Global demand for power infrastructure has unleashed an electric transformer supercycle, with transformer exports by South Korean companies rising roughly 50% from a year ago. Hyosung Heavy Industries, LS Electric and HD Hyundai Electric, which produce medium- and large-sized transformers essential for power grids, have secured five years’ worth of work and are expanding their production capacities.
From January to May this year, total exports of ultra-high-voltage transformers, over 10,000 kilovolt-amperes (kVA), were valued at $394.74 million, up 47.8% from the same period last year. During the same period, total export volume reached 27,875 tons, up 30% year-on-year. The increase in value outpaced the rise in volume.
The export value increased by 251% compared to the same period two years ago. This surge is driven by the transformer replacement cycle in the United States, which has led to a flood of orders for Korean transformer companies.
A typical transformer has a lifespan of 20 to 30 years. According to a 2020 U.S. Department of Energy survey, around 70% of large transformers in the U.S. have exceeded 25 years of service. In addition, the Inflation Reduction Act (IRA) is spurring the construction of large factories in the U.S. The AI boom is also expected to boost data center growth, driving up power consumption and transformer demand.
“Demand for power equipment is increasing dramatically, but companies have not responded as swiftly,” said Lee Dong-heon, an analyst at Shinhan Investment & Securities. “As companies begin to invest aggressively, there could be an oversupply in the future, but that stage hasn’t come yet.”
Three domestic power equipment companies have announced production expansion plans. HD Hyundai Electric plans to invest 27.2 billion won and 18 billion won each in its transformer plants in Ulsan and Alabama, aiming to expand production capacity by 20%.
Hyosung Heavy Industries announced it would invest roughly 100 billion won to ramp up production in its ultra-high voltage transformer plants in Memphis and Changwon. Once the expansion is completed in the first half of next year, Hyosung Heavy Industries’ ultra-high voltage transformer production capacity will increase by more than 40%. LS Electric intends to invest 80 billion won to boost the production capacity of ultra-high voltage transformers at its Busan plant.
