customers to enable their new technologies. We do that continuously. We do that massively in the width.
Today, I will illustrate that with four examples in four different technologies which are well known to most of you. The first illustration is our EUV alignment with leading EUV litho tool manufacturer since 10 years. When EUV got adapted into the market 10 years ago, it needed an exhaust system to go with it, communicating continuously with these EUV systems. We were there. After years of close co-engineering, we were able to capture that part of the market as well. We all know that these companies go fast and spend huge percentages of their revenue back into the R&D. We also need to go fast.
Just to give an example, to align and stay aligned with the roadmap of such a supplier in EUV lithography, you need continuous R&D efforts to continuously have your technology inserts ready when they bring a new generation in the market. Just to give a bit of a feel there, their tools over the past five years became so much more productive that within the same footprint, we had to increase our capacity to take the gases out of the EUV tools five times. That means that requires a tremendous amount of energy and engineering work in order to, within the same footprint, because we need to stay in the shadow of the clean room in the subfab to cope with the five times higher exhaust. Doing that, we also feel like we could go beyond it. We know that EUV uses tremendous amounts of hydrogen.
It's a tremendous hydrogen consumer. That hydrogen is typically disposed in atmosphere afterwards. We came with a concept as we are anyway pulling the hydrogen out of the tool to also purify the hydrogen and bring it back to the tool. Creating full circularity solutions for the semiconductor industry for the fabs. This starts to be well acknowledged and well accepted in the market. We do have first orders on these types of systems. In the afternoon's session, there will be quite a bit more on the technology shown to you. I will stick to this. Another one is space commercialization. Space commercialization increases the needs for satellites dramatically. Satellites need to be tested under space conditions. Space conditions are, of course, ultimate vacuum, but also very cold.
Our cryogenics play can get very hot as well when the satellite is passing by the sun. Our early adoption or early focus on developing full turnkey solutions for this segment has paid off well in the past. Later, I'll show you the CAGR in this sector that we have seen. Quantum computing is another very rapidly fast emerging market where they need vacuum and cryogenics to unlock the potential of quantum computing to create the qubits. These qubits, they can only exist in a very controlled environment with temperatures close to zero. We are well positioned to provide those controlled environments. We have been participating in many of these different quantum computing technologies, which are being worked on by many different incubators. Whatever the technology that will prevail, and there are different roads to the stabilized qubit, we are participating. We have the competence.
We have the knowledge. We have the data points. We are in close co-engineering with all these companies. When one of these technologies scales and becomes maybe the dominant technology, we will scale with them. Last but not least, I'll illustrate with an example in the industrial vacuum space, where through some acquisitions in China, with acquisitions that brought us vertical setups in the liquid ring pump markets, we started to understand that there is a huge potential in process markets to do mechanical vapor decompression. That means to take steam and other heat sources out of processes and reuse that heat and then cut cost and waste. Even through our acquisitions, we see that then we can open up further total addressable markets as we learn from our acquisitions as well. Local for local, we have been on that journey for quite some years.
With the current volatility in the market, we believe this is the right journey to be on. With vacuum technique, we have a truly global footprint with local competence and local leadership as well. I should say that as well. Product factories and service centers are in all major semiconductor markets. On the general vacuum side, we can always go fully synergetic with the other business areas and markets where the semiconductors are not as present. We have a good global footprint there to capture demand. I illustrated that this morning by talking about how strong we are in Asia and how we are able to capture the growth that is coming from the chip makers and the AI space. We're ready to scale when demand picks up in the U.S. We're building a dry pump factory total vertically setup for semiconductor industries.
This will be the first American dry pump manufacturing place that serves semiconductor industries. In Chandler, Arizona, we are very close to many of the chip makers. In Haverhill, we have installed a new factory with a lot of lab capacity in order to move forward on our journey with cryogenics after we acquired CTI out of Brooks Automation. In Qingdao, we have our model factory. We are localizing all our dry pumps over time in Qingdao. We are well on that road. I think we have progressed well. There is still a bit more space for some dry pumps from the scientific division to be localized as well. In Korea, Chennai, as well as in Asan, we have increased capacity, machining capacity, but also we have increased lab infrastructure.
As we know, there is a lot of the chip makers there, and we want to be able to innovate close to our customers. We have installed a lot of lab capability there, both on the EUV and the abatement technology side. In China, we did a joint venture with a company called ShareWay. This gave us immediate inroads into plasma abatement. Plasma abatement produced very economically in China, focused on tier two, tier three, and we see opportunities to take that product and also bring it into tier one through our premium brands whilst upgrading the product. In Wuhan, again, we're building a service center close to our customers, close to one of the main chip makers in China.
In Pune in India, we're also setting up more vertically in order to capture the Indian demand, both on general vacuum, but also on solar and the upcoming semi ambitions that the Indians have too. Our local for local progressing well. As a market leader, innovation is key. We innovate not only in the subfab, but also in the clean room. That's why we have two divisions. We have a semi equipment division operating in subfab, and we have a semi chamber solution division focusing on the typical dynamics in the clean room. Looking at the subfab, we have quite some innovations coming through. We're innovating our platform of dry pumps for better energy efficiency, lower footprint, digital capabilities, but also for harsh process applications, dust handling capacities, handling nasty gases. That's where we thrive. That's where we play at our best.
