ABB LTD [ABB] Filings

20-F 1 abb20211231.htm 20-F abb20211231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM

20-F

☐

REGISTRATION STATEMENT

PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

December 31, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

☐

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report ____________________

Commission file number:

001-16429

_________________________________________

ABB Ltd

(Exact name of registrant as specified in its charter)

Switzerland

(Jurisdiction of incorporation or organization)

Affolternstrasse 44

CH-8050

Zurich

Switzerland

(Address of principal executive offices)

Richard A. Brown

Affolternstrasse 44

CH-8050

Zurich

Switzerland

Telephone: +

317-7111

Facsimile:

+41-43-317-7992

(Name, Telephone, E-mail and/or

Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b)

of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

American Depositary Shares

each representing one Registered Share

ABB

New York Stock Exchange

Registered Shares, par value CHF 0.12

N/A

New York Stock Exchange

_________________________________________

Securities registered or to be registered pursuant to Section 12(g)

of the Act: None.

Securities for which there is a reporting obligation pursuant

to Section 15(d) of the Act: None.

Indicate the number of outstanding shares of each of the

issuer’s classes of capital or common stock as of the close

of the period covered by the annual report:

1,958,344,400

Registered Shares

_________________________________________

Indicate by check mark if the registrant is a well-known seasoned

issuer, as defined in Rule 405 of the Securities

Act.

Yes

☒

⬜

If this report is an annual or transition report, indicate by

check mark if the registrant is not required to file reports pursuant to Secti

on 13 or 15(d) of the Securities

Exchange Act of 1934. Yes

☐

☒

Note – Checking the box above will not relieve any registrant required

to file reports pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934 from their

obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all

reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the

preceding 12 months (or for such shorter period that the registrant

was required to file such reports), and (2) has been subject

to such filing requirements for the past

90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted

electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T

(§232.405 of this chapter) during the preceding 12 months (or

for such shorter period that the registrant was required to submit

such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large

accelerated filer, an accelerated filer,

a non-accelerated filer, or an emerging

growth company. See definition of

“large accelerated filer,” “accelerated

filer,” and “emerging growth company”

in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Emerging growth company

☐

If an emerging growth company that prepares its

financial statements in accordance with U.S. GAAP,

indicate by check mark if the registrant has elected not

to use the

extended transition period for complying with any new or

revised financial accounting standards† provided pursuant to Section

13(a) of the Exchange Act.

☐

† The term “new or revised financial accounting standard” refers

to any update issued by the Financial Accounting Standards

Board to its Accounting Standards

Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a

report on and attestation to its management’s

assessment of the effectiveness of its internal control over

financial reporting under Section 404(b) of the Sarbanes-Oxley Act

(15 U.S.C. 7262(b)) by the registered public accounting

firm that prepared or issued its audit report.

☒

Indicate by check mark which basis of accounting the registrant

has used to prepare the financial statements included in this

filing:

U.S. GAAP

☒

International Financial Reporting Standards as issued

by the International Accounting Standards Board

☐

Other

☐

If “Other” has been checked in response to the previous question,

indicate by check mark which financial statement item the registrant

has elected to follow.

Item 17

☐

Item 18

☐

If this is an annual report, indicate by check mark whether the registrant

is a shell company (as defined in Rule 12b-2 of the Exchange

Act). Yes

☐

☒

__________________________________________________

Listed on the New York

Stock Exchange not for trading or quotation purposes,

but only in connection with the registration of American Depositary Shares

pursuant to

the requirements of the Securities and Exchange Commission.

(i)

TABLE OF CONTENTS

Page

PART I

Item 1.

Identity of Directors, Senior Management and Advisers

Item 2.

Offer Statistics and Expected Timetable

Item 3.

Key Information

Item 4.

Information on the Company

Item 4A.

Unresolved Staff Comments

Item 5.

Operating and

Financial Review and Prospects

Item 6.

Directors, Senior Management and Employees

Item 7.

Major Shareholders and Related Party Transactions

135

Item 8.

Financial Information

136

Item 9.

The Offer and Listing

137

Item 10.

Additional Information

138

Item 11.

Quantitative and Qualitative Disclosures About Market Risk

147

Item 12.

Description of Securities Other than Equity Securities

149

PART II

150

Item 13.

Defaults, Dividend Arrearages and Delinquencies

150

Item 14.

Material Modifications to the Rights of Security Holders

and Use of Proceeds

150

Item 15.

Controls and Procedures

150

Item 16.

[Reserved]

151

Item 16A.

Audit Committee Financial Expert

151

Item 16B.

Code of Ethics

151

Item 16C.

Principal Accountant Fees and Services

151

Item 16D.

Exemptions from the Listing Standards for Audit Committees

152

Item 16E.

Purchase of Equity Securities by Issuer and Affiliated

Purchasers

152

Item 16F.

Change in Registrant’s Certifying Accountant

152

Item 16G.

Corporate Governance

153

Item 16H.

Mine Safety Disclosure

153

Item 16I.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

153

PART III

154

Item 17.

Financial Statements

154

Item 18.

Financial Statements

154

Item 19.

Exhibits

155

Introduction

ABB Ltd is a corporation organized under the laws of

Switzerland. In this Annual Report on Form 20-F

(Annual Report),

“the ABB Group,” “the Group,” “ABB,”

the “Company,”

“we,” “our” and “us” refer to ABB Ltd

and its consolidated subsidiaries (unless the context otherwise requires).

We also use these terms to refer to

ABB Asea Brown Boveri Ltd and its subsidiaries prior to the

establishment

of ABB Ltd as the holding

company for the entire ABB Group in 1999, as described in this

Annual Report under “Item 4. Information on

the Company—Introduction—History of the ABB Group”. Our American Depositary

Shares (each

representing one registered share of ABB Ltd) are referred

to as “ADSs”. The registered shares of ABB Ltd

are referred to as “shares”. Our principal corporate offices

are located at Affolternstrasse 44, CH-8050 Zurich,

Switzerland, telephone number +41-43-317-7111.

Our internet address is www.abb.com

or global.abb. The

information contained on or accessible from our Web

site is not incorporated into this annual report, and

you

should not consider it to be a part of this annual report.

Financial and other information

The Consolidated Financial Statements of ABB Ltd, including

the Notes thereto, as of December 31, 2021

and 2020,

and for each of the years in the three-year period

ended December 31, 2021, (our Consolidated

Financial Statements) have been prepared in accordance

with United States generally accepted accounting

principles (U.S. GAAP).

In this Annual Report: (i) “$,” “U.S. dollar” and “USD”

refer to the lawful currency of the United States

America; (ii) “CHF” and “Swiss franc” refer to the lawful currency

of Switzerland; (iii) “EUR” and “euro” refer to

the lawful currency of the participating member states of the

European Economic and Monetary Union

(Eurozone); (iv) “SEK” and “Swedish krona” refer to the

lawful currency of Sweden; (v) “Chinese renminbi”

and “CNY”

refer to the lawful currency of the People’s

Republic of China; and (vi) “INR” and “Indian Rupee”

refer to the lawful currency of India.

Except as otherwise stated, all monetary amounts in this

Annual Report are presented in U.S. dollars. Where

specifically indicated, amounts in Swiss francs have been translated

into U.S. dollars. These translations are

provided for convenience only,

and they are not representations that the Swiss

franc could be converted into

U.S. dollars at the rate indicated. The twelve o’clock buying

rate in the City of New York

for cable transfers as

certified for customs purposes by the Federal Reserve

Bank of New York

for Swiss francs on December 30,

2021, was $1.00 = CHF 0.9146.

The twelve o’clock buying rate for Swiss francs

on February 18, 2022,

was

$1.00 = CHF 0.9210.

