Power equipment companies, which are on a record-breaking winning streak of orders, are making aggressive investments. With trade issues, once cited as one of the biggest uncertainties, no longer a hindrance as the industry enters a supercycle, they are preparing future revenue sources.
According to the industry on the 11th, major power equipment companies such as HD Hyundai Electric, LS ELECTRIC, and Hyosung Heavy Industries have secured up to six years' worth of work.
An industry official said, "We have already booked orders for volumes to be delivered in 2030. In the case of the United States, we are taking orders for 2031 volumes," and added, "Even if we see opportunities in new markets, it is difficult to enter because capacity is lacking."
Power equipment refers to equipment and systems involved in the flow of electricity during generation, conversion, transmission and distribution, and use. Major products include transformers, circuit breakers, switchgear, distribution panels, power semiconductors, and power converters.
The power equipment industry is booming because demand has surged in the United States. With strong replacement demand for aging power equipment and additional demand from expanded investment in artificial intelligence (AI), orders keep coming. However, because there are not many companies in the United States that make power equipment, Korean corporations are benefiting.
The tariff burden, which had been a concern for the industry, also appears to be easing, thanks to a supplier's market. An industry official said, "We are in a situation where products are in such short supply that we can't sell enough, so clients say they will buy even if they have to bear the tariff," adding, "For new contracts, we are raising product prices by the amount of the tariff, and for existing contracts, we are negotiating to share the tariff burden with clients." HD Hyundai Electric's tariff burden in the third quarter was 10 billion won, down from 20 billion won in the second quarter.
Despite the record boom, power equipment companies are moving to develop new markets through aggressive investment. Hyosung Heavy Industries in Jul. broke ground on a High Voltage Direct Current (HVDC) transformer plant in Changwon, South Gyeongsang Province, with an investment of 330 billion won. A Hyosung Heavy Industries official said, "In addition to existing circuit breakers and transformers, we plan to newly target the HVDC transformer market." LS ELECTRIC is also expanding investment in the ultra-high-voltage field beyond its mainstay of low-voltage distribution.
Factory expansions are also underway. HD Hyundai Electric will expand its U.S. Alabama plant in 2027 to boost 765 kV transformer production capacity and actively respond to local North American demand. LS ELECTRIC has expanded the transformer production building at its Busan site to enter the U.S. and European transmission and distribution and renewable energy markets, increasing facilities related to manufacturing and testing transformers for global HVDC conversion.
Lee Dong-heon, Head of Team of the corporate analysis department at Shinhan Investment & Securities, said, "As demand is strong, companies are announcing capacity expansions, raising concerns about oversupply, but it appears it will take quite some time for oversupply to arrive," adding, "For the time being, backlogs are expected to increase gradually."