I'll come back in the next slide to where we are with that platform. I already talked about our continuous re-engineering and upgrading and innovating of our EUV systems to be perfectly aligned with the EUV litho tools and to remain in the shadow in the subfab to enable and power up these EUV litho tools. I just talked about ShareWay and our access now to economic plasma abatement. We talked already about the hydrogen recovery systems where we have first orders and where we're delivering. GenMade, we have a lot of it's a program. It's a full program. It might take a few years to do the full platform because there is a lot of different variants and different sizes being re-engineered. The first phase is hitting the market.
We have multiple units deployed across leading fabs to check, validate, and verify performances and to get these qualifications from these fabs for our product. We have also already secured first customer orders with this product. In the clean room, we have moved from 4K turbomolecular pumping on tool to 5K. This is really important because this enables the tool makers to make their tools within the same footprint more productive. With our 5K turbomolecular pump that has been qualified at several tool makers, we are enabling for the same footprint more productivity, more output of chip through the tools. We are making good strides in our ambition to become also a clean room valve manufacturer, isolation and transfer valves after the acquisition of pieces, which is going very well according to business case.
We're now looking into making the setup more global, making the production more lean as this is a small company and we can add our production lean principles there, and also adding design efforts in order to expand the portfolio of these valves. Of course, we're redesigning and upgrading our portfolio for cryogenic pumps and cryogenic compressors. On the compressor side, there has been a lot of progress. We bring a new helium compressor in the market that has a unique benefit to stabilize the tools better. Again, to bring quality to the tools, but also to reduce the power consumption for this helium compression significantly. Also here on the 5K, which you will be able to see later on in the innovation stations in the afternoon, we are qualified already at several tool makers with the 5K and we have first orders in.
On the industrial vacuum side, we have been expanding quite significantly in the process industries through acquiring liquid ring pump technologies. We acquired them mainly for vertical setups for economic production, having factories that could match cost with our competence and our market knowledge that we had already available through acquisitions of Edwards and others. Doing that, bringing that competence, that application know-how together with economic setups with factories that can produce at good cost in China. We also have one of these factories in the States. We have seen a very good CAGR of 45% in this space. I talked already about centralized vacuum and how after the acquisition of Edwards, we decided to fill one of these spaces in general manufacturing through centralized vacuum through the Atlas Copco channel, going highly in synergy with compressors. This delivered a CAGR of 27% over 10 years.
In scientific vacuum, we talked already about our positioning in the quantum space, where you see also thanks to an acquisition of Montana Instruments that operates mainly in the quantum research area, we have a CAGR of 45%. If one of these technologies starts to scale, then these markets can become very significant and very huge. I talked about leak detection, how we operate through acquisitions more vertically, how we operate more globally as through system capabilities. You can say, okay, this is a CAGR of 14%. The acquisitions, however, that we did to have a vertical setup with NOIE in China and to have a more horizontal setup on systems capabilities with ESA in Italy, they were done in the quarter four and quarter three and quarter four of last year. They do not yet fully come into that CAGR.
If we would have 25 in there, that would also be a very significant CAGR, in fact. We talked already about the capabilities for space simulation. Let's talk about service. We feel that service will become a strong backbone and a resilience factor in vacuum technique business area. You can see that the service divisions start to outgrow the pace of the growth of the equipment divisions. With the installed base that we have on the general vacuum side, but as well with the growth on wafer output in the fabs and the metric of MSI, which I have shown you on the OPEX slide, we feel that that service growth will continue at high pace. In service, we don't reinvent the wheel. I think we learned from our colleagues in compressor technique, the very successful compressor technique service division.
We take these concepts and we bring them also forward in vacuum. We move from reactive run-to-crash type of models at fabs and also in general vacuum. We provide value. We provide uptime. This customers really start to appreciate as our customers are also under pressure for OPEX. The more and the longer we can keep those tools in the semi fabs up and running, the more chip goes through and the bigger the output of a fab. We see a lot of good momentum there. We do measure in the different ranks of this service ladder. We see that our business continuously moves from the more reactive into the core service plans all the way into the advanced service.
Again, in the afternoon, there will be a dedicated session to illustrate how we do that, also using AI and using our unique capabilities of having end-to-end. We produce the pumps, we produce the abatement, we remanufacture the pumps and service. Therefore, we have so many data points and hands per tool, per process, we can start to work together with AI on prescriptive maintenance formulas. For that, you need to end-to-end. There we are uniquely positioned. Service is also very much an operational business. Just like any factory, it is about productive hours. It is about being lean. In service, we are on that transformation strategy in VTBA. We see service in VTBA as a business, and we see that there is still a lot of room for growth and a lot of room for efficiency as well.