Cautionary Note Regarding Forward-Looking Statements

This Annual Report includes forward-looking statements

within the meaning of the United States Private

Securities Litigation Reform Act of 1995. We

intend such forward-looking statements to be covered by the

safe harbor provisions for forward-looking statements

contained in Section 27A of the Securities Act of 1933,

as amended, and Section 21E of the Securities Exchange

Act of 1934, as amended (Exchange Act). These

forward-looking statements can be identified by the use of forward

-looking terminology,

including the terms

“believes,” “estimates,” “anticipates,”

“expects,”

“intends,”

“may,”

“will,” or “should” or, in each case,

their

negative, or other variations or comparable terminology.

These forward-looking statements include all matters

that are not historical facts. They appear in a number of

places throughout this Annual Report and include

statements regarding our intentions, beliefs or current

expectations concerning, among other things, our

results of operations, financial condition, liquidity,

prospects, growth, dispositions, strategies and the

countries and industries in which we operate.

These forward looking statements include, but are not limited to,

statements about our financial condition and

performance, operating results, liquidity and our ability

to fund our business operations and initiatives, the

impact of the COVID-19 pandemic on our business, capital

expenditure and debt service obligations, plans

regarding our capital structure, ability to take advantage

of market opportunities and drive growth, our

products and service offerings and their anticipated

performance and impact across various industries and

consumer segments, anticipated benefits to the shareholders,

planned divestments, acquisitions and

integration, and related synergies and other benefits, investment

and risk management strategies, volatility in

the credit markets, oil prices, foreign currency exchange rates

and other market conditions, trends and

opportunities, industry trends and expectations, changing consumer

behavior and demands, our ability to

respond to changing business and economic conditions,

our comparative advantages, our commitments and

contingencies, availability of raw materials, and other plans,

goals, strategies, priorities and initiatives related

to our business, including our brand management initiative,

the implementation of ABB Way,

and cost-saving

measures, as well as, the following:

•

statements in “Item 3. Key Information—Risk Factors”,

•

statements in “Item 5. Operating and Financial Review

and Prospects” regarding our

management objectives, including our outlook, as well

as trends in results, prices, volumes,

operations, margins and overall market trends,

•

statements in “Item 8. Financial Information—Legal Proceedings”

regarding the outcome of

certain legal and compliance matters, and

•

statements in “Item 8. Financial Information—Dividends

and Dividend Policy” regarding our policy

on future dividend payments.

By their nature, forward-looking statements involve risks

and uncertainties because they relate to events and

depend on circumstances that may or may not occur in

the future. We caution you that forward-looking

statements are not guarantees of future performance and that

our actual results of operations, financial

condition and liquidity,

and the development of the countries and industries in which

we operate, may differ

materially from those described in or suggested by the forward-looking

statements contained in this Annual

Report. In addition, even if our results of operations, financial condition

and liquidity,

and the development of

the countries and industries in which we operate, are consistent

with the forward-looking statements

contained in this Annual Report, those results or developments

may not be indicative of results or

developments in subsequent periods. Important factors

that could cause actual results to differ materially

from our expectations are contained in cautionary statements

in this Annual Report and include, without

limitation, the following:

Business, economic and industry risks

•

Our business is exposed to risks associated with the COVID-19

pandemic.

•

Our business is exposed to risks associated with the volatile

global economic environment and

political conditions.

•

Our operations in emerging markets expose us to risks

associated with conditions in those

markets.

•

We may encounter difficulty in managing

our business due to the global nature of our operations.

•

We operate in very competitive and rapidly changing

markets and could be adversely affected

we fail to keep pace with technological changes.

•

Industry consolidation could result in more powerful competitors

and fewer customers.

•

Increases in costs or limitation of supplies of raw materials

may adversely affect our financial

performance.

•

Our multi-national operations expose us to the risk of fluctuation

in currency exchange rates.

•

The uncertainties relating to the United Kingdom’s

new relationship with the European Union and

its potential impact on the relationship between Switzer

land and the European Union, may have

a negative effect on cross-border trade and our business.

Operational risks

•

Increased information technology (IT) security threats

and more sophisticated cyber

‑

attacks

could pose a risk to our systems, networks, products, solutions

and services.

•

Our business strategy includes making strategic divestitures. There

can be no assurance that

any divestitures will provide business benefit.

•

Anticipated benefits of historical, existing and potential

future mergers, acquisitions, joint

ventures or strategic alliances may not be realized.

•

There is no guarantee that our ongoing efforts to

reduce costs will be successful.

•

Illegal behavior by any of our employees or agents could have

a material adverse impact on our

consolidated operating results, cash flows, and financial position

as well as on our reputation and

our ability to do business.

•

We may be the subject of product liability claims.

•

Undertaking long

‑

term, technically complex projects or projects that are

dependent upon factors

not wholly within our control could adversely affect

our profitability and future prospects.

•

If we are unable to obtain performance and other guarantees

from financial institutions, we may

be prevented from bidding on, or obtaining, some contracts,

or our costs with respect to such

contracts could be higher.

•

Our hedging activities may not protect us against the consequences

of significant fluctuations in

exchange rates, interest rates or commodity prices on

our earnings and cash flows.

Legal and regulatory risks

•

An inability to protect our intellectual property rights or actual

or alleged infringement of a third

party’s intellectual property rights could adversely

affect our business.

•

Failure to comply with evolving data privacy and data

protection laws and regulations or to

otherwise protect personal data, may adversely impact

our business and financial results.

•

Examinations by tax authorities and changes in tax regulations

could result in lower earnings and

cash flows.

•

We are subject to environmental laws and regulations

in the countries in which we operate. We

incur costs to comply with such regulations, and our ongoing operations

may expose us to

environmental liabilities.

•

We could be affected by future laws

or regulations enacted to address climate change concerns

as well as the physical effects of climate change.

General risk factors

•

If we are unable to attract and retain qualified management

and personnel then our business

may be adversely affected.

•

Our business subjects us to considerable potential exposure to

litigation and legal claims and

could be materially adversely affected if we incur

legal liability.

We urge you to read the other important factors

set forth under sections of this Annual Report entitled

“Item 3. Key Information—Risk Factors,”

“Item 4. Information on the Company”

and “Item 5. Operating and

Financial Review and Prospects”

for a more complete discussion of the important factors that could

affect our

future performance and the countries and industries in

which we operate. In light of these risks, uncertainties

and assumptions, the forward-looking circumstances described

in this Annual Report and the assumptions

underlying them may not occur.

Except as required by law or applicable stock exchange rules

or regulations, we undertake no obligation to

update or revise publicly any forward-looking statement,

whether as a result of new information, future events

or otherwise. All subsequent written and oral forward-looking

statements attributable to us or to persons

acting on our behalf are expressly qualified in their entirety

by the cautionary statements referred to above

and contained elsewhere in this Annual Report.

PART I

Item 1.

Identity of Directors, Senior Management and Advisers

Not applicable

Item 2.

Offer Statistics and Expected Timetable

Not applicable

Item 3.

Key Information

—

Risk factors

You should

carefully consider all of the information set forth in

this Annual Report and the following

description of risks and uncertainties that exist or that

we currently believe may exist. Our business, financial

condition or results of operations could be adversely affected

by any of these risks. Additional risks of which

we are unaware or that we currently deem immaterial may

also impair our business operations. This Annual

Report also contains forward-looking statements that involve risks

and uncertainties. Our results could differ

materially from those anticipated in these forward-looking statements

as a result of certain factors, including

those described below and elsewhere in this Annual Report.

See “Cautionary Note Regarding

Forward-Looking Statements”.

—

Business,

economic and industry risks

Our business is exposed to risks associated with

the COVID-19 pandemic.

