Blake has worked as a Market Analyst at Interact Analysis since 2017. Covering the markets for low voltage AC motor drives, predictive maintenance, and mobile hydraulics, Blake has developed expertise in automation systems, industrial digitalization, and off highway-electrification.
On September 27th, Sumitomo Heavy Industries announced it will be acquiring Invertek Drives for around £100m. This announcement comes nearly one year after the company acquired Italian motor manufacturer Lafert. Both acquisitions are a means to a stated end goal of “achieving global growth in areas such as robotics, material handling, intralogistics, and food & beverages”. Sumitomo already plays in the gearbox/gearmotor space and the acquisition of both Invertek and Lafert helps round out its Machinery Components Division’s portfolio to lean towards companies like SEW-Eurodrive, Lenze, and Nord Drivesystems. One commonality of each of the aforementioned companies is a strength in a key area mentioned in Sumitomo’s stated goal of the acquisition – Intralogistics and material handling.
Intralogistics and material handling have become a focus for several motor and drive-train suppliers, as these sectors are expanding more rapidly than most and are home to a very fast-growing product trend: decentralized drive architectures. Trends like increased high mix/low volume manufacturing and omnichannel distribution have led to considerable demand for flexible conveying. Flexibility is needed to cope with the constantly changing routes that develop within a facility’s intralogistics. Consequently, conveyor systems are increasingly being modularized as a mechanism to offering enhanced flexibility. As the demand for modular conveying has progressed, motor drive-train suppliers identified a need for equipment that would not inhibit this flexibility; and companies like SEW, Lenze, and Nord have developed solutions that serve this specific need. Each of these companies produce geared motors and decentralized drives, which together enable modular conveying. With Sumitomo’s strength in gearboxes and last year’s acquisition of Lafert, Invertek’s drives should be the last piece Sumitomo needed to develop a compelling competitive offer in the intralogistics and material handling space.
Offering a decentralized drive is a crucial factor for the success of this solution. Decentralized drives have a high protection rating, are meant to sit directly next to the motors they are controlling, and typically have a form factor which are flat and wide. SEW, Lenze, and Nord all list a significant number of decentralized drives on their websites. Invertek does not offer a decentralized drive but does offer something that is comparable: a high IP wall mounted drive.
High IP wall mounted drives are increasingly being used as decentralized solutions because they offer many of the same benefits as decentralized drives, including high protection and freedom from a cabinet. This is the drive of choice for decentralized architectures in the US due to Rockwell’s influence over the region. Rockwell has yet to offer a true decentralized drive (as we define it) and instead offers wall mounted drives for this type of application. Danfoss has also found success in this strategy with their Vacon 20X drive. All of this points to Invertek’s high IP drives as being an important part of this acquisition. Not only that, it would not be a stretch for the Invertek team to develop a decentralized drive, which is preferred in Europe.
We estimate the market for decentralized drives to be growing at a CAGR of ~16% globally. As stated previously, this drive type is primarily found in intralogistics and material handling applications. While the market for decentralized drive types is a fast growing one, it’s still small enough that a company producing £36m (Invertek’s annual turnover as stated in the announcement) could represent significant competition. This fast growth combined with limited competition supports Sumitomo’s goal with this acquisition and we expect the company will find some level of success in the intralogistics/material handling space.
One Final Thought
One aspect of this acquisition that will be interesting to see play-out is whether Invertek’s brand-label agreements continue or not. It’s widely known that an undisclosed portion of Invertek’s drives get sold to other drive manufacturers and resold under a private label. As a smaller player in the drives market, this strategy made sense as an effective route to market. However, the scale at which Sumitomo operates may mean that there is less appetite for such arrangements in the future, with the possibility of these being wound down over time.
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