Chinese VFD (Variable-frequency Drive) industry develops gratifyingly with an annual growth rate of over 15%

The VFD (Variable-frequency Drive) industry has a history of 20 years in China, and the market scale is expanding year by year. In 2008, the total market capacity of high, medium and low voltage VFD (Variable-frequency Drive) was close to 15 billion, with about 140 domestic and foreign brands. There are thousands of companies engaged in agency sales and secondary development. In terms of the number of brands, domestic brands account for more than 70%, but the market share is only about 24%. Although the market share of domestic brands is expanding rapidly, most of the market is still occupied by more than ten European and American brands and Japanese brands. At present, the industry has begun to take shape, and the development potential is very considerable. Industry insiders believe that China's VFD (Variable-frequency Drive) market will reach saturation in the next 10 years, during which the annual growth rate of the market will remain above 15%. But in 2009, due to the impact of the financial crisis, the growth rate of industry market capacity will slow down significantly.

Development characteristics of Chinese VFD (Variable-frequency Drive) industry

In the 1980s, foreign-funded VFD (Variable-frequency Drive) products began to enter the Chinese market. With the rapid development of Chinese economy and the enhancement of people's awareness of energy conservation and environmental protection, the application of VFD (Variable-frequency Drive) in the industrial field has become more and more popular since the 1990s. , the scale of the industry has expanded rapidly. Chinese VFD (Variable-frequency Drive) industry mainly shows the following characteristics:

The industry scale and application fields continue to expand

In 1993, the market capacity of VFD (Variable-frequency Drive) in China was less than 400 million yuan. By 1999, it had reached 2.8 billion yuan, and in 2008, it was close to 15 billion yuan. With the expansion of the market and the diversification of user demands, the functions of VFD (Variable-frequency Drive) products in the Chinese domestic market have been continuously improved, the degree of integration and systemization has become higher and higher, and the operation has become more convenient. Specialized VFD (Variable-frequency Drive) products for some industries. In addition, the application field of VFD (Variable-frequency Drive) is also expanding. From the perspective of medium and low voltage VFD (Variable-frequency Drive), from factory production and processing equipment to central air conditioning, from heavy machinery to light textile industry, from 0.4 Motors with low power of kilowatts to high-power motors of thousands of kilowatts have been widely used, and significant economic benefits have been achieved.

Compared with foreign brands, domestic brands have a certain gap in technology

The strength of Chinese VFD (Variable-frequency Drive) supporting industry is relatively weak. Generally speaking, Chinese domestic brands have a gap with foreign brands in terms of technology, processing and manufacturing, industrial design, and financial strength, especially Siemens. Compared with the two giants of ABB, the gap is more obvious. At present, the market share of foreign brands in Chinese domestic medium and low voltage VFD (Variable-frequency Drive) market is basically the same as in 2007, still maintaining at about 76%. industry) and other factors, the industry concentration of the top ten foreign-funded enterprises has increased, especially the share of industry-leading brands has further expanded. Most of the local VFD (Variable-frequency Drive) enterprises mainly focus on V/F control products. For products such as Vector VFD (Variable-frequency Drive) with superior performance and high technology content, most domestic enterprises have not developed mature VFD (Variable-frequency Drive) products. product. Although some outstanding domestic brands such as Shenzhen INVT and Chengdu Sunwoele have launched vector VFD (Variable-frequency Drive) products and made breakthroughs in some market applications, compared with international giants, their product types and specifications There is still room for further enrichment and enrichment.

The share of local brands has expanded rapidly, and the strength of local dominant brands has increased rapidly, but most of the market share is still attracted by the huge potential of the top ten foreign brands occupying the Chinese market, such as Siemens, ABB, Mitsubishi, Yaskawa, etc. China's domestic VFD (Variable-frequency Drive) market started with the entry of foreign brands, and foreign brands were preconceived. With the rise of local brands, the market share of domestic VFD (Variable-frequency Drive) enterprises has gradually expanded, especially in recent years, the trend of accelerating the replacement of foreign brands has appeared. In 2005, the share of domestic brands in the medium and low voltage VFD (Variable-frequency Drive) market was only about 15%, which reached 20% in 2006, and further expanded to 24% in 2007; Many of the basic engineering construction projects of the company are the traditional dominant markets of the leading VFD (Variable-frequency Drive) brands in Europe and the United States. The domestic brands failed to continue to expand their power and continued to maintain a market share of 24%.