We're working on different transformation programs in the past years in order to further professionalize and make our service operations more lean. M&A and adjacent growth. Vacuum technique, in fact, the business area came to exist as one big acquisition happened, which was the acquisition of Edwards in 2014. That then developed through organic growth and further acquisitions. The next big one was Leybold in the general vacuum space into a business area, which got reported in the annual reports. Since that time, we have been adding acquisitions both in general vacuum and in the semiconductor space. In general vacuum, we see that we still have room and headroom when it comes down to closing the portfolio, growing market share through portfolio additions, technology additions, factory additions being more vertical, but also going further global with distribution and commercial type of acquisitions of sales channel.
We will keep going with our efforts there, mapping out the targets and see what makes sense. Where we have higher market shares, like in the semiconductor industry, we might not be able to acquire anymore in the dry pump space, but there we are more looking into adjacencies. Prius was one of those where we start to move into the valve business. With Series, we moved into the vapor delivery system business with CTI and cryogenics. We are continuously on the look for small and maybe bigger acquisitions in these adjacencies. Vagner talked about the decentralized model, which of course we also operate in the vacuum technique business area. That decentralized model requires a certain profile of employees and leaders. We continuously support that decentralized model with intentional talent management, bringing the right profiles in through early careers, having them grow with our company.
Once they reach that leadership stage in their careers, also providing them with training on the leadership in a decentralized model. Also, and very important to note, we see that we want to operate through local leadership in China as well. For us, we operate fully equal dignity, and we have the local leadership in China to drive our local presence, but also drive our factories there and make sure that our supply chains are local too. In summary, as a market leader, we need to stay ahead of the game. We need to be early into the new technologies. We enable our customers that are critical technologies through our vacuum solutions. We will keep doing that. We believe that early involvement is a critical success factor.
We have strong focus on developing our service business, where we still see quite some upside in the coming years and the coming decade. We are continuously positioning ourselves into new emerging markets. I talked a bit about these four illustrations, the quantum, the space simulation, being early with EUV and matching the EUV and the vapor decompression. We operate through a truly global operational footprint. Local for local is one of our strategies, and we feel that's a good strategy to handle the volatility in the market. We keep, besides being ready to capture growth in the market, we also keep opening up the addressable market through adjacencies. Thank you. I think now we will go into a Q&A session. Yes.
Thank you, Koen. Now it's time for the Q&A. Please stay on stage. Bear with us a bit. Good. Yeah, you'll bring that.
For those of you who are with us via the web, you can write your written questions to us in the player, and we will bring them forward. For those here in the room, as always with Atlas Copco, we kindly ask you, please limit your questions to one at a time. Okay. The first question goes to Klaus Berglick, CT. Thank you.
Thank you for the presentations. I just want to come back to one of the first slides where you showed the growth during different periods. Obviously, you grew 8% CAGR since COVID, but you had a lot of abnormal growth drivers through the time, a lot of decarbonization. Before that, the growth was more in the sort of mid-single digit range. Is that when you look at sort of your 8% total, which is organic plus M&A, is that what you see ahead?
Can SEMIs potentially go back to 10% and push the organic higher? I just want to understand a little bit how you think about the composition between the industrial part and the VT part around the trend growth. Thank you.
I think one thing to remind on the recent years as well, we also have quite a lot of inflation. I think that definitely is part of that accelerated growth. We also have a super cycle in semiconductor, if I can call that a super cycle, Koen. It was a fantastic growth there. I think going forward, we are committed to the 8%. I think the semi market, we are quite confident. Koen can speak more about that. We are confident, like Koen showed, we have quite a lot of, let's say, indications from this research that this market will continue to grow.
We are quite confident. On the ratio, it's very difficult to see how the market will unfold. It's very difficult to say the vacuum is going to accelerate. They have a very good position in some new upcoming technology that looks quite promising. Also, the industrial vacuum can continue to grow quite nicely. It's difficult to say that vacuum will be higher or lower. I think over the cycle, we are committed to the 8%, and that's perhaps the main message.
Okay. Just a quick follow-up, if that's okay. No, because obviously 7% growth in terms of demand for wafer, and then you've just outlined a very, very promising growth outlook on service. Like when you sort of weigh the two equipment and service, it's pretty clear that it looks like it can come back to 10% in VT.
Yeah, it looks very promising ahead, at least when I sort of listen to your presentation.
We will see how that will unfold over time.
Thank you, Klaus. Next question goes to Daniela Costa. Please go ahead.
Good morning. It's a question for Vagner because it relates actually to compressor technique. You mentioned the globalization, and we saw just on the slides on these divisions how you fit for that. If we look at your biggest division on compressor technique, you still have a very core of manufacturing of the OE, basically in one location in Europe. Can you talk about sort of like your plans for really truly local for local there and how we should think about the impact of that in your margins and profitability and CapEx going forward?
That's a very good point.
Indeed, we have a large, our largest manufacturer footprint is in Belgium. It is also fair to say that what we have today in China in terms of footprint is almost as big as what we have in Belgium. Our new USHI campus, it is really, I would say, the same size. We have built quite a lot of R&D capabilities in China that we were lacking. We were centralized the R&D effort, especially the R part of R&D in Belgium. We believe we can also benefit from knowledge, existing knowledge in China from the general market, also from the speed we have in China. I think we have invested. We are quite happy with that investment because we can also, when Chinese companies go global, we can also benefit from that in different ways, like Chinese OEM going global.
