China's ac, dc drives market growing rapidly

Austin, TX—Suppliers of ac and dc motor drives in China are reporting 20-40% annual growth rates, which pushed the nation’s drives market to reach $463 million in 2003, according to recent research by IMS Research.

05/18/2004


Austin, TX— Suppliers of ac and dc motor drives in China are reporting 20-40% annual growth rates, which pushed the nation’s drives market to reach $463 million in 2003, according to recent research by IMS Research . This growth is caused largely by the recent influx of foreign investment in China, usually resulting in new or renovated manufacturing facilities.

“With much of the foreign investment coming from Europe and North America, European and North American drive suppliers have been able to leverage their local relationships and grow considerable businesses in China,” says Steve Odom, IMS’ analyst. “Five of the top 11 drives suppliers in Asia Pacific are European or North American, mainly because of their success in China.”

With little to spark the ac and dc motor drives market in the larger, more mature markets in Japan, North America, and Europe, China is expected to offer drives suppliers the best opportunity to capture incremental revenue growth.

However, there also are some potential challenges ahead, adds Odom. There is a potential for a devaluation of the Chinese Yuan that could slow the booming Chinese export market. A crippled banking system, large amounts of public debt, and escalating property values also are likely to slow public spending on large infrastructure projects, all of which helped the market for large drives in China.

In addition, India promises to pose a bigger competitive challenge to China as a destination to relocate manufacturing. India’s government recently raised its foreign ownership cap to 75%, and committed added budget revenues to spending on infrastructure. Also, the successful migration of the information technology and back-office operations of many high-profile large multinational corporations also seems to provide a good precedent for manufacturing companies to follow. As a result, IMS forecasts that revenues of India’s drives market will grow at a compound annual growth rate of 13.3% during the next four years.

In any event, most large drives suppliers are already increasing their focus and resources in China, which is creating fierce competition. This competition, combined with exchange rate pressures, logistical challenges, and market preference for lower-margin, low-functionality drives, is producing a very challenging operating environment. Despite these challenges, or perhaps partially because of them, drives suppliers that execute sound strategies stand to gain significant upside performance and global market share, Odom says.

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





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