Variable-speed drive manufacturers’ OEMs shifting from North America

San Antonio, TX—Despite slight projected revenue gains through 2010, variable speed drive (VSDs) manufacturers in North America still face a shrinking client base because the OEMs they serve are shifting production to newly industrialized countries, according to recent research by Frost & Sullivan.

By Control Engineering Staff June 22, 2004

San Antonio, TX— Despite slight projected revenue gains through 2010, variable speed drive (VSDs) manufacturers in North America still face a shrinking client base because the OEMs they serve are shifting production to newly industrialized countries, according to recent research by Frost & Sullivan . The study, “North American Variable Speed Drives Markets,” found that the VSD market generated revenue of $1.54 billion in 2004, and is expected to reach $1.73 billion in 2010.

Emerging nations reportedly can offer improved productivity and lower manufacturing costs, and this is encouraging OEMs to establish foreign subsidiaries and factories. Even though it fosters more global penetration, this trend is depleting the North American end-user market. ‘OEMs are seeking component sources closer to the countries where their facilities are located, and this reduces demand for variable speed drives in the domestic market,’ says Liliya Navarette, Frost & Sullivan’s industry analyst.

Due to recent OEM relocations, Frost & Sullivan reports that several North American drives plants have either shut down, or restructured to produce smaller volumes. To retain business, some manufacturers are developing strategies to meet customers’ overall needs locally and inter-nationally. For example, reducing costs is one way to staying competitive in the mature VSD market, especially many features and capabilities provide little advantage as differentiating fac-tors. Also, intense competition between manufacturers is sparking price wars, making products more affordable and encouraging adoption.

In addition, by meeting demands for lower prices, manufacturers are popularizing specialized designs and higher-power ratings. Meanwhile, clients are also requiring shorter lead times, which is likely to compel VSD companies to invest in R&D and in more efficient equipment to trim production processes.

Although price cuts are expected to cut revenues, they also encourage new users to switch to VSDs for new installations and upgrades, which can increase unit sales. Also, downward price pressure is likely to escalate as more participants enter the market, and vie to provide the best products at the lowest cost. This influx of next-generation products approximately every four years has led to early replacement of drives.

Similarly, frequent introductions of advanced technology stimulate manufacturer ingenuity, as they try to increase VSD sales. ‘Manufacturers have to strive to engineer new solutions that will help increase product value and customer service,’ adds Navarrete. ‘This move is even more sig-nificant now because clients are seeking technological improvements to increase productivity and efficiency in the wake of economic recovery.’

These initiatives, coupled with provision of simpler and faster solutions, have accelerated de-mand for VSDs in new applications. Likewise, simple solutions minimize requirements for extra features, which reduces added potential costs and promotes unit shipment growth.

Control Engineering Daily News Desk
Jim Montague, news editor
jmontague@reedbusiness.com