We can supply compressors together with a strong brand. We are very well suited to support them globally. Chinese EPCs going globally and winning projects globally. We also sell to Chinese EPC in China that will deliver contracts all over the world. Our position there is good. Maybe your question is more about the U.S., I know. In the U.S., we have production footprint. What we are doing recently, and not because of tariffs, much decisions we took before, we are expanding our gas and process facility in Albany. There is an investment program going on there. That was already a decision we took in the past. We are expanding our expander facility in Santa Maria in California. We are increasing the production of turbo compressors in Houston. We have a facility there dedicated for oil and gas.
They will produce as well turbo compressors or package turbo compressors in the U.S. We have our production of oil injected compressors in Alabama in Bay Minette. We are scaling up that production facility, was dedicated for the Quincy brand that we have acquired, and we have good position in the U.S. We will also produce some Atlas Copco compressors there. We also are expanding our manufacturing capabilities in Rock Hill in a quite asset light way because we do not know what is going to happen with the tariffs over time. In a quite asset light way, we will also produce oil-free compressors in the Rock Hill area. It is a lot of movement, some investments we have decided before. Some we are doing. By the way, we are also increasing our logistic capabilities in Rock Hill, where we have a center of gravity.
We have quite a lot of people there and facilities. Also our logistics center, we will expand in the US because we will have more local products being purchased there, and then we need to increase our capabilities there. There's a lot of movement ongoing. We don't plan to do any machining centers or to build machining centers there. I think that we will keep centralized.
Okay. Thank you. We have actually one question from the web. I will read out loud. I think it's for you, Koen. It's from Rory Smith at OxCap. Thank you for the question. I just wanted to understand more about the GenMade. Can this product and vacuum products innovation more generally generate replacement demand outside of the wafer fab CapEx cycle, or is it product development necessary for Atlas Copco to benefit from the next wafer fab CapEx cycle?
Very clear, I think.
To the question, it's a yes. You can bring it back into the existing fabs. When you do so, that product needs to be qualified to a certain tool, right? You know that chip makers always want a qualification phase, three to six months on a specific process, on a specific tool. If we go through that effort, no doubt there is this upgrading opportunity, which we have been doing on some of our other products as well, like IXH for the Dunn Legacy products. This is an ongoing effort. This is a clear yes, we can do that independent from a next wafer. That opens that upgrade, but it does not go just easily. You need to first qualify at a certain process, at a certain tool.
The chip maker needs to be interested in reducing its OPEX, taking the benefits of lower energy consumption, and so on and so forth, all the benefits and the features that these new products bring. It is a yes if you go through the qualification procedures.
Sounds very good. Next question goes to Sebastian Kuhner. Please go ahead.
I have a question to Vagner as well. You mentioned the electrification trend as a mega trend. We saw this very impressively in the industrial technique business, where over the years, compressed air for handheld bolt fasteners was replaced by electric motors and drive. Of course, in industrial technique, you could play that game and maintain business. There are other industries, process technology, and discrete processing industries where a lot of compressed air is used today.
Now companies like ABB come along and say, you can also use a small electric motor with drive, and you don't need the compressed air anymore. How do you see the risk that other client groups are moving away from compressed air, which is quite cumbersome to handle in a factory and replace your business?
I think that question has been around for quite some time. It's not new for us. When I took over as Business Area President of Compressor Technique, that was the same connection because we lacked organic growth. The first connection was, oh, we see less and less compressed air. I think what we are doing in Compressor Technique, it's to find you have that trend. For instance, the electrification of tools we have absorbed in our result already for many years.
There are some trends, like you mentioned, but there are so many new applications as well that we find for compressed air that it's really, I'm sometimes even surprised with the things we can do. Examples on how we have changed the trend as well, on-site generation of nitrogen, just as an example. Before, nitrogen was only transporting bulk. You have the cryogenic process centralized and then transported, bottled, and transported by truck. We have developed this on-site generation. And why did we do? Because it's not only because of the generator business, nitrogen generator, because you need a compressor to feed. That created a new market for us that we didn't have. We supply oxygen generators, for instance, for fish farming. It's a market we didn't have before. Now we have the oxygen generator. To feed the oxygen generator on-site, you need a compressor.
We keep on developing those new applications. We have been talking about low pressure as well. I think in low pressure, if you see what is going on in terms of food production, a lot of fermentation applications are popping up that will create the need of different types of compressor, medium pressure, low pressure. I acknowledge that there are some trends, but what is the impact? I want to align that as well with the fact that we see another trend as well because the applications we have, the requirement to a higher quality of the air, it's really improving. The requirements for the quality of the air, it's higher now. That means you sell now the compressors, you sell a high-spec dryer, absorption dryer, you sell different types of filters.
The spec of the compressed air that you need to deliver, it's higher as well. It increases the potential of quality air product. There are different trends going on as well.
Thank you. Next question to Andreas Kosko.
