Industrial Automation October 2021

Low Voltage Drives Market Stages Steady Recovery With Projected 2020-25 CAGR Of 4.8%

Blake Griffin
Blake Griffin

Blake is an expert in automation systems, industrial digitalization, and off highway-electrification. Since joining Interact Analysis in 2017, he has written in-depth reports on the markets for low voltage AC motor drives, predictive maintenance, and mobile hydraulics.

The performance of the LV drives market is closely tied to overall global manufacturing output. In ‘normal’ economic crises, manufacturing tends to endure a sharp contraction, followed by a strong rebound before plateauing. But the COVID-19 crisis has gone very differently. Slow vaccine uptake, labor shortages and supply chain disruptions are all coming together to cause a much slower recovery in the manufacturing sector, and therefore in the LV drives sector, than might have been expected.

APAC weathered the COVID storm well in 2020 – with a strong Chinese economic performance

The graph above illustrates how comparatively well APAC weathered the COVID storm in 2020, while the Americas and EMEA saw a significant dip in revenues. It also describes the predicted steady, if not slow, recovery. Clearly, this is not a V-shaped bounce-back.

2020: APAC weathers the COVID storm, thanks to the Chinese economic juggernaut

Global sales of low voltage motor drives dropped by approximately 8.9% in 2020. Interestingly, however, the impact of the pandemic on the market was very uneven, affecting some regions far more than others. EMEA was hit the hardest, with a -17.8% reduction in LV drive sales and the Americas saw a -11.9% contraction. But APAC actually saw a modest 1.1% growth in sales driven by the Chinese economy as the country managed, against all expectations, to maintain economic growth.

As a consequence, drive manufacturers embedded in the APAC market, such as ABB, FUJI and Inovance, gained global market share of the order of 1%, 0.5% and 0.3% respectively at the expense of manufacturers less exposed to the region. It should be noted, however, that not all drive vendors with a strong foothold in APAC fared well. Siemens, for example, the #2 supplier of drives in that region, saw a 0.5% contraction in sales, but that was because its biggest market for drives is Germany, which experienced a serious collapse in manufacturing during the pandemic, particularly in the automotive sector.

2021: stockpiling leads to boom in sales in first half, market to flatten in second half

In spite of the big contraction in sales in some major regions in 2020, the LV drives market is expected to see global revenues overtake pre-pandemic levels by 2022. Meanwhile, over the period 2020 to 2025, we predict the global market will grow with a CAGR of 4.8%. The first half of 2021 saw a significant increase in order volumes – up to 20-30% in some cases. Most of the orders were for delivery in the second half though, indicating that there has been significant stockpiling occurring. The result will be that the high rate of orders in the first half of the year will level out. We anticipate an overall 7.7% increase in global sales of LV drives in 2021, which pretty closely matches our forecast for global manufacturing as a whole, though it’s important to note that there are important customers in the drives market who lie beyond the scope of our wider manufacturing research, such as in the mining industry.

Long term trend for annual price erosion is on hold

Historically, there has been a steady reduction of pricing in the drives market, of the order of 1 – 2% per year. It’s something the market has got used to and it’s caused by the fierce competition among vendors in the sector and the fact that customers in China, one of the biggest markets, have developed a taste for less functional, lower cost drives. The relentless downward pressure on prices in China has had a ripple effect across the global market. In the period 2019-2020 we saw prices remain flat, with the average selling price of a drive standing at $543.60, but in 2021 there was an uptick in pricing, with global price levels rising nearly 2.5%, raising the average selling price to $556.60.

COVID has disrupted the 1-2% annual average price reductions that the drives market was used to

This price rise was driven by the shortage of semiconductors, and it’s likely to remain around that level, as we do not anticipate seeing the semiconductor market return to normality until the second half of 2022, or even into 2023. There are also two other price drivers – the shortage of other raw materials and higher shipping costs. As a result, the gradual price erosion the market has become accustomed to will not return until 2024 at the earliest.

To continue the conversation about the low voltage drives market, get in touch with Blake Griffin, our lead on the LV drives market, direct: Blake.Griffin@InteractAnalysis.com

 

 

 

 

 

 

 

Posted in: Industrial Automation.