As the investment in artificial intelligence (AI) data centers expands in the United States, the demand for electricity is surging, prompting domestic electrical equipment corporations to accelerate the expansion of factories and production facilities within the U.S. Data centers require a tremendous amount of power, accounting for about 10% of the total electricity consumption in the U.S. The surge in power demand for data centers has brought a boom to the electrical equipment market, including ultra-high voltage transformers, distribution panels, and power lines.
According to the electrical equipment industry on the 6th, HD Hyundai Electric announced that it will invest approximately 400 billion won in expanding its Ulsan factory facilities and constructing a second factory in Alabama next month to increase its production capacity for 765-kilovolt (kV) ultra-high voltage transformers. The combined production capacity for ultra-high voltage transformers is expected to increase by about 30% from 400 units per year to approximately 510 units. Ultra-high voltage transformers are key equipment in the transmission and distribution network, and 765 kV is the highest voltage specification in the U.S. The current operational rate of the U.S. factory is reaching 95%, prompting efforts to expand production capacity.
As of the end of last year, HD Hyundai Electric has accumulated a backlog of orders valued at $5.541 billion (approximately 8 trillion won). It is estimated that the backlog in the North American market accounts for about 63% (or $3.5 billion) of the total backlog. By actively targeting the profitable U.S. market, the company achieved an operating profit margin that surpassed 20% last year, which is about 8 percentage points higher than in 2023 (11.7%).
HD Hyundai Electric has set a goal to secure orders worth $3.822 billion this year. A representative from HD Hyundai Electric noted, "As investments in power infrastructure and demand for power related to data centers expand, the demand for electrical equipment continues to grow."
LS ELECTRIC is building a factory on a 3,300-square-meter plot in Texas, aiming for completion by the end of this year. The production facilities for its distribution panel factory in Utah are also being expanded. LS ELECTRIC develops and produces almost all types of devices used in distribution panels in-house. Following the supply of distribution panel components to xAI, an AI development company founded by Tesla CEO Elon Musk, it is reported that the company is also negotiating to supply distribution panels for another large American tech company's data center.
While U.S. investments in data centers are increasing, there are not many suppliers of electrical equipment capable of meeting the demand. It is known that electrical equipment accounts for about 8-10% of data center investment costs. LS ELECTRIC is expected to play a larger role in the process of increasing investments by Korean corporations in U.S. facilities under the second Trump administration. Last year, overseas sales accounted for more than half of LS ELECTRIC's total revenue, and the company plans to increase the share of overseas sales to 70% by 2030.
Hyosung Heavy Industries is currently expanding testing and production facilities at its ultra-high voltage transformer factory in Tennessee. Around 100 billion won will be invested alongside the expansion of its Changwon factory. The expansion of the Tennessee plant is targeted for completion next year. After the completion of the expansion, the production capacity of the plant is expected to double.
Many observers expect the boom in the U.S. electrical equipment market to continue for the time being. Due to the aging of transmission and distribution network facilities and transformers, there is significant replacement demand, and the United States' restriction on Chinese electrical equipment has increased its reliance on Korean manufacturers. The second Trump administration launched the Stargate Project last month, which is a large-scale infrastructure construction project for data centers and power plants with an investment of $500 billion (approximately 730 trillion won) over the next four years.
Despite the emergence of DeepSeek, a high-performance, low-cost AI from China, which raised doubts about the high-cost American AI model, major U.S. tech corporations have expressed their commitment to expand investments in data centers. Eaton, a U.S. electrical equipment corporation, recently revealed that data center clients have requested to expedite completion after the DeepSeek shock.