Thank you. Andreas Kosko from BNP Paribas. A question for Henrik and the growth outlook. Because if we look at light vehicle production, the CAGR will be between 1 and 2%, I guess. At the same time, on the general industry side, we are seeing the transition from pneumatic tools to smart tools. I got the impression that the other part, the non-auto part, is expected to grow much faster than the auto part. I just wanted to hear if you share that view and what you expect for autos versus non-auto and how that mix change could impact the margins for industrial technique.
Yeah, that's a good question. Thank you. I think we see automotive business also being very attractive, good profit levels, and we see a good outlook there to really create more business. We are not, as I explained, so dependent on the production volume. Of course, we know it's a very separate business. For us to grow general industry faster, that I would agree with, that should be the ambition. We see, of course, a much bigger total potential in general industry. I think there we have now the product portfolio and the presence to go after that. It's not either or, it's really both, but agree with the ambition on general industry side.
Thank you, Henrik. Before we move to the next in the room, I have another one from the web, and it's from RiskMindy. He's asking this.
We have seen some volatility around vacuum technique margins over the years. How shall we think about normalized profitability over the long term given the secular growth themes you presented and the different services offering to CT?
Sure, and thanks for the question. I would say, first of all, in the past quarters and in the past two years, we have seen revenues coming down somewhat, whilst orders were flattened out now for two years. We are at this point where revenues and orders are kind of similar. This famous business, book to bill, B2B is around one at the moment. That's encouraging. We have done the necessary cost restructuring. We don't believe that orders will further drop with the current situation. You never know, of course, if something happens in the world.
Given what we know, we do not see orders dropping any further from the current levels. We have done that cost restructuring to make sure that our profitability is solid. Cost restructuring will still start to hit the results as time goes by. There are all kinds of effects when you do cost restructuring. There are local legislations. You have to talk in certain factories with unions and so on and so forth. The benefits of the cost restructuring spread themselves somewhat over time as well. Knowing that our book-to-bill is coming close to one, we do not see orders dropping any further. We see service business continuously growing and strengthening. We see some markets opening up again. I think we should be able to move back to historic profit levels. Of course, it will need a bit of time.
No promises on the immediate, let's say, perspective here. I think we are doing all the measures that it takes to bring that profit back to where it should be.
Greatly. Thank you. Next question goes to Anders Roslund at Pareto, please.
Yes, thank you. I have one question regarding acquisitions in industrial technique and specifically regarding the market area vision technologies. That market potential could be 10 times bigger or it's only your own limitations. What are the opportunities for you or the limitations when coming to acquisitions in that field?
Yes, no, but very good question. I agree. It's a big potential. If we take now our focus for vision, it's two business models. One is to combine it with assembly technologies, and the other part is this inline quality solutions.
I would say in both those areas, we have really big opportunities to grow organically. Also, to add specific acquisitions and technologies into that picture makes sense. We acquired one smaller company last year. I think it was that added to the portfolio. At the same time, we want to standardize and get the operational excellence into the current business. Definitely also M&A potential over time.
Thank you. Next question is James Moore, please.
Hi, it's James from Rothschild and KO Reb. One clarification and one question, if I could. Just to clarify to your answer to Daniela's question, in compressor technique, my sense is the degree of localization in the U.S. before the changes that you talk about is very low, with a lot coming out of Belgium. Could you put a number on that?
Could you say once you've done all the things you talked about, what the degree of localization would be? That's the first question. Secondly, on operational excellence, Vagner, you mentioned there are a number of the 24 divisions that aren't where you'd like them to be. Would it be possible to say how many are not in a growth mandate? Could you name-check them and say what the plan is? I'm really trying to scale what the margin potential to the group is from uplifting the remaining non-performing businesses to where you think they should be.
Good. Coming back to compressor technique, of course, we don't disclose that ratio. That is some of the plans that we had. Like in large compressors, we were producing in Germany.
To ship a 10 MW or 20 MW compressors from Germany to the U.S. was a bit of a challenge. We decided to do that a few years back to do that in the U.S. I think we are happy with that decision because now we will need, because of the tariffs, there will be an impact like we communicate during Q3 result, and we will mitigate already with the decision that we had in the past. We will accelerate, but everything is business case driven. I do not have a figure to show what is the ratio because we need to make sure we have a business case for that. It is not that now we have the tariff, then I can find the right supply chain because supply chain is a challenge in the U.S.
We are really working, ramping up our capabilities to source more from the region. You need to look at the region. If you look at the region, you need to look into the U.S. You need to look into Mexico. If you look into Mexico, you need to buy American steel. It is a complicated puzzle to come up with a figure. I think the direction, we are increasing our sourcing capabilities. We will increase production capabilities. The CapEx, to be honest, is quite limited. What we are going to do, because we do assembly lines. Assembly lines, I mean, the CapEx to do that is not significant. I think the major investment we do is mostly around the testing cells and so on and so forth. Perhaps too much detail, but it is good to exemplify. I think we are not concerned.
I think the concern, it's sourcing, and people could be a problem. We have our production footprint there. We know how to recruit. It's just a matter of scaling up what we have. We will ramp up one facility around Rock Hill. We have already a quite nice footprint in Rock Hill. We are well known in the region with partnerships. I'm less concerned about people, more concerned about sourcing to have the right business case to build in the U.S.
