According to a new report, established switchgear manufacturers will face stiff competition from Asian rivals as the global market value grows from last year’s $49bn to almost $84bn by 2020.
The study from research firm GlobalData says that growth in the next four years will be driven primarily by the need for many countries to repair or replace their aging grids and incorporate renewable energy installations.
The report adds that other switchgear market drivers include “the rapidly burgeoning demand for power caused by booming populations, growing industrialization and urbanization, and the need for utilities to provide a safe and efficient energy supply in deregulated markets”.
GlobalData power analyst Tanmay Mishra said that while the “potential growth of the switchgear space will be a boon to manufacturers of the product worldwide, the market will be rocked somewhat by upcoming Asian manufacturers posing challenges to established ones”.
“In the Chinese high-voltage switchgear market, established international players ABB and Siemens face tough competition from the local manufacturers Chint Electrics, China Xian Electric Group, and Guangdong Zhujiang Switchgear, which together account for almost 85 per cent of the market.
“Even in India, domestic manufacturers hold a significant share of the market in the medium- and low-voltage segments.”
The presence of so many manufacturers in the arena, particularly in the Chinese and Indian markets, will induce intense competition and huge pricing pressures, according to GlobalData.
Mishra added: “As the scope of product differentiation is quite low for switchgears, price is a key criterion for gaining market share, meaning multi-nationals are facing tough competition from Chinese and Indian manufacturers.
“Pricing pressure is reducing manufacturers’ profit margins, and while this will have moderate effects on most switchgear markets, such competitive pricing means smaller ones will actually deteriorate over the forecast period.”
Despite this, GlobalData’s report indicates that overall market growth will remain strong, with China continuing to lead the way, particularly in the high-voltage switchgear space, which is expected to increase from $17.4bn to $35.8bn by 2020.