The growing importance of the Chinese variable speed drives market is highlighted in a new study which suggests that it will grow at a compound annual rate of 6.3% over the rest of this decade, to reach $1.87bn by 2010. The market analyst Frost & Sullivan predicts that this rapid growth will attract an influx of new competitors to the fragmented market, which is already served by more than 200 suppliers.

The growth of the Chinese drives market is being driven by a combination of factors including the country`s rapid industrialisation, its expanding local economy and a wider understanding of drives technology.

Pricing is becoming more competitive, helping to expand the potential customer base. "Competitive pressures can be expected to heighten as new competitors move into the market," says Mik Sabiers, Frost & Sullivan`s research manager.

Frost & Sullivan detects three levels of competition in the Chinese drives market. The first tier of European and US manufacturers has concentrated on drive systems rather than product sales, while a second tier of Japanese companies has adopted the opposite approach. Local companies producing low-end drives comprise the third tier and they are now developing more advanced drives.

In the highly fragmented, competitive landscape, only Fuji Electric, Siemens, Mitsubishi and ABB have built reasonable market shares, says F&S. Some prominent local producers, such as Guangzhou Foshan, Ningbo Zhongyi and Shanghai Nanfang, have carved out solid positions in niche areas.

Servos and standard AC drives are expected to dominate demand and revenues in the Chinese market. Servo sales, with a predicted 13.4% annual growth in revenue and a 14.3% growth in units shipped over the period 2003-2010, will show the greatest growth.

The AC drives sector is expected to strengthen its position as the largest sector in revenue terms, rising from an estimated $529.6m last year to $711.3m by 2010.

Unlike other regions, mechanical drives are expected to retain an important role in the Chinese market, partly on the grounds of costs. Similarly, the revenue share of hydraulic drives is also likely to expand.

• Danfoss is investing €25m to expand its manufacturing site in Tianjiin, China - the company`s largest ever investement in Asia. The plant will make drives, and hearing and refrigeration products for the Chinese and export markets. A first phase, covering 8,200m², has been completed and a second 4,200m² phase is being added. Over the coming two years, about 340 extra staff will join the current workforce of 230. Danfoss is also setting up an international purchasing office on the site to source for Danfoss factories globally.