Chinese Market Emerges as Lynchpin in Global Expansion Plans of Variable Speed Drives Manufacturers | Automation.com

Chinese Market Emerges as Lynchpin in Global Expansion Plans of Variable Speed Drives Manufacturers

January 122004
Rapid industrialisation, an aggressively expanding local economy and greater customer understanding of the technology are creating a buoyant market for variable speed drives in China. This $1.22-billion market is forecast to experience strong demand and revenue growth, establishing it as one of the key global regions for drives manufacturers.

“The market should continue to see a good overall advance with trends gaining from technology developments, the continuing rise in demand for more advanced electric drives, rising industrialisation and key construction projects as well as good demand in a series of user sectors ranging from HVAC to food and beverage, handling and general manufacturing,” notes Frost & Sullivan (www.motors.frost.com) Research Manager Mik Sabiers.

At the same time, the market is also set to benefit from increasingly competitive price levels. The move toward more competitive prices across all product sectors has expanded the potential customer base and is offering suppliers the opportunity to capitalise on new applications.

Supported by these trends, the Chinese variable speed drives market is estimated to grow at a compound annual revenue growth rate of 6.3 per cent to reach $1.87 billion in 2010.

Among the product sectors, robust growth is anticipated for servo and standard AC drives. These technologies are expected to increasingly shift to dominate demand and revenues within the variable speed drives market.

With an anticipated 13.4 per cent annual revenue growth rate and a compound annual unit growth rate of 14.3 per cent over the 2003 to 2010 period, the servo drives sector is in line for the greatest individual advance in both revenue and demand terms. This expansion is likely to be underpinned by the growing interest in advanced motion control solutions.
Supported by technological advances and the decline of the DC drives market, the AC drives sector has made strong gains. It is expected to strengthen its position as the largest sector in revenue terms, rising from an estimated $529.6 million to $711.3 million over the 2003 to 2010 period. Unit shipment share of this sector too is headed for significant increase.

In contrast to other regions, mechanical drive technology is expected to retain an important role within the Chinese market. Cost considerations are expected to underlie high annual demand for mechanical variable speed drives solutions. The revenue share of the hydraulic drives sector is also likely to expand in the future.

Enticed by the market’s strong overall potential, an influx of new competitors is expected in the near term. This, in turn, is set to result in a highly fragmented market already populated by over 200 active suppliers.

Three levels of competition are currently noticeable in the market. The first tier of European and American manufacturers concentrate on drive solutions rather than product sales, with the second tier of Japanese companies focussing on the reverse. Both, however, are known for their high-quality service and support. Local companies producing low-end drives comprise the third tier of competition. They are now attempting to challenge international competitors by developing more advanced drives.

In a highly fragmented competitive landscape, only Fuji Electric, Siemens, Mitsubishi and ABB have been able to build reasonable market share. Some prominent local producers such as Guangzhou Foshan, Ningbo Zhongyi and Shanghai Nanfang account for minor shares of the overall market, but have carved out solid positions in niche areas.

”The main competitive issues remain price factors, service, technology expertise, quality, distribution and customer education,” says Mr. Sabiers. “Competitive pressures can be expected to heighten as new competitors move into the market as a consequence of the fast overall growth expected.”

Customers are expected to continue valuing high-quality technology. Manufacturers will need to support the demand for more advanced technology through customer education. A local production base will also be crucial to gaining market success while logistics and distribution channels are acknowledged as critical to deepening market penetration.

Frost & Sullivan, an international growth consultancy, has been supporting clients' expansion for more than four decades. Our market expertise covers a broad spectrum of industries, while our portfolio of advisory competencies includes custom strategic consulting, market intelligence and management training. Our mission is to forge partnerships with our clients' management teams to deliver market insights and to create value and drive growth through innovative approaches. Frost & Sullivan's network of consultants, industry experts, corporate trainers and support staff, spans the globe with offices in every major country.

Contact

Kristina Menzefricke
Tel. +44 (0) 207 343 8376

www.frost.com
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