The novel coronavirus (COVID-19) pandemic has had,

and continues to have, significant impacts on the

global economy including on demand for products, operational

predictability, the

movement of people and

products across borders, supply chains (including the

supply of semiconductors) and the cost of capital.

Given the global nature of our business, COVID-19

has had an adverse impact on our revenues and

operating margins in all of our businesses and is expected to continue

to have an impact at least in the short

term. In particular, our Robotics

and Process Industries businesses as well as our

service businesses have

been materially impacted. The ultimate extent to which the

pandemic impacts our business, liquidity,

results

of operations and financial condition will depend on future developments,

which are highly uncertain and

cannot be predicted with confidence, including the availability

and effectiveness of vaccines, future mutations

of the COVID-19 virus and any resulting impact on the

effectiveness of vaccines, the duration and

extent of

the pandemic and waves of infection, travel restrictions

and social distancing, the duration and extent of

business closures and business disruptions and the effectiveness

of actions taken to contain, treat and

prevent the disease. If we or our customers experience

prolonged shutdowns or other business disruptions,

our business, liquidity,

results of operations and financial condition may

be materially adversely affected and

our ability to access the capital markets may be limited.

Our business is exposed to risks associated with

the volatile global economic environment and

political conditions.

Adverse changes in economic or political conditions,

particularly in locations where our customers or

operations are located, as well as concerns about global trade,

global health crises, developments in energy

prices, and terrorist activities, could have a material adverse

effect on our business, financial condition,

results of operations and liquidity and may adversely impact

the demand for our products and services.

These and other factors may prevent our customers and

suppliers from obtaining the financing required to

pursue their business activities as planned, which may

force them to modify,

delay or cancel plans to

purchase or supply our products or services. In addition, if

our customers do not generate sufficient revenue,

or fail to timely obtain access to the capital markets, they

may not be able to pay,

or may delay payment of,

the amounts they owe us. Customers with liquidity issues

have delayed payments of amounts they owe us

and this had lead and may lead to additional bad debt expense for

us, which may adversely affect our results

of operations and cash flows. We are also subject

to the risk that the counterparties to our credit agreements

and hedging transactions may go bankrupt if they suffer

catastrophic demand on their liquidity that prevents

them from fulfilling their contractual obligations to us.

Our business environment is influenced also by numerous other

economic or political uncertainties which

may affect the global economy and the international

capital markets. In periods of slow economic growth

decline, our customers are more likely to buy less of our

products and services, and as a result we are more

likely to experience decreased revenues. Our businesses

are affected by the level of investments and

demand in the markets that we serve, principally utilities,

industry and transport & infrastructure. At various

times during the last several years, we also have experienced,

and may experience in the future, gross

margin declines in certain businesses, reflecting the effect

of factors such as competitive pricing pressures,

inventory write-downs, charges associated with the cancellation

of planned expansion and increases in

component and manufacturing costs resulting from higher

labor and material costs borne by our

manufacturers and suppliers that, as a result of competitive

pricing pressures or other factors, we are unable

to pass on to our customers. Economic downturns also

may lead to restructuring actions and associated

expenses. Uncertainty about future economic conditions

makes it difficult for us to forecast operating results

and to make decisions about future investments.

In addition, we are subject to the risks that our business

operations in or with certain countries may be

adversely affected by trade tariffs, trade

or economic sanctions or other restrictions imposed on these

countries, including the trade tensions between the United

States and China in recent years. These could

lead to increased costs for us or for our customers or limit

our ability to do business in or with certain

countries. In addition, actual or potential investors that object

to certain of these business operations may

adversely affect the price of our shares by disposing

or deciding not to purchase our shares. These countries

may from time to time include countries that are identified

by the United States as state sponsors of terrorism.

If any countries where or with whom we do business are

subject to such sanctions or restrictions, our

business, consolidated operating results, financial condition

and the trading price of our shares may be

adversely affected. In 2021, our total revenues

from business with countries identified by the U.S.

government as state sponsors of terrorism represented

significantly less than 1 percent of our total revenues.

Based on the amount of revenues and other relevant quantitative

and qualitative factors, we have determined

that our business in 2021 with countries identified by

the U.S. government as state sponsors of terrorism was

not material.

Our operations in emerging markets expose us to risks associated

with conditions in those markets.

A significant amount of our operations is conducted in the

emerging markets in South America, Asia, and the

Middle East and Africa. In 2021, approximately 40 percent of

our consolidated revenues were generated from

these emerging markets. Operations in emerging markets

can present risks that are not encountered in

countries with well-established economic and political systems,

including:

•

economic instability,

which could make it difficult for us to anticipate

future business conditions in

these markets, cause delays in the placement of orders

for projects that we have been awarded

and subject us to volatile geographic markets,

•

political or social instability,

which could make our customers less willing to make

cross-border

investments in such regions and could complicate our

dealings with governments regarding

permits or other regulatory matters, local businesses and workforces,

•

boycotts and embargoes that may be imposed by the international

community on countries in

which we do business or where we seek to do business

could adversely affect the ability of our

operations in those countries to obtain the materials

necessary to fulfill contracts and our ability

to pursue business or establish operations in those countries,

•

foreign state takeovers of our and our customers’ facilities,

•

significant fluctuations in interest rates and currency exchange

rates,

•

the imposition of unexpected taxes or other payments

on our revenues in these markets,

•

our inability to obtain financing and/or insurance coverage

from export credit agencies, and

•

exchange controls and other restrictions by foreign governments.

Additionally, political

and social instability resulting from increased violence

in certain countries in which we

do business has raised concerns about the safety of our

personnel. These concerns may hinder our ability to

send personnel abroad and to hire and retain local personnel.

Such concerns may require us to increase

security for personnel traveling to and working in affected

countries or to restrict or wind-down operations

such countries, which may negatively impact us and result

in higher costs and inefficiencies.

Consequently, our

exposure to the conditions in or affecting

emerging markets may adversely affect our

business, financial condition, results of operations and liquidity.

We may encounter difficulty in managing our

business due to the global nature of our operations.

We operate in approximately 100 countries around

the world and, as of December 31, 2021, employed

about

105,000 people, of which approximately 48 percent were

located in the Europe region, approximately

28 percent in the Asia, Middle East and Africa region and

approximately 24 percent in the Americas region.

manage our day-to-day operations, we must deal with cultural

and language barriers and assimilate

different business practices. Due to our global

nature, we deal with a range of legal and regulatory systems

some of which are less developed and less well-enforced

than others. The laws and regulations to which we

are subject can change rapidly and in unexpected directions. Currency

and other local regulatory limitations

related to the transfer of funds exist in a number of countries where

we operate, including: China, India, the

Russian Federation, South Africa and Turkey.

All of this may impact our ability to protect our contractual,

intellectual property and other legal rights. In addition,

we are required to create compensation programs,

employment policies and other administrative programs

that comply with the laws of multiple countries. We

also must communicate, monitor and uphold group-wide

standards and directives across our global network,

including in relation to our suppliers, subcontractors and

other relevant stakeholders. Our failure to manage

successfully our geographically diverse operations could

impair our ability to react quickly to changing

business and market conditions and to enforce compliance

with group-wide standards and procedures.

We operate in very competitive and rapidly changing

markets and could be adversely affected if we

fail to keep pace with technological changes.

We operate in very competitive and rapidly changi

ng markets where we regularly need to innovate and

develop products, systems, services and solutions that

address the business challenges and needs of our

customers. The nature of these challenges varies across

the geographic markets and product areas that we

serve. The markets for our products and services are characterized

by evolving industry standards, which

may require us to modify our products and systems. The continual

development of advanced technologies for

new products and product enhancements is an important way

in which we remain competitive and maintain

acceptable pricing levels. If we fail to keep pace with technological

changes in the industrial sectors that we

serve, we may experience lower revenues, price erosion and

lower margins.