Okay, next question goes to Gustaf Schwerin at Svenska Handelsbanken.
T hank you, Daniel. I also have a question on machine vision. Go back to your spin in 2022. I think you showcased the integration with the industrial tools that you mentioned. I think back then, I mean, the value propositions are quite strong.
You were talking 10x value for the customer if they fully implemented this. Can you give us a sense of what success you've had in scaling this to non-automotive customers? Maybe give us a sense of the install base today versus three years ago and also to what extent you captured that value through price. Thank you.
That was quite a lot of questions. If we start, I think what I presented in 2022, I think is still very valid. I see no change of direction. We have been, I think, very successful in integrating the vision with the assembly technologies. You will see it in real life this afternoon. It becomes really clear how the vision complements and creates value together with the assembly technologies. It is really about standardization and making that happen.
On the direct business, these inline quality stations, I think we still have a quite low penetration. It's a market that is also about to be created. We are working with key customers both in automotive, but also a good balance outside automotive when it comes to creating this quality inspection solution. We will continue that route and also consider over time M&A to expand it. It's an exciting opportunity.
Next question, Magnus from Nordea, please.
Thank you, Magnus at Nordea here. I wanted to return to the service opportunity within the vacuum. I think it's about 30% of sales at the moment. Is there any way where this could approach the group average over the coming years? If it does, could it eventually become margin accretive to the business area?
Can you repeat the second part? Yes.
Could this eventually become margin accretive to the business area?
Do we expect that we will match over time the compressor technique kind of ratios? I do think so. As semiconductor keeps buying, and there are several plans as we go into this semiconductor industry, which is above $1 trillion in 2030. As we see that wafer output being needed, I think, sure, there is going to be quite a significant amount of growth there. On the general vacuum side, we have a lot of installed base where I feel we were not yet in the past years fully capturing that installed base because we were so focused on our market shares and equipment. I think now, because the economy is a bit softer, we have the time to put that focus into the service divisions, both on semi-site and general vacuum site.
Sure, I think ratio-wise, that will grow. Also, as we professionalize the service businesses, I do believe that there will be an accredited element to it. When it kicks in and how much it will be, it's hard to say. I do believe in general that that will become accredited.
If I can maybe add one comment to that, is that, of course, now we need to also be aware that the amount of equipment we are putting in the market is more relative compared to a couple of years ago when the growth was really steep. For the moment, it might look like a positive development. If there is a new wave of capital investment and much more products being put in the market, the ratio might not necessarily go up. The ratio as such is not a real target.
We also do not compare, let's say, in that sense between the business areas because the nature of the business is very different. The dynamics are quite different. It is not like we are trying to mimic the ratios kind of as a hard number. Of course, the fact that we have good service business is very important for the resilience of the group overall. In that sense, it is very important that we continue to work on the strategy as Koen explains.
Thanks for that clarification. We have a next question back over there, please.
It is Bruno Gianni from UBS. Talk a little bit about China just in more detail. Specifically around, I guess, VT and IT.
If we start with VT, how would the business be impacted if, say, we reach those external 2030 market projections, but the regional mix within shifts such that China with domestic companies, not multinational companies within China, but domestic companies take a greater than anticipated share? Is there an impact to the vacuum technique business as a result? For IT, if we do have more regionalization, I guess, so more Chinese OEM plants in Europe or elsewhere, if this were to have a negative impact on incumbent OEMs, what would the net impact be to your overall business for industrial technique? How does your market share differ between those incumbent OEMs and some of those Chinese OEMs?
I guess just broadly in China overall, because we started off with some more cautious commentary at the group level and as it related to compressor technique, you noted market challenges, a period of strong investment, now it's slightly weaker in certain end markets. Is the planning assumption that China is softer or more muted for a number of years, or is it when do you see a recovery within that broader market? Are there other factors at play? It's not just market dynamics, and it's perhaps other competitive factors that are weighing or something else that perhaps is worth speaking to.
I guess finally, because it was sort of quite cautious commentary, but in terms of on the other side of the coin, what are some of the opportunities that you see in China in terms of to offset some of those pressures or market challenges? What gets you excited?
To summarize, I think there's quite a few questions on that. Maybe Vagner can start to elaborate a little bit, and then there was a specific question to industrial technique, correct?
In fact, if I can start to talk about China in general, I think we see softer demand in general. Of course, there are growth pockets. That's true. You can see they are investing in the semi, Koen, you comment later. If I relate to compressor technique, some of the growth pockets are not as strong as before.
Going forward, it's difficult to see how the market is really going to unfold. I see a lot of potential still in terms of replacement market. Because if you consider, for instance, that they have been so focused on greenfields and the culture there was build, build, build, expand capacity. There are a lot of compressor rooms, and that could be applied to other technologies as well that we have, that there is a mismatch between capacity and demand that creates a lot of inefficiencies. We have seen that when they went through the consolidation phase of the steel smelters, for instance, that consolidation phase created a lot of opportunities for us to sell new different types of equipment fit for purpose. The winners, you know, the Chinese market is a lot of players.
