The world market for variable speed AC drives is showing steady, but unspectacular, growth which should see it grow in value from around $6.2bn last year, to more than $7.6bn by 2004. According to the market analyst ARC, the effects of the economic turmoil in emerging markets, especially in Asia, are still being felt even though the worst of the problems are over.

ARC has produced a pair of studies* splitting the AC drives market into low-power (below 200kW) and high-power sectors. It predicts that the low-power sector will experience faster growth in the coming years, driven partly by the new applications which are emerging for lower-cost, but more advanced, drives. The report predicts that the global market for low-power AC drives will expand from $3.8bn last year to $4.8bn by 2004.

Activity in this market, "has turned the corner," ARC reports. "Due to aggressive pricing, and rapid technological advancements, certain segments of the low-power AC drive market are experiencing strong growth."

Before the economic problems in the developing markets, these countries expected to provide the demand that would fuel growth in the global drives market. Although these economies are now looking healthier, Bob Wasylson, a senior ARC analyst who prepared the report, says that "the state of the world economy, short-term interest rates, and the high cost of crude oil are slowing the recovery from the economic crisis". These factors are also limiting growth in the more prosperous regions, he warns.

One result of the earlier problems was that suppliers with large market shares in healthier economies had to contend with stiffer competition as rivals targeted these markets to obtain relief from the problems they were experiencing elsewhere.

Conditions are still difficult. "Suppliers are finding the marketplace especially challenging," reports Dick Hill, ARC`s vice president for Automation Systems and Solutions. "Global competition in the low power AC drive range is fierce."

But, more positively, the falling prices for drives technology are opening up new applications. "The lower costs allow users to address issues such as energy conservation within their plants," Wasylson explains. "Lower capital costs, coupled with energy savings are now enabling a total return on investment of one to five years."

Energy-saving applications are also helping to build the market for drives above 200kW. The second ARC report predicts that sales of these systems will grow from $2.4bn last year to $2.8bn by 2005. Wasylson says that the high-power market will be driven by "higher efficiency, lower distortion, lower costs, smaller footprints and technical advancements".

He sees high-power drives increasingly making inroads into markets that were previously catered for by DC drives, soft starters, contactors and mechanical drives. There will be continuing pressure on prices as a result of the fierce competition in this sector and the falling prices of electronic components, he adds.

Mature economies will provide the main market for larger drives and "will experience steady, but modest growth for the foreseeable future," says Wasylson. He expects developing markets to experience faster growth but points out their revenues are still relatively small.

ABB continues to lead the high-power drives sector, partly because its traditional strength in industries such as pulp and paper. Siemens is in second place, with a business that is the largest contributor to the company`s corporate earnings. Yaskawa, Alstom, and Toshiba also hold significant market shares, according to ARC.

* Low Power and High Power AC Drives Worldwide Outlook. $4,500 each. Details from ARC at info@ARCweb.com.