Our primary competitors are sophisticated companies with significant

resources that may develop products

and services that are superior to our products and services or

may adapt more quickly than we do to new

technologies, industry changes or evolving customer requirements.

We are also facing increased competition

from low cost competitors in emerging markets, which may give

rise to increased pressure to reduce our

prices. Our failure to anticipate or respond quickly to technological

developments or customer requirements

could adversely affect our business, results of operations,

financial condition and liquidity.

Industry consolidation could result in more powerful

competitors and fewer customers.

Competitors in the industries in which we operate are consolidating.

In particular, the automation

industry is

undergoing consolidation that is reducing the number but

increasing the size of companies that compete with

us. As our competitors consolidate, they likely will increase

their market share, gain economies of scale that

enhance their ability to compete with us and/or acquire

additional products and technologies that could

displace our product offerings.

Our customer base also is undergoing consolidation. Consolidation

within our customers’ industries (such as

the marine and cruise industry,

automotive, aluminum, steel, pulp and paper and pharmaceutical

industries

and the oil and gas industry) could affect our customers

and their relationships with us. If one of our

competitors’ customers acquires any of our customers, we may

lose that business. Additionally,

as our

customers become larger and more concentrated, they

could exert pricing pressure on all suppliers, including

us. If we were to lose market share or customers or face

pricing pressure due to consolidation of our

customers, our results of operations

and financial condition could be adversely affected.

Increases in costs or limitation of supplies of raw

materials may adversely affect our financial

performance.

We purchase large amounts of commodity-based raw

materials, including steel, copper,

aluminum and oil.

Prevailing prices for such commodities are subject to fluctuations

due to changes in supply and demand and

a variety of additional factors beyond our control, such

as global political and economic conditions.

Historically, prices

for some of these raw materials have been volatile

and unpredictable, and such volatility is

expected to continue. Therefore, commodity price changes may

result in unexpected increases in raw

material costs, and we may be unable to increase our

prices to offset these increased costs without suffering

reduced volumes, revenues or operating income. We

do not fully hedge against changes in commodity prices

and our hedging procedures may not work as planned.

We depend on third parties to supply raw materials

and other components and may not be able to obtain

sufficient quantities of these materials and components,

which could limit our ability to manufacture products

on a timely basis and could harm our profitability.

The risk that we may not be able to obtain raw

materials or

other components is increased by the COVID-19 pandemic.

For some raw materials and components, we

rely on a single supplier or a small number of suppliers.

If one of these suppliers were unable to provide

with a raw material or component we need, our ability to

manufacture some of our products could be

adversely affected until we are able to establish a

new supply arrangement. We may be unable

to find a

sufficient alternative supply channel in a reasonable

time period or on commercially reasonable terms,

if at

all.

In 2021, global supply chain constraints caused us to

experience some delays in supplier deliveries and

product shortages for various categories such as semiconductors

and certain other raw materials as well as

constraints in the transportation of inbound supplies. We

took steps to mitigate supply chain shortages,

including building up buffer stocks, approving new

suppliers and redesigning certain products. Although we

were able to mitigate some disruptions and support our

business growth, we have experienced some delays

in delivering to certain of our customers and cannot assure

you that our mitigation efforts will be sufficient

overcome these supply chain constraints if these continue

or worsen in 2022.

If our suppliers are unable to deliver sufficient

quantities of materials on a timely basis, the manufacture and

sale of our products may be disrupted, we may be required

to assume liability under our agreements with

customers and our sales and profitability could be materially

adversely affected.

Our multi-national operations expose us to the risk

of fluctuations in currency exchange rates.

Currency exchange rate fluctuations have had, and could continue

to have, a material impact on our

operating results, the comparability of our results between

periods, the value of assets or liabilities as

recorded on our Consolidated Balance Sheet and the price of

our securities. Volatility in exchange

rates

makes it harder to predict exchange rates and perform

accurate financial planning. Changes in exchange

rates can unpredictably and adversely affect

our consolidated operating results and could result

in exchange

losses.

Currency Translation Risk.

The results of operations and financial position of

most of our non-U.S.

companies are initially recorded in the currency of the country

in which each such company resides, which

we call “local currency”. That financial information is then

translated into U.S. dollars at the applicable

exchange rates for inclusion in our Consolidated Financial

Statements. The exchange rates between local

currencies and the U.S. dollar can fluctuate substantially,

which could have a significant translation effect

our reported consolidated results of operations and financial

position.

Increases and decreases in the value of the U.S. dollar versus

local currencies will affect the reported value

of our local currency assets, liabilities, revenues and expenses

in our Consolidated Financial Statements,

even if the value of these items has not changed in local currency

terms. These translations could

significantly and adversely affect our results of operations

and financial position from period to period.

Currency Transaction Risk.

Currency risk exposure also affects our operations

when our sales are

denominated in currencies that are different from

those in which our manufacturing or sourcing costs are

incurred. In this case, if, after the parties agree on a price, the

value of the currency in which the price is to be

paid were to weaken relative to the currency in which

we incur manufacturing or sourcing costs, there would

be a negative impact on the profit margin for any such

transaction. This transaction risk may exist regardless

of whether there is also a currency translation risk as described

above.

Currency exchange rate fluctuations in those currencies

in which we incur our principal manufacturing

expenses or sourcing costs may adversely affect

our ability to compete with companies whose costs are

incurred in other currencies. If our principal expense currencies

appreciate in value against such other

currencies, our competitive position may be weakened.

The uncertainties relating to the United Kingdom’s

new relationship with the European Union and its

potential impact on the relationship between Switzerland

and the European Union, may have a

negative effect on cross-border trade and our business.

The United Kingdom has withdrawn from the European

Union and has negotiated the terms of such

departure (the UK-EU Trade and Cooperation

Agreement or TCA). The TCA is subject to formal approval

the European Parliament and the Council of the European Union

before it comes into effect and has been

applied provisionally since January 1, 2021. Because the agreement

merely sets forth a framework in many

respects and will require complex additional bilateral negotiations

between the United Kingdom and the

European Union as both parties continue to work on the

rules for implementation, significant political and

economic uncertainty remains and this has had and may

continue to have a material effect on cross-border

trade with the United Kingdom and with the European

Union. Lack of clarity about future United Kingdom

laws and regulations, potentially divergent national laws,

the possibility of increased regulatory complexities,

or future developments in the European Union could depress

economic activity,

reduce demand for our

products and services, restrict our access to capital, and

diminish or eliminate barrier-free access between

the United Kingdom and other European Union member

states or among the European economic area

overall. Furthermore, the TCA may influence discussions

on open trade and political matters between

Switzerland and the European Union. Any of these factors

could have an adverse effect on our business,

financial condition and results of operations.

—

Operational risks

Increased information technology (IT) security threats and

more sophisticated cyber-attacks could

pose a risk to our systems, networks, products, solutions

and services.

We have observed a global increase in IT security

threats and more sophisticated cyber-attacks, which pose

a risk to the security of systems and networks and the

confidentiality, availability

and integrity of data stored

and transmitted on those systems and networks. Despite our efforts,

we have experienced, and may in the

future experience, cyber-attacks against us and we have incurred

and will continue to incur substantial costs

to reduce the cyber risks to our systems, networks,

products, solutions and services. Similarly,

we have

observed a continued increase in attacks generally against

industrial control systems as well as against our

customers and the systems we supply

to them, which pose a risk to the security of those systems

and

networks. Future attacks could potentially lead to the compromising

of confidential information, disruption of

our business, improper use or downtime of our systems

and networks or those we supplied to our customers,

manipulation, corruption,

inaccessibility and destruction of data, defective products

or services, production

downtimes and supply shortages.

