Compact AC drive profit margins down in 2012 but forecast to improve

Due to intense competition and the penetration of new lower cost compact drives, profit margins declined in 2012.


IMS Research (acquired by IHS, Inc.)IMS Research (acquired by IHS, Inc.) forecasts that global compact AC low-voltage drive sales will grow to $3 billion in 2016. Compact AC drives are those rated less than 25 kW, used primarily in fan and pump applications. End-users are increasingly demanding a low priced, simple product and the industry is responding by splitting compact AC motor drive product lines into a simpler lower-priced line and a more complex, higher-functioning and expensive drive.

“Compact AC drive average selling price declines accelerated in 2012, especially in EMEA and Japan where prices fell nearly 4 percent. Suppliers accepted lower overall margins on compact drives to maintain and secure customers to which they sell higher margin products,” commented IMS Research analyst Rolando Campos.

Despite economic slowdowns in Asia and Europe in 2012, demand for low-end drives remained strong, partly due to lower prices facilitating budget approvals in a tight-lending environment, but also as separate lines of drives increased options for customers. In 2012, compact AC drive shipments grew 2.6 percent over 2011 levels, reaching nearly 11 million unit shipments.

Compact drives are much less complicated to manufacture, making it easier for suppliers to introduce products in the market. After experiencing success in China, numerous domestic suppliers such as Delta and INVT are entering EMEA, and have captured market share in the region over the past year. The Chinese market for compact AC drives has grown rapidly over the past several years to $880 million in 2012 and forecast to nearly double in 2016. 

Due to intense competition and the penetration of new lower cost compact drives, profit margins declined in 2012. Reluctance to reduce compact drive prices in line with the overall industry has resulted in a loss of market share for some companies in EMEA and Japan. In response to a more competitive market, some suppliers are moving towards drive products and markets with less competition, more opportunity to add value, and higher potential margins.

Compact AC drive prices are estimated to have declined by nearly 2 percent in 2012. As the global economy recovers, compact AC drive price declines are predicted to moderate, resulting in higher profit margins for compact AC drive sales. IMS Research forecasts that future compact AC drive price declines will moderate to about -1 percent CAGR from 2012 to 2016.

No comments
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
Safety for 18 years, warehouse maintenance tips, Ethernet and the IIoT, GAMS 2016 recap
2016 Engineering Leaders Under 40; Future vision: Where is manufacturing headed?; Electrical distribution, redefined
Strategic outsourcing delivers efficiency; Sleeve bearing clearance; Causes of water hammer; Improve air quality; Maintenance safety; GAMS preview
SCADA at the junction, Managing risk through maintenance, Moving at the speed of data
Safety at every angle, Big Data's impact on operations, bridging the skills gap
The digital oilfield: Utilizing Big Data can yield big savings; Virtualization a real solution; Tracking SIS performance
Applying network redundancy; Overcoming loop tuning challenges; PID control and networks
Driving motor efficiency; Preventing arc flash in mission critical facilities; Integrating alternative power and existing electrical systems
Package boilers; Natural gas infrared heating; Thermal treasure; Standby generation; Natural gas supports green efforts

Annual Salary Survey

Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.

But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.

Read more: 2015 Salary Survey

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
This article collection contains several articles on the vital role of plant safety and offers advice on best practices.
This article collection contains several articles on the Industrial Internet of Things (IIoT) and how it is transforming manufacturing.
This article collection contains several articles on strategic maintenance and understanding all the parts of your plant.
click me