Korean power equipment manufacturers that have enjoyed an "AI power boom" in North America are aiming for the Middle East as their next target. With orders for transformers and circuit breakers surging on the back of aging grid replacements and data center investments, they do not intend to miss demand for grid restoration and urban infrastructure rebuilding after the end of the U.S.-Iran war.
On the 19th, the industry said LS Electric has begun reorganizing its local order network, centered on its Dubai subsidiary, to capture postwar reconstruction demand in the Middle East. After the management reviewed power infrastructure demand in the region, the company is understood to be conducting preliminary sales targeting power authorities in major markets such as Saudi Arabia, as well as construction, engineering, and procurement (EPC) firms and local power equipment distribution networks.
Power grids are considered the foundational facilities that must be restored first in postwar reconstruction. Other infrastructure such as housing, hospitals, industrial complexes, and ports can return to normal only when electricity is supplied. Power demand in the Middle East is already rising quickly. The International Energy Agency (IEA) projected that power demand in the Middle East and North Africa (MENA) region will increase 50% by 2035 from now.
LS Electric is reassessing its Middle East strategy based on its experience winning substation projects during the grid restoration process after the Iraq War. While more than half of new orders for switchgear and ultra-high-voltage transformers currently come from North America, the company expects demand for distribution solutions and transformers used in future large-scale construction and infrastructure projects in the Middle East to surge.
In the power equipment market, products that have been validated once are often adopted again in subsequent expansions or related projects. The Middle East, in particular, is seen as a market with high import dependence due to its relatively small local manufacturing base for power equipment. An industry official said, "In the Middle East, a network with the power authority must come first, and touchpoints with local power equipment distributors and EPC players are also important," adding, "There is a tendency to reuse products that have been used before, so expanding the customer base is essential."
HD Hyundai Electric, which has a long-standing sales base in the Middle East, is strengthening local order networking by operating Dubai and Riyadh branches in addition to its Middle East subsidiary. Last year, under consolidation, it posted 421.2 billion won, or 10.3% of its 4.0795 trillion won in revenue, from the Saudi Electricity Company. Middle East orders in the first quarter of this year came to $166 million, about 9.2% of total orders. While North American order backlog is the largest at 69.2% of the total, there is an outlook that references secured mainly with the Saudi Electricity Company could serve as a strength in capturing demand for grid restoration and infrastructure rebuilding in the Middle East.
Hyosung Heavy Industries is also focusing on expanding Middle East demand. Currently, the Middle East accounts for around 10% of revenue in the power institutional sector. In a quarterly report disclosed on the 14th, Hyosung Heavy Industries cited Saudi Arabia's "Vision 2030" renewable generation plan and said, "Middle Eastern countries are moving to expand power grids and renewable energy generation, which will increase large-scale orders for power equipment."
In a conference call last month, Iljin Electric cited increased transformer sales in the Americas and the Middle East as the reason for revenue growth in the heavy electric institutional sector. In last year's heavy electric institutional sector revenue, the Americas accounted for 35%, the largest share among export regions, and the Middle East accounted for 9.7%. To respond to rising demand, Iljin Electric is also reportedly reviewing expansion of production facilities at home and abroad.
An official in the power equipment industry said, "North America is currently the core market for power equipment companies, but the Middle East is a market with growth potential as grid restoration and urban infrastructure investment coincide," adding, "Once power equipment enters a market, it is highly likely to lead to follow-up projects, so companies that secure local networks first will have an advantage."