Such attacks may also expose us to loss of business, claims

or regulatory

action. Any such impact in turn could adversely affect

our reputation, competitiveness and results of

operations. Our insurance coverage may not be adequate

to cover all the costs related to cyber security

attacks or disruptions

resulting from such events. Due to the nature of these security

threats, the nature and

scope of the impact of any future incident cannot be predicted.

Our business strategy includes

making strategic divestitures. There can be

no assurance that any

divestitures will provide business benefit.

Our strategy includes divesting certain businesses. The divestiture

of an existing business could reduce our

future profits and operating cash flows and make our financial

results more volatile. We may also retain

certain obligations or grant indemnities in connection with

a divestment. We may not find suitable purchasers

for our non-core businesses and may continue to pay operating

costs associated with these businesses.

Failed attempts to divest non-core businesses may distract

management’s attention from other business

activities, erode employee morale and customers’ confidence,

and harm our business. A divestiture could

also cause a decline in the price of our shares and increased reliance

on other elements of our core business

operations. Whether we realize the anticipated benefits

of a divestment, including our divestment in 2020 of

80.1 percent of the Power Grids business and the divestment

in 2021 of our Mechanical Power Transmission

business,

depends on whether we successfully manage the related risks.

If we do not successfully manage

the risks associated with a divestiture, our business, financial

condition, and results of operations could be

adversely affected.

Anticipated benefits of historical, existing and potential

future mergers, acquisitions, joint ventures

or strategic alliances may not be realized.

As part of our overall strategy,

we may, from time

to time, acquire businesses or interests in businesses,

including noncontrolling interests, or form joint ventures

or create strategic alliances. Whether we realize the

anticipated benefits, including operating synergies and cost

savings, from these transactions, depends, in

part, upon the integration between the businesses involved,

the performance and development of the

underlying products, capabilities or technologies, our correct

assessment of assumed liabilities and the

management of the operations in question. Accordingly,

our financial results could be adversely affected by

unanticipated performance and liability issues, transaction-related

charges, amortization related to

intangibles, charges for impairment of long-term assets

and partner performance.

There is no guarantee that our ongoing efforts to reduce

costs will be successful.

We seek continued cost savings through operational

excellence and supply chain management. Lowering our

cost base is important for our business and future competitiveness.

However, there is no guarantee

that we

will achieve this goal. If we are unsuccessful and the shortfall

is significant, there could be an adverse effect

on our business, financial condition, and results of operations.

Illegal behavior by any of our employees or agents

could have a material adverse impact on our

consolidated operating results, cash flows, and financial position

as well as on our reputation and

our ability to do business.

Certain of our employees or agents have taken, and may

in the future take, actions that violate or are alleged

to violate the U.S. Foreign Corrupt Practices Act of 1977

(FCPA), legislation

promulgated pursuant to the

1997 Organisation for Economic Co-operation and Development

(OECD) Convention on Combating Bribery

of Foreign Public Officials in International Business

Transactions, applicable antitrust

laws, other applicable

laws or regulations or our Code of Conduct. For more information

regarding investigations of past actions

taken by certain of our employees, see “Item 8. Financial

Information—Legal Proceedings”. Such actions

have resulted, and in the future could result, in governmental

investigations, enforcement actions, civil and

criminal penalties, including monetary penalties and other sanctions,

and civil litigation. It is possible that any

governmental investigation or enforcement action arising

from such matters could conclude that a violation

applicable law has occurred, and the consequences of

any such investigation or enforcement action may

have a material adverse impact on our consolidated

operating results, cash flows and financial position. In

addition, such actions, whether actual or alleged, could

damage our reputation and ability to do business.

Further, detecting, investigating

and resolving such actions could be expensive and

could consume

significant time and attention of our senior management.

While we are committed to conducting business in a

legal and ethical manner, our

internal control systems at times have not been, and in

the future may not be,

completely effective to prevent and detect such

improper activities by our employees and agents.

We are

subject to certain ongoing investigations by governmental agencies.

We may be the subject of product liability claims.

We may be required to pay for losses or injuries

purportedly caused by the design, manufacture or operation

of our products and systems. Additionally,

we may be subject to product liability claims for the improper

installation of products and systems designed and manufactured

by others.

Product liability claims brought against us may be based

in tort or in contract, and typically involve claims

seeking compensation for personal injury or property damage. Claims

brought by commercial businesses are

often made also for financial losses arising from interruption to

operations. Depending on the nature and

application of many of the products we manufacture, a defect

or alleged defect in one of these products could

have serious consequences. For example:

•

If the products produced by our electricity-related businesses

are defective, there is a risk of fire,

explosions and power surges, and significant damage

to electricity generating, transmission and

distribution facilities as well as electrical shock causing injury

or death.

•

If the products produced by our automation-related businesses

are defective, our customers

could suffer significant damage to facilities and

equipment that rely on these products and

systems to properly monitor and control their manufacturing

processes. Additionally,

people

could be exposed to electrical shock and/or other harm causing

injury or death.

•

If any of our products contain hazardous substances, then there

is a risk that such products or

substances could cause injury or death.

•

If any of our protective products were to fail to function

properly, there is a risk

that such failure

could cause injury or death.

If we were to incur a very large product liability claim, our

insurance protection might not be adequate or

sufficient to cover such a claim in terms of paying

any awards or settlements, and/or paying for our

defense

costs. Further, some claims

may be outside the scope of our insurance coverage.

If a litigant were successful

against us, a lack or insufficiency of insurance coverage

could result in an adverse effect on our business,

financial condition, results of operations and liquidity.

Additionally, a well

-publicized actual or perceived issue

relating to us or our products could adversely affect

our market reputation, which could result in a decline

demand for our products and reduce the trading price

of our shares. Furthermore, if we were required or we

otherwise determined to make a product recall, the costs

could be significant.

Undertaking long-term, technically complex projects or projects

that are dependent upon factors not

wholly within our control could adversely affect our profitability

and future prospects.

We derive a portion of our revenues from long-term,

fixed price and turnkey projects and from other

technically complex projects that can take many months,

or even years, to complete. Such contracts typically

involve substantial risks, including the possibility that

we may underbid and consequently have no means

recouping the actual costs incurred, and the assumption

of a large portion of the risks associated with

completing related projects, including the warranty obligations.

Some projects involve technological risks,

including in cases where we are required to modify our

existing products and systems to satisfy the technical

requirements of a project, integrate our products and systems

into the existing infrastructure and systems at

the installation site, or undertake ancillary activities such

as civil works at the installation site. Our revenue,

cost and gross profit realized on such contracts can vary,

sometimes substantially,

from our original

projections for numerous reasons, including:

•

unanticipated issues with the scope of supply,

including modification or integration of supplied

products and systems that may require us to incur incremental

expenses to remedy such issues,

•

the quality and efficacy of our products and services

cannot be tested and proven in all situations

and environments and may lead to premature failure or

unplanned degradation of products,

•

changes in the cost of components, materials or labor,

•

difficulties in obtaining required governmental permits

or approvals,

•

delays caused by customers, force majeure or local weather

and geological conditions, including

the ongoing COVID-19 pandemic and natural disasters,

•

shortages of construction equipment,

•

changes in law or government policy,

•

supply bottlenecks, especially of key components,

•

suppliers’, subcontractors’ or consortium partners’ failure

to perform or delay in performance,

•

diversion of management focus due to responding to unforeseen

issues, and

•

loss of follow-on work.

These risks are exacerbated if a project is delayed because

the circumstances upon which we originally bid

and quoted a price may have changed in a manner that

increases our costs or other liabilities relating to the

project. In addition, we sometimes bear the risk of delays

caused by unexpected conditions or events. Our

project contracts often subject us to penalties or damages

if we cannot complete a project in accordance with

the contract schedule. In certain cases, we may be required

to pay back to a customer all or a portion of the

contract price as well as potential damages (which may

significantly exceed the contract price), if we fail to

meet contractual obligations.

