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Energy savings will push global drives sales

01 July, 2003

Energy efficiency will be the key driver of the global AC drives market over the next few years, according to a pair of new market studies. The reports*, from the ARC Advisory Group, predict that the global market for high-power AC drives -- those rated above 40kW - will grow by a compound annual average of 5.7%, from a little over $2.5bn last year, to reach $3.3bn by 2007. Growth at the low-power end of the market (below 200kW) will be slightly slower, averaging 4.7%, and taking global sales from $4.1bn last year to $5.1bn by 2007. (The two reports overlap for ratings from 40-200kW.)

"Increasing energy prices are compelling users to seek equipment, operating methodologies, and technologies that help them to minimise energy consumption and to save on energy costs," says Himanshu Shah, an ARC senior analyst who co-authored the reports. "High-power AC drives are favourably placed as they pay back their costs relatively quickly."

Shah believes that the long-term outlook for the high-power drives market "looks positive, despite the current state of the global economy". These drives are technologically mature and offer "an attractive return on investment with practically no attendant risk," the ARC study suggests.

Several suppliers of high-power drives, whose growth prospects have been constrained by the weak global economic conditions, have expanded their market shares through acquisitions and mergers. Drives suppliers have also been turning to services, such as engineering, installation and maintenance, to boost their revenues. According to ARC, this trend will continue.

Europe is the world`s largest market for high-power drives, fuelled partly by demand from Eastern Europe, and partly by the energy conservation legislation in many countries. ARC regards Asia as "a promising growth market".

The second report, on the global market for smaller drives, reveals that although this is a bigger market, it is growing more slowly than the large drives sector. Again energy-saving is an important factor, but ARC predicts that it is in energy-intensive sectors outside of manufacturing that the strongest growth will occur.

"Declining prices of AC drives, when contrasted against rising energy costs, will shorten the payback period and further accelerate market growth, particularly in power ratings below 40kW," says Shah. As payback periods fall below the critical three-year threshold, sales of sub-40kW drives will benefit.

Another factor propelling this market is that the processing power built into many modern drives means that they can often avoid the need for separate control systems in OEM machinery.

According to ARC, drives suppliers which have relied on their home markets have been hit hardest by the global recession. Those which have forged alliances with foreign suppliers to serve a broader global market, have prospered. These alliances range from co-ordinated marketing arrangements to joint r&d and production.

High energy costs and strong OEM demand in Europe and Japan mean that these markets account for the lion`s share of low-end drives sales. ARC reports that Asia is the fastest-growing market "particularly as the Chinese economy gets into overdrive".

* Low power AC drive worldwide outlook and High power AC drive worldwide outlook. Price: $4,900 each.

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