Even so, the share of domestic brands has surpassed that of Korean brands, Taiwanese brands, and even Japanese brands that dominated the Chinese market in the 1990s, forming a triad of European and American brands, Japanese brands, and domestic brands. According to this trend, it is entirely possible for domestic brands to surpass European and American brands in market share in the next five years or so (in the high-voltage VFD (Variable-frequency Drive) market segment, domestic brands have already achieved this surpassing).

So far, there are about 40 foreign brands in the Chinese market, of which there are more than ten active foreign brands. At the same time, about 100 domestic brands have emerged. These VFD (Variable-frequency Drive) manufacturers are mainly concentrated in coastal open provinces and cities such as Guangdong, Shandong, Jiangsu and other places. Shenzhen INVT, Chengdu Sunwoele, and Shenzhen Huichuan Technology have all launched relatively mature vector products. Among them, Shenzhen INVT also has mature medium-voltage vector products. Last year, it developed a high-voltage VFD (Variable-frequency Drive). -frequency Drive) has become the first Chinese domestic brand supplier of the world's port machinery giant Zhenhua Port Machinery, and its comprehensive product line has surpassed that of well-known foreign brands such as Mitsubishi and Emerson; frequency Drive) has also achieved initial market success, successfully entering the advantageous industries of Japanese brands such as wire drawing machines, elevators, and machine tools, showing strong market competitiveness.

Brief Analysis of Chinese VFD (Variable-frequency Drive) Industry

According to the voltage level of the motor equipped with VFD (Variable-frequency Drive), the VFD (Variable-frequency Drive) market is subdivided into three parts: low voltage, medium voltage and high voltage. In 2008, China's VFD (Variable-frequency Drive) market totaled nearly 15 billion yuan, of which low-voltage VFD (Variable-frequency Drive) was 9.77 billion yuan, and medium-voltage VFD (Variable-frequency Drive) was 1.41 billion yuan (the sum of the two). 11.18 billion yuan), the two together account for about 76% of the total market, and the remaining 3.5 billion yuan is high-voltage VFD (Variable-frequency Drive). Regardless of the number of brands and manufacturers or the breadth of product applications, the industry representativeness of medium and low voltage VFDs (Variable-frequency Drive) is far from that of high voltage VFDs (Variable-frequency Drive). (Variable-frequency Drive) products are the focus of this market research. This section will briefly analyze the current situation of China's medium and low voltage VFD (Variable-frequency Drive) industry from the following five aspects, among which the production enterprises mainly refer to domestic enterprises.

Supplier of VFD (Variable-frequency Drive) manufacturers

Both upstream and downstream companies in the supply chain of an enterprise will have a positive or negative impact on its operations. For local medium and low voltage VFD (Variable-frequency Drive) companies, their suppliers can be roughly divided into two categories:

The first type of suppliers mainly provides shell materials and ordinary

Electronic components, such as chassis, cooling devices, reactors, filters, braking resistors, circuit breakers, relays, etc. Such suppliers are mainly from China, the number is relatively large, and the impact on VFD (Variable-frequency Drive) manufacturers is relatively small. VFD (Variable-frequency Drive) manufacturers generally have more choices, and choosing different brands has little impact on the quality of their final products and production costs, so the bargaining power is relatively strong.