If we are unable to obtain performance and other guarantees

from financial institutions, we may be

prevented from bidding on, or obtaining, some contracts,

or our costs with respect to such contracts

could be higher.

In the normal course of our business and in accordance

with industry practice, we provide a number of

guarantees including bid bonds, advance payment bonds

or guarantees, performance bonds or guarantees

and warranty bonds or guarantees, which guarantee our

own performance. These guarantees may include

guarantees that a project will be completed on time or that a

project or particular equipment will achieve other

defined performance criteria. If we fail to satisfy any defined criteria,

we may be required to make payments

in cash or in kind. Performance guarantees frequently are requested

in relation to large projects.

Some customers require that performance guarantees

be issued by a financial institution. In considering

whether to issue a guarantee on our behalf, financial institutions

consider our credit ratings. If, in the future,

we cannot obtain such a guarantee from a financial

institution on commercially reasonable terms or at all, we

could be prevented from bidding on, or obtaining, some contracts,

or our costs with respect to such contracts

could be higher, which would reduce

the profitability of the contracts. If we cannot obtain

guarantees on

commercially reasonable terms or at all from financial institutions

in the future, there could be a material

impact on our business, financial condition, results of operations

or liquidity.

Our hedging activities may not protect us against the

consequences of significant fluctuations in

exchange rates, interest rates or commodity prices

on our earnings and cash flows.

Our policy is to hedge material currency exposures by entering

into offsetting transactions with third-party

financial institutions. Given the effective horizons

of our risk management activities and the anticipatory

nature of the exposures intended to be hedged, there

can be no assurance that our currency hedging

activities will fully offset the adverse financial impact

resulting from unfavorable movements in foreign

exchange rates. In addition, the timing of the accounting

for recognition of gains and losses related to a

hedging instrument may not coincide with the timing of

gains and losses related to the underlying economic

exposures.

As a resource-intensive operation, we are exposed to

a variety of market and asset risks, including the

effects of changes in commodity prices and interest rates.

We monitor and manage these exposures

as an

integral part of our overall risk management program, which recognizes

the unpredictability of markets and

seeks to reduce the potentially adverse effects

on our business. As part of our effort to manage

these

exposures, we may enter into commodity price and interest

rate hedging arrangements. Nevertheless,

changes in commodity prices and interest rates cannot

always be predicted or hedged.

If we are unable to successfully manage the risk of changes

in exchange rates, interest rates or commodity

prices or if our hedging counterparties are unable to perform

their obligations under our hedging agreements

with them, then changes in these rates and prices could

have an adverse effect on our financial condition

and

results of operations.

—

Legal and regulatory risks

An inability to protect our intellectual property rights

or actual or alleged infringement of a third

party’s intellectual property rights could

adversely affect our business.

Our intellectual property rights are fundamental to all of

our businesses. We generate, maintain, utilize and

enforce a substantial portfolio of trademarks, trade dress,

patents and other intellectual property rights

globally. Intellectual

property protection is subject to applicable laws in

various local jurisdictions where

interpretations and protections vary or can be unpredictable

and costly to enforce. We use our intellectual

property rights to protect the goodwill of our products,

promote our product recognition, protect our

proprietary technology and development activities, enhance our

competitiveness and otherwise support our

business goals and objectives. However,

there can be no assurance that the steps we take to obtain,

maintain and protect our intellectual property rights will be adequate.

Our intellectual property rights may fail

to provide us with significant competitive advantages, particularly

in foreign jurisdictions that do not have, or

do not enforce, strong intellectual property rights. The weakening

of protection of our trademarks, trade

dress, patents and other intellectual property rights coul

adversely affect our business. In addition, there

exist risks around actual or alleged infringement of third-party

intellectual property rights, which could – even

with mitigation processes in place - lead to claims against

us that require significant resources to resolve. We

also may engage in legal action to protect our own intellectual property

rights, and enforcing our rights may

require considerable time, money and oversight, and existing

laws in the various countries in which we

provide services or solutions may offer only limited

protection.

Failure to comply with evolving data privacy and data

protection laws and regulations or to otherwise

protect personal data, may adversely impact our business

and financial results.

We are subject to many rapidly evolving privacy

and data protection laws and regulations around the world

including the General Data Protection Regulation (GDPR)

in Europe as well as the California Data Privacy

Act and the California Privacy Rights Act (effective

in January 2023) in the United States. This requires us to

operate in a complex environment where there are significant

constraints on how we can process personal

data across our business. The GDPR, which became

effective in May 2018, has established stringent data

protection requirements for companies doing business in or

handling personal data of individuals in the

European Union. The GDPR imposes obligations on data

controllers and processors including the

requirement to maintain a record of their data processing and

to implement policies and procedures as part of

their mandated privacy governance framework. Breaches

of the GDPR could result in substantial fines, which

in some cases could be up to four percent of our worldwide

revenue. In addition, a breach of the GDPR or

other data privacy or data protection laws or regulations

could result in regulatory investigations, reputational

damage, orders to cease/change our use of data, enforcement

notices, as well as potential civil claims

including class action type litigation. We have invested,

and continue to invest, human and technology

resources in our data privacy and data protection compliance

efforts. There can be no assurance that

any

such actions will be sufficient to prevent cybersecurity

breaches, disruptions, unauthorized release of

sensitive information or corruption of data. Despite such

actions, there is a risk that we may be subject to

fines and penalties, litigation and reputational harm if we fail

to properly process or protect the data or privacy

of third parties or comply with the GDPR or other applicable

data privacy and data protection regimes.

Examinations by tax authorities and changes in tax regulations

could result in lower earnings and

cash flows.

We operate in approximately 100 countries and

therefore are subject to different tax

regulations. Changes in

tax laws could result in a higher tax expense and higher

tax payments. Furthermore, this could materially

impact our tax-related receivables and liabilities as well

as deferred income tax assets and liabilities. In

addition, the uncertainty of the tax environment in some

regions could limit our ability to enforce our rights. As

a globally operating organization, we conduct business

in countries subject to complex tax rules, which may

be interpreted in different ways. Future interpretations

or developments of tax regimes may affect our tax

liabilities, returns on investments and business operations. We

are regularly examined by tax authorities in

various jurisdictions. An adverse decision by a tax authority

could cause a material adverse effect

on our

business, financial condition and results of operations.

We are subject to environmental laws and regulations

in the countries in which we operate. We incur

costs to comply with such regulations, and our ongoing

operations may expose us to environmental

liabilities.

Our operations are subject to U.S., European and other

laws and regulations governing the discharge of

materials into the environment or otherwise relating to

environmental protection. Our manufacturing facilities

use and produce paint residues, solvents, metals, oils and related

residues. We use petroleum-based

insulation in transformers and chloroparaffins

as a flame retardant. We have manufactured

and sold, and we

are using in some of our factories, certain types of transformers

and capacitors containing polychlorinated

biphenyls (PCBs). These are considered to be hazardous

substances in many jurisdictions in which we

operate. We may be subject to substantial liabilities

for environmental contamination arising from the use of

such substances. All of our manufacturing operations are

subject to ongoing compliance costs in respect of

environmental matters and the associated capital expenditure

requirements.

In addition, we may be subject to significant fines and

penalties if we do not comply with environmental laws

and regulations, including those referred to above. Some environmental

laws provide for joint and several or

strict liability for remediation of releases of hazardous

substances, which could result in us incurring a liability

for environmental damage without regard to our negligence

or fault. Such laws and regulations could expose

us to liability arising out of the conduct of operations or

conditions caused by others, or for our acts which

were in compliance with all applicable laws at the time

the acts were performed. Additionally,

we may be

subject to claims alleging personal injury or property damage

as a result of alleged exposure to hazardous

substances. Changes in the environmental laws and regulations,

or claims for damages to persons, property,

natural resources or the environment, could result in substantial

costs and liabilities to us.