You have part of the market where you have a lot of newcomers and a big battle and some winners. The winners of the market that will drive consolidation, they will think more about efficiency. I think we are very well positioned to support those customers to improve that efficiency as they become dominant players. We have seen that in the consolidation, like I said, of the steel market. We also get ready for that phase where replacement is going to be more important. We have even adapted our organization to create really a dedicated force to be able to address that because it is more about project management. Greenfields, it is a completely different process. Brownfield, you need to have project management skills. It takes time. You need to budget with the customer because maybe the customer does not have the budget. All that is now ongoing.
We are creating competence, also a good pipeline. I do see potential. There are pockets that will continue to grow. If they continue to grow in semi, we also sell a lot of compressors for the semi business as well. If you see more production of lithium-ion battery, we are positioned there. We are positioned in several market segments. Regardless of what is going to happen with the Chinese GDP, I mean, we all read a lot of news on the paper what is going to happen. Let's say it's 2% GDP to go. I'm not saying it's going to be 2%. I'm saying let's say 2%. It's going to be a significant market still where we will pay a lot of attention, we will present, we will continue to develop technology, and that is cross business areas.
We are committed to local production, local R&D, and now more and more IP development as well. There was one particular question to you, Henrik.
Taking the industrial technique part of the question, I mean, first of all, I would say it's not only about automotive in China. It's really also a lot of other industries for us. Number two, if we want to be successful with the Chinese companies building plants outside China, we have to start with being successful in China. If an automotive OEM builds a factory in Hungary, you need to first be successful, I think, in China normally. I think our presence, we started early. We have been successful so far in China. I think the picture I showed with how we can grow globally also applies to China.
We have something with most customers, some product line, but we can cross-sell, take more customer share, transform in a similar way. I think we are very committed to continue that journey. Koen, you wanted to add something?
I think I'll get some color on semi, which is, I think, a different speed in China than most traditional industries because of geopolitics. We have seen China investing a lot in memory, but those investments have stalled. Now they're looking into progressing on the logic side, and we see quite some investment coming through on the logic side. We also see that self-sufficiency happening. We see local toolmakers that need also on-tool vacuum pumps. There we're also collaborating, co-engineering with them. I think we're very happy with the customer shares that we have with the local toolmakers in China.
They do need our product, and that refers to what I have been seeing in my presentation. We're always early in the development phase, so they rely on us to make their tools also operational and make them work. When you're talking about the domestic competition, of course, in the easy applications, load lock and so on, you see that domestic competition coming through. We would call that tier three, tier two type of segments. Where tools are critical and productivity needs to be up there and the gases and the tools are naughty, they fall back on our products still. We still are very strong in that tier one space. To address your question, if you then look at 2030, do you expect that the domestic players will take a bigger share?
I don't feel like that will be happening at that pace in these more difficult applications. On the easier applications, it has happened already. How do we mitigate that by being local, by having our supply chains local? That's very much appreciated by chip makers. What have we done with, for example, the joint venture ShareWay? We now start to look into joint venturing acquisitions in order to also have that local profile and play in that tier two, tier three market as well with the chip makers. These are all activities ongoing. We feel that China for us is for sure an opportunity and not as much as a threat on our market share, I think. Just bottom line.
Thank you. Next question goes to you, Tim.
Hi, John from Deutsche Bank.
If we could refocus back on VT for a second, there's been quite a bit of localization and reallocation, I think, of strategic investment. Where are you on that journey? Have you chosen to invest early in certain areas? If we see recovery or the growth rates that you showed in those certain subsegments, are there some regions that will effectively pop, or will you need to invest and we need to consider that when we think about margin evolution?
I think in the past years, driven by that super semi cycle, I think we wanted to make sure that we could scale further, right? Supply chains were limiting. Also here and there on machining capabilities were limiting. I think we have addressed that. All the big infrastructure works, having factories, being able to scale up, those are addressed.
As from now, we're fully focused on R&D, engineering, and making sure that we are the market leaders in the semi space and also in the general vacuum space for that matter. We feel like operationally, we don't have a lot of investments to do anymore. There will always be upgrades or efficiency projects on the investment. Maybe a service center that has grown out of its capacity and we need to add the service center or expand the service center. We don't need major investments anymore for the next years, I think, on the infrastructure side.
Thank you. Next question is to Yuan.
Thank you, Yuan Heberg, Kepler Cheuvreux. Question for you, Koen. Very interesting to hear about the service offering in the VT and how that has progressed and you're adapting to the CT also.
You have previously talked about the margin difference between service and equipment being lower in the vacuum business compared with the other business areas. How have you seen sort of that difference developing now over the last couple of years?
Sure, sure. Basically, I think when you compare with compressor technique service, they have scaled over the past 30 years. They are a humongous size. Of course, they have the scaling effects as an efficiency factor there. If we look at our general vacuum service setup, it is very much aligned with what we see in compressor technique, but we are not yet that scaled. There are some inefficiency factors there as service mechanics that are trained for vacuum pumps specifically might not be fully loaded.