The second type of supplier provides IGBT, the core power device of medium and low voltage VFD (Variable-frequency Drive) products. IGBT is a power semiconductor product. China started relatively late in this field. Several large domestic brands generally use imported products from Germany and Japan, especially the two major brands of Infineon and Mitsubishi. In addition to Infineon and Mitsubishi, there are several companies in Germany and Japan that are engaged in IGBT business. Their existing products can replace Infineon and Mitsubishi, but Infineon and Mitsubishi have some device specifications that are their existing products. Not in the product line. There are also four or five Chinese domestic companies supplying IGBTs in China, but the production and sales are still small in comparison. On the surface, companies in this industry have to rely mostly on imported products from Infineon and Japanese Mitsubishi, and their bargaining power is weak. But in fact, the more powerful VFD (Variable-frequency Drive) companies often have a variety of product solutions, and can use different brands of IGBTs without too much dependence on a certain brand. Moreover, with the development and changes of product technology and related markets, the survival pressure of several IGBT brands that are emerging at present is increasing, which is forming a stronger impact on the market shares of Infineon and Mitsubishi; The first generation of products adopted standardized design, the compatibility of each brand has been greatly improved, and the replacement is more convenient; at the same time, Chinese domestic enterprises have made rapid progress, and their mass-produced products can already replace imported products from Germany and Japan.

Therefore, the procurement risk of local VFD (Variable-frequency Drive) enterprises has been reduced a lot compared with three years ago. According to this trend, it is expected that this risk will continue to decrease in the future.

The market structure and development trend of the IGBT industry are more favorable to VFD (Variable-frequency Drive) manufacturers. First of all, Japanese Mitsubishi and Germany's Infineon, the two mainstream IGBT suppliers in the market, have the same market share and technical level. Although the two together account for 70-80% of the world's IGBT market, they are mutually restrained, and they are not in the IGBT market. The possibility of a market monopoly. Secondly, TYCO and other small and medium-sized brands have also successively launched many new products. Their comprehensive product performance has approached or even reached the level of similar products from Mitsubishi and Infineon. They have expanded their market shares by reducing prices and promising better after-sales service. Third, Chinese domestic IGBT companies are growing rapidly. Although the scale of several IGBT companies founded by returnees is not large at present, many products can replace Mitsubishi and Infineon.

Since 2007, the IGBT market price has shown an obvious downward trend, which is mainly due to the development of technology, the increase of supply channels, and the intensification of market competition. VFD (Variable-frequency Drive) enterprises have become more and more proactive in purchasing IGBT devices.

VFD (Variable-frequency Drive) users

The needs of users play a decisive role in the development of production enterprises and directly affect the profit rate of an industry. At present, the users of medium and low voltage VFD (Variable-frequency Drive) products in China are mainly domestic users, and they are distributed in many economic fields, such as plastics, chemicals, building materials and so on. Although the products of individual excellent brands are exported abroad, the overall export ratio of the entire industry is still very limited.

In the medium and low voltage VFD (Variable-frequency Drive) market, China has a large number of state-owned industrial groups as users. Although the VFD (Variable-frequency Drive) industry has been developing in China for 20 years, it is still immature and many market segments are yet to be developed. Considering the current installed capacity of AC motors in China and its VFD (Variable-frequency Drive) assembly rate, the market potential is still huge. Industry insiders generally believe that China's VFD (Variable-frequency Drive) market will become saturated and mature after at least 10 years, and the average annual growth rate of the market during this period will be around 15%.

As a power control device, VFD (Variable-frequency Drive) is a key device. Users generally take product performance, quality reliability, timeliness of after-sales service, and comprehensive performance-price ratio as the main considerations when purchasing, with better performance and stable quality. . VFD (Variable-frequency Drive) manufacturers with a certain brand foundation and service network scale have strong bargaining power.

Entry barriers in Chinese VFD (Variable-frequency Drive) industry

If the entry barriers of an industry are high, it means higher profits for existing companies in the industry, and it will also attract capital from outside the industry to enter the industry to compete, reducing profits.

In developed countries such as Europe, America and Japan, because the VFD (Variable-frequency Drive) market is very mature, its market is dominated by about ten companies, and the entry cost of potential external competitors is high. However, due to the particularity of Chinese national conditions, the industrial development started late, the management and operation experience of the early market economy system was insufficient, and the laws and regulations were not very sound. Therefore, Chinese domestic brands have emerged in large numbers. From 2005 to 2008, as the performance of a few leading Chinese brands gradually approached or even reached the level of well-known foreign brands, the market share continued to expand, while market prices continued to decline, and some smaller brands began to be eliminated from the market, Chinese VFD ( Variable-frequency Drive) industry is transitioning from the early stage of development to the mature stage, and the current industry entry barriers have also changed from "lower" to "higher" before 2005.