We could be affected by future laws or regulations

enacted to address climate change concerns as

well as the physical effects of climate change.

Existing or pending laws and regulations intended to address

climate change concerns could affect us in the

future. We have incurred, and may need to incur

additional costs to comply with these laws and regulations

and any non-compliance could adversely affect

our reputation and result in significant fines. We could

also be

affected indirectly by increased prices for goods

or services provided to us by companies that are directly

affected by these laws and regulations and pass

their increased costs through to their customers. At this

time, we cannot estimate what impact such costs may

have on our business, results of operations or financial

condition. We could also be affected by the

physical consequences of climate change itself, although

cannot estimate what impact those consequences might have

on our business or operations. Any such

changes could also impact our ability to achieve our 2030 Sustainability

targets as well as the related costs

and resources necessary to do so.

—

General risk factors

If we are unable to attract and retain qualified management

and personnel then our business may be

adversely affected.

Our success depends in part on our continued ability to hire,

assimilate and retain highly qualified personnel,

particularly our senior management team and key employees.

Competition for highly qualified management

and technical personnel remains intense in the industries

and regions in which we operate. If we are unable

to attract and retain members of our senior management team

and key employees, including in connection

with our ongoing organizational transformation, this could

have an adverse effect on our business.

Our business subjects us to considerable potential exposure

to litigation and legal claims and could

be materially adversely affected if we incur legal liability.

We are subject to, and may become a party to, a variety

of litigation or other claims. Our business is subject

to the risk of claims involving current and former employees,

customers, partners, subcontractors, suppliers,

competitors, shareholders, government regulatory agencies

or others through private actions, class actions,

whistleblower claims, administrative proceedings, regulatory

actions or other proceedings. Our acquisition

activities have in the past and may in the future be subject

to litigation or other claims. While we maintain

insurance for certain potential liabilities, such insurance does

not cover all types and amounts of potential

liabilities and is subject to various exclusions as well as

caps on amounts recoverable.

Item 4.

Information on the Company

—

Introduction

About ABB

ABB is a leading global technology company that energizes

the transformation of society and industry to

achieve a more productive, sustainable future. By connecting

software to its electrification, robotics,

automation and motion portfolio, ABB pushes the boundaries

of technology to drive performance to new

levels. With a history of excellence stretching back more

than 130 years, ABB’s success is driven by about

105,000 talented employees.

Our business is international in scope and we generate

revenues in numerous currencies. We operate

in over

100 countries across three regions: Europe, the Americas,

and Asia, Middle East and Africa. We are

headquartered in Zurich, Switzerland.

We manage our company through our four

Business Areas: Electrification, Motion, Process Automation,

and

Robotics & Discrete Automation. For a breakdown of

our consolidated revenues (i) by Business Area,

(ii) by

geographic region, and (iii) by product type, see “Item

5. Operating and Financial Review and Prospects—

Analysis of results of operations—Revenues” and “Note

23 - Operating segment and geographic data” to

our

Consolidated Financial Statements.

Until June 30, 2020, we also operated the Power Grids business,

which

is reported as discontinued operations in the Consolidated Financial

Statements (see “Discontinued

operations” section below). On July 1, 2020, we completed

the divestment of 80.1 percent of the Power Grids

business to Hitachi Ltd (Hitachi). We retain a 19.9

percent ownership interest through our investment in

Hitachi Energy Ltd, formerly Hitachi ABB Power Grids

Ltd (Hitachi Energy) which beneficially owns or

controls all the subsidiaries of the Power Grids business

Our principal corporate offices are located at

Affolternstrasse 44, CH 8050 Zurich, Switzerland, telephone

number +41 43 317 7111.

Our agent for U.S. federal securities law purposes is ABB

Holdings Inc., located at

305 Gregson Drive, Cary,

North Carolina 27511.

Our internet address is www.abb.com

or global.abb.

The

information contained on or accessible from our Web

site is not incorporated into this annual report, and

you

should not consider it to be a part of this annual report.

The United States Securities and Exchange

Commission (SEC) maintains a website at www.sec.gov

which contains in electronic form each of the reports

and other information that we have filed electronically with

the SEC.

History of the ABB Group

The ABB Group was formed in 1988 through a merger

between Asea AB and BBC Brown Boveri AG. Initially

founded in 1883, Asea AB was a major participant in the introduction

of electricity into Swedish homes and

businesses and in the development of Sweden’s railway

network. In the 1940s and 1950s, Asea AB

expanded into the power,

mining and steel industries. Brown Boveri and Cie. (later

renamed BBC Brown

Boveri AG) was formed in Switzerland in 1891 and initially

specialized in power generation and turbines. In

the early to mid

‑

1900s, it expanded its operations throughout Europe and

broadened its business operations

to include a wide range of electrical engineering activities.

In January 1988, Asea AB and BBC Brown Boveri AG each contributed

almost all of their businesses to the

newly formed ABB Asea Brown Boveri Ltd, of which they

each owned 50 percent. In 1996, Asea AB was

renamed ABB AB and BBC Brown Boveri AG was renamed

ABB AG. In February 1999, the ABB Group

announced a group reconfiguration designed to establish

a single parent holding company and a single class

of shares. ABB Ltd was incorporated on March 5, 1999,

under the laws of Switzerland. In June 1999,

ABB Ltd became the holding company for the entire ABB Group.

This was accomplished by having ABB Ltd

issue shares to the shareholders of ABB AG and ABB AB, the

two companies that formerly owned the ABB

Group. The ABB Ltd shares were exchanged for the shares

of those two companies, which, as a result of the

share exchange and certain related transactions, became wholly

‑

owned subsidiaries of ABB Ltd.

As described above, on July 1, 2020, we divested 80.1

percent of our ownership in the Power Grids business

to Hitachi.

ABB Ltd shares are currently listed on the SIX Swiss Exchange,

the NASDAQ OMX Stockholm Exchange

and the New York

Stock Exchange (in the form of American Depositary Shares).

ABB Today

As a global leader in resource efficiency,

excelling in electrification and automation, our offering

is relevant for

the global energy transition, increased energy efficiency,

and the transition to more adaptive manufacturing

and automation, putting us right in the center of long-term

secular trends.

The ABB Purpose

The ABB Purpose captures what we do, and the ABB

Way describes how we do it. With

our Purpose at the

core, ABB strives to create superior value for customers,

employees and shareholders. The ABB Purpose is

summarized as:

•

We succeed by creating superior value.

•

We push the boundaries of technology to drive performance

to new levels.

•

We energize the transformation of society and

industry to achieve a more productive, sustainable

future.

Our core competencies

Our leadership in resource efficiency is based on our

core competencies, each of which constitutes a barrier

to entry: decades-long domain expertise, cutting-edge

technology and innovation as well as the ability to

scale operations and distribution.

With its long history,

ABB not only invented or pioneered many power and automation

technologies but has

retained technology and market leadership in many of

these areas. Being present in various vertical markets

for decades with close long-term relationships with customers

and channel partners has resulted in our

unique deep domain expertise, enabling a thorough understanding

of customers’ needs and operations.

We continuously evolve our offering to remain

a relevant and trusted partner to our customers. Our annual

non-order related research and development spending

in 2021 amounted to approximately 4.2 percent of

revenues. We focus our research and development

expenditures on key areas of innovation and have spent

approximately $7 billion since the beginning of 2016, focusing

on developing best-in-class products and

services in the fields of electrification and automation with

the goal of helping our customers to increased

productivity and lower their ecological footprint.