We're working on that lean and that operational mindset of making sure that we have productive hours as much as possible and making sure that we're lean. On the semi side, there, of course, our service model is quite a bit different than the compressor technique service model where we take pumps, we decontaminate them, we then kind of reassemble them. These are small factories. There you talk about a service division that also has quite some factories in there. Also there we see a lot of lean opportunities. One of these lean opportunities is to automate the decontamination as much as possible. It will always need some handling and operators, but we have been working on R&D and engineering concepts and service space as well to automate to make sure that we become more efficient.
A journey that we have been on and that starts to yield more and more as we go forward. Although for semi service, we will always be pushed and forced to be close to our customers, have these service technology centers close, they are infrastructures, and hence they can never be as lean as a compressor technique service setup, I think. That is upside possible for your question.
Just one comment, Daniela. Just to address what James Moore asked, I think Koen addressed somehow one of the areas where operational excellence we can improve. I think he just mentioned, I think they could, and Koen is addressing that. Some of the companies, if you take for instance, industrial flow, it is another one. We have these assets, now we create a division. Now we need to go to that phase where we standardize processes.
We also, should we have all the factories producing what they are producing today, or should we reshuffle to create operational efficiency? All that is ongoing as we speak. Those are the areas I believe that especially on the acquired companies that we can address.
Please. Alexander Jones, Bank of America. Bogdan, you talked about wanting to accelerate integration of small and mid-sized businesses once you acquire them. Concretely, can you tell us what you've changed in that acquisition process and what were the barriers historically that prevented you integrating those businesses quicker? Thank you.
Very good question. I think what we tried to do, we did quite a good exercise in terms of lessons learned in the acquired entities, what went good, what did not went well. Then we set up a training program dedicated for integration managers.
I think that we set up a couple of years ago. We started in compressor technique. Now we have a business area training program that in advance we identify potential integration managers, general managers of these future acquisitions, and we train them in a proactive way. When the opportunity comes, we have people with very good knowledge about what means to run an acquired entity and how to drive synergies. We also saw this was not enough because when you acquire an entity, today we pay a lot of attention for cybersecurity, for instance. We want to take over IT infrastructure as soon as possible because they become vulnerable when they are part of a group and not fully integrated. There are a lot of other aspects of the integration that we want to do, cultural aspects as soon as possible because we buy to hold.
We do not buy to trade later on. The cultural aspects are important. The integration manager was a bit too busy with those things, and the value creation synergies were left a bit for later. We have changed that. In compressor technique, we have built an organization to support the acquired entities to deliver on the synergies to the point that pre-acquisition, before closing, we go through all the synergy points and we identify what are the biggest synergies, what is required, do we need engineering resource, yes or no? If we need, we can allocate resources in our engineering hub in India, everything upfront. When we close the deal, we hit the ground, we start as soon as we can undo. We did not have the people to support, but now we allocated dedicated people because the number of acquisitions that we do is quite impressive.
I think vacuum is upgrading the acquisition as well, post-acquisition process, power technique as well. I think that's what the... I have benchmarked with best-in-class companies. It doesn't mean we were doing bad, not at all. If we believe in our book that we say there is always a better way, I believe there was a better way in this process and we have worked on it. I think we are quite happy now. Going back, we also have done benchmarks with companies with private equity as well, how they do on the value creation side. I think it was a nice exercise. I'm quite happy with the structure that we have built and the strategy we have now. We have to execute according to this new plan.
Okay, now we actually only have time for one last question, and that needs to be a bit short because then there's a lot of practical information, but that's for Anders Hedborg at ABG, please. Okay, thank you. I'll try to...
Just for Koen, could you help us set the expectations straight for the timing of these greenfield investments in the US? Because I think we were all a bit carried away when we saw TSMC going from one to six fabs, etc. You built up a plant. I don't think any of your competitors have done so. I expect, is this process already underway? Do you have already now visibility on your market share in populating these fabs? When do you think we could expect that to fall through in orders?
It's fully in our own control at this moment. The building is there.
The tools, the machining tools have arrived. They will be brought in. The timing from now onwards is fully in our own control. Of course, we want to make sure that once we take the machines up in production, that they will be working, right, in order to make sure we are efficient, we live up to our profit expectations. We can control when we kick in and when we produce from there. Most probably somewhere summer after summer of next year, we can do that. It is in our control. We could speed it up. We could delay it a little bit. Depends a little bit on how we want to move loading-wise of the factory.
I do not know if the question is about our factory or the factories that have been, the fabs that have been announced in the U.S. Oh, I'm sorry.
I thought you were talking about the Genesee factory. I misunderstood totally. Okay. The timing on the factories, it's always very speculative. It's very blurred. I think there are only a few in this world who really know. You have to wonder whether they know for sure or whether they will change their minds. For us, I think priority is to be agile, to make sure that we can ramp up when it happens, that we can ramp down when it's not happening, or that we can stay at level when it's not happening, and to secure that profitability at the card or other incomes. I think we're at this moment well set and vacuum to ramp up whenever something would happen. I'm not too concerned about that. When it happens, there are probably much other people who know better than I do.
Yeah. Okay. Thank you, Koen. With this, we will end this Q&A session. Thank you all. Thank you all in the room. Thank you for all the questions. For those of you joining us now via the web, we will leave you now. Thanks for joining today.