In the medium and low voltage VFD (Variable-frequency Drive) industry, economies of scale are very important. Only when an enterprise has a certain production scale can it be possible to effectively reduce product costs and improve competitiveness. Before 2004-2005, due to the rapid expansion of the market, some medium and low voltage VFD (Variable-frequency Drive) production enterprises had only workshop-style production scale, and some enterprises did not even have the necessary testing equipment, but they were still able to survive and have a good performance. benefit. With the gradual maturity of the industry and the intensification of market competition, the market price has dropped significantly.

Judging from the current competitive situation, even if an enterprise that has not formed a certain scale can barely survive in the industry, it is difficult to adapt to the current increasingly fierce market competition. On the other hand, the cost advantage of large enterprises has been formed, and the profits are becoming increasingly meager; there is no extra capital to invest heavily in R&D to achieve product upgrades. The low level of product technology in turn affects product profitability and customer reputation, resulting in a serious lack of development. Persistent. Therefore, from the perspective of economies of scale, the entry barriers of Chinese medium and low voltage VFD (Variable-frequency Drive) industry have changed from low to high.

VFD (Variable-frequency Drive) is a high-tech product involving power electronics, control and information industries. No matter in theory, design process and manufacturing process, the production of medium and low voltage VFD (Variable-frequency Drive) requires high technical level and accumulation of experience, so it has high requirements for the talent team, and its R&D team needs to be in Software, hardware, structural design and other aspects have high theoretical and practical level, experienced technical personnel. Relatively speaking, it is very difficult for new entrants to acquire and combine such a talent team. Therefore, from a technical point of view, Chinese medium and low voltage VFD (Variable-frequency Drive) industry has a high entry threshold.

In addition, new entrants to the industry have to consider sales channels. First, industrial products are different from consumer goods, and it is difficult to quickly establish channels. If you want to enter existing channels, the cost of substitution is huge. Especially the top foreign brands, with their outstanding quality and performance, have already established themselves in the Chinese domestic market. achieved high brand loyalty. In this case, it is difficult for new entrants to gain effective sales channels. Second, although the application fields of medium and low voltage VFD (Variable-frequency Drive) in China are broad and the market potential is huge, new entrants in the industry need to have a certain amount of capital as the backing in the early stage of opening up new markets and sales channels to gradually Adapt to the long initial payment cycle for agents. Therefore, from the perspective of sales channels, the barriers to entry in this industry are relatively high.

On the whole, in the early stage, due to the immature domestic medium and low voltage VFD (Variable-frequency Drive) market, high product prices, and limited user knowledge of products, it was relatively easy for new entrants to make profits and develop, so entry barriers Not high, which is one of the main reasons why there are so many domestic brands. With the maturity of Chinese domestic market and the intensification of competition, the barriers to entry have been greatly increased in the past two or three years, and a large number of existing smaller brands are destined to be gradually eliminated by the market.

Alternatives to VFD (Variable-frequency Drive) products

In terms of performance and efficacy of medium and low voltage VFD (Variable-frequency Drive) products, there are no alternative products and technologies with the same or similar functions. VFD (Variable-frequency Drive) is considered to achieve energy saving and improve process control through motor speed regulation. The best choice for level.

Competition in Chinese VFD (Variable-frequency Drive) industry

Overall, the competition in Chinese medium and low voltage VFD (Variable-frequency Drive) industry is becoming increasingly fierce. First of all, Chinese VFD (Variable-frequency Drive) market is very attractive, with not only large market capacity, but also considerable potential capacity, attracting many industry players. According to statistics, there are currently about 140 brands including foreign and domestic capital in Chinese domestic VFD (Variable-frequency Drive) market, as well as thousands of companies engaged in product sales and secondary development.

Secondly, the homogeneity of products is mainly the backward V/F control products, and the price competition is increasingly intensified. Many Chinese domestic small and medium-sized brands can only produce V/F products. The backward control method makes it impossible for them to enter the high-end industry-specific VFD (Variable-frequency Drive) field with strong profitability. Price competition is often regarded as the most effective market means. Many small and medium-sized brands that do not have the advantage of scale will become more and more difficult to survive.