All our four Business Areas are market leaders in their respective

areas being in either the number 1 or 2

positions. Our global reach along with our extensive local

presence assists us in scaling innovations to

achieve stronger returns, which supports higher absolute investments

for future growth. Active globally,

our

revenues are well-balanced across regions with customers

served directly and through a strong channel

partner network.

The ABB Way

The ABB Way is the glue that unites

our Group and comprises a select number of common processes

covering our business model, our people and culture, the ABB

brand and our governance framework. It

facilitates accountability,

transparency and speed in ABB.

In our operating model, the Divisions represent the highest

level of operating decisions. They are closest to

their respective markets and customer needs. Each Division

progresses through the strategic mandates and

priorities of stability and profitability before growth. Meaning, in

order to deploy full focus on organic and

acquired growth to the extent of consolidating the market, the

business’ structure should be robust and

profitability should be at least in line with industry peers.

We have made good progress on the transition

through these priorities with two thirds of our Divisions,

representing approximately 60 percent of Group

revenues, now on a growth mandate.

Each Division has full accountability for its results and

carries the responsibility for business development,

and research and development for leading technology

to secure a number 1 or 2 market position. To

fully

complete the decentralized way of working at ABB, our

focus area in 2022 will be to make sure that we also

have accountability, transparency

and speed within all of the Divisions. Strong performance

management is

key in a decentralized business model. We apply a

monthly scorecard system for the Divisions and Business

Areas, based on a standardized set of Key Performance

Indicators, to support full transparency of

performance. It is accompanied by a mandatory target

to make annual productivity improvements of at least

3 percent each year.

The corporate functions focus on necessary strategic, financial

and governance activities, with a lean

headcount of approximately 800 employees.

Enhanced growth profile

Over the past several years, we have taken significant

organic and inorganic actions to align our business

portfolio to more attractive growth markets, increasing

our focus on discrete industries, as well as transport

and infrastructure, that offer better growth opportunities.

Additionally, we

have increased the proportion of

sales stemming from short-cycle businesses, meaning

a reduced proportion from project-related activities,

which should reduce the risk and volatility in our earnings.

This ongoing shift towards better quality of

revenues is part of ABB’s DNA which centers

around resource-efficiency in electrification

and automation.

The responsibility for growth has been fully transferred

to the Divisions,

as they are closest to customers.

This includes both organic and acquired growth. The Divisions

have the best insights into current and future

customer needs and are accountable for building their

respective business accordingly.

With more Divisions

transitioning over time from stability and profitability to

growth, we expect to see a continuous shift in our

growth profile.

Finally, the underlying

demand for our products, systems and services

is supported by strong sustainability

megatrends with more favorable regulations, improved technology

and changing consumer patterns all being

positive drivers. An example of such a megatrend is sustainable

transport. We estimate that approximately

10 percent of our order intake comes from this area and that

we have outgrown the market in recent years.

The related segments have different commercial

maturity, including

more mature technologies which already

generate significant orders, including traction systems in rail

or hybrid ships using Azipod® propulsion.

Segments that are in commercial take-off (i.e. currently

see very high growth rates) include electric vehicle

charging solutions or robotic solutions for electric

vehicle manufacturing. There are also very early-stage

segments which are still emerging and which might offer

a high potential in the future such as fully electric

mines (“eMines”) or alternative fuels such as hydrogen.

—

Businesses

Our markets

ABB is a leading global technology company with a comprehensive

and increasingly digitalized offering of

electrification, motion and automation solutions. Our

exposure to customers is geographically balanced while

catering to multiple end-markets and segments. We

believe that our portfolio is well positioned to benefit from

secular growth drivers, including urbanization, labor shortage,

shift to electrification, automation and

robotization, as well as other data and digitalization trends.

We are focused on creating superior customer value

through our comprehensive, modular offering,

combining traditional products and services with software

-enabled products and systems as well as digital

services and software that we sell both separately and

combined as scalable solutions. Superior software is

key differentiation of our digital offering

and about 60 percent of our approximately 7,000 employees

research and development are active in software development.

The majority of our businesses are market leaders within their respective

segments. We believe market

leadership is critical, as it provides the opportunity for

price leadership, which in turn supports profitability,

enabling us to invest in further research and development to

sustain our technological leadership. For a

discussion of the geographic distribution of our total revenues,

see “Item 5. Operating and Financial Review

and Prospects—Analysis of results of operations—Revenues.”

Industry market

Approximately half of our customers are industrial customers.

We serve production facilities and factories

all

around the world, from process industries such as oil and

gas, pulp and paper as well as mining, to discrete

industries including automotive, food and beverage and

consumer electronics. Automation, software and

digital services that help customers achieve improved

safety, uptime, energy

efficiency and productivity are

key to the success of our offerings in this market. The

ongoing COVID-19 pandemic has served as a

prominent reminder for companies of the importance of simplicity

and flexibility in automated production and

has accelerated customer demand for the digital services

and solutions we offer.

Industrial end-markets recovered from the initial pandemic-related

impacts. In discrete industries, end-

markets such as food and beverage, consumer electronics,

machine builders and general industry grew

strongly. Investments

in robotics by the automotive industry recovered

and we applied a strategic selective

order approach aimed at improving long-term profitability

in the segment.

Later-cycle process industries segments picked up especially

during the second half of 2021, benefiting from

a rebound in commodity prices and generally easing

international travel restrictions. This was particularly

the

case for the oil and gas segment, while the recovery in

segments such as pulp and paper,

mining or water

and wastewater had already started earlier.

Transport & infrastructure

market

Approximately one-third of our customers operate in the transport

& infrastructure market. Our expertise

provides efficient, reliable and sustainable solutions

for these customers, with a focus on energy efficiency

and reduced operating costs.

Transport & infrastructure markets were strong

in 2021. Buildings activity rebounded from the widespread

lockdowns of the previous year.

Data center markets continued to expand,

with ABB successful in offering

bundled solutions to hyperscale and co-location customers

in particular. Underlying demand

in rail for

electrification and traction solutions was also high, while

modest growth rates were impacted by the strong

order intake in 2020. In the marine sector,

we saw continued strong order demand

for our market-leading

electric propulsion systems. Services in the cruise segment started

to pick-up in the second half of 2021 in

anticipation of a recovery in cruising activities. EV charging

markets also continued to see very strong growth

rates.

Utilities market

ABB delivers solutions mainly for distribution utilities

and renewables customers, while continuing to service

conventional power generation customers with our control

and automation solutions. Following the

divestment of our Power Grids business to Hitachi in July

2020, our exposure to the utilities market has

decreased significantly.

During 2021, the renewables markets saw very strong

growth after a challenging, pandemic-impacted 2020.

Business levels in the conventional power generation

market improved, albeit from a low level. Demand from

electrical distribution utilities was strong, with ongoing investments

to increase grid reliability and resilience

with integrating increased renewables.

We serve industry,

transport & infrastructure and utilities through our

operating Divisions which are included

in our Business Areas. Developments in these Business

Areas are discussed in more detail below.

Revenue

figures presented in this Businesses section are before

intersegment eliminations.

—

Electrification Business Area

Overview

The products of the Electrification Business Area portfolio

are designed to enable safe, smart, and

sustainable electrification, with a full range of low- and

medium-voltage products and solutions, along with

pre-engineered packaged services and tailored solutions

for intelligent protection and connection.

The Electrification Business Area delivers products through

a global network of channel partners and end

customers. Most of the Business Area’s revenue

is derived from distributors and approximately a quarter

derived from direct sales to end-users. The remaining

revenues are generated from original equipment

manufacturers (OEMs), engineering, procurement, construction

(EPC) contracting companies, system

integrators, utilities and panel builders. The proportion of direct

compared to channel partner sales varies by

segment, product technology and geographic markets.

The Electrification Business Area had approximately

50,800 employees on December 31, 2021, and

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