The component availability issue was more apparent in premium AC drives over compact AC drives; hence, this has reshaped the LV drives market, allowing compact AC drives to outpace them in 2021.

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Summary

Component shortages affected the low voltage (LV) drives market in 2021 amid the growth rebound. The component availability issue was more apparent in premium AC drives over compact AC drives; hence, this has reshaped the LV drives market, allowing compact AC drives to outpace them in 2021.

Supply chain issues and component shortages persist

Coming to the end of 2022, supply chain issues and component shortages persist and continue to affect the LV drives market. Innovation has taken a backseat, and R&D teams have shifted their focus to redesigning drives so that they better suit the component availability and the requalifying and sourcing of secondary vendors and parts.

In 2021, the growth of LV drives was approximately 13.8%, after experiencing a decline in 2020 owing to the pandemic. The growth of compact AC drives was about 18.3% globally, exceeding the growth percentages of both standard and premium AC drives, which were 13.7% and 11.5%, respectively. This growth is because LV drive suppliers have expanded their portfolio for compact AC drives with higher-priced compact AC drives to mitigate risks amid existing headwinds, such as component shortages, supply chain issues, and logistics issues.

Figure 1: Global market for LV drives by product and 2021 growth rate Figure 1: Global market for LV drives by product and 2021 growth rate Source: Omdia

Component shortage issues severely affected the LV drives market. The negative impact was more apparent in premium AC drives over compact drives, because of their parts’ complexity, with an average lead time of six months. Compact AC drives are still affected by component shortages, but because of their parts’ availability and the use of fewer components, these drives will be produced and delivered to customers with a shorter lead time compared to premium AC Drives.

Customer demand for drives has been so heightened, owing to the pent-up demand caused by the post-pandemic recovery, that they are willing to accept compact drives. A shorter lead time has become the main consideration over pricing, which was what allowed compact AC drives to grow in 2021.

Because LV drive suppliers want to adapt to the LV drives market, they have expanded their portfolio to not lose market share to smaller drive competitors that focus on low-end drive products. As a result of the limited availability of premium AC drives, the new compact AC drives have been redesigned to be distinguishable from the usual compact AC drives, such that they must be sufficient so customers can easily adopt them in place of premium drives.

Through several interviews with global drive suppliers, Omdia has observed an apparent trend of suppliers investing in compact AC drive features that promote high efficiency and have a certain level of connectivity in terms of data collection. They are also considering safety features. They do all this to give advantages to those who opt to purchase their products rather than risk a premium drive’s long lead time.

Opportunities in commercial HVAC and growth in emerging markets

Apart from component shortages, there are other factors that have driven the decision to focus on the compact AC drives portfolio. Commercial HVAC was the largest sector in the compact AC drives market, and this sector has vast opportunities in Asia, especially the emerging regions, mainly driven by commercial construction and infrastructure projects that have restarted since 2020.

According to Omdia’s Low Voltage Drives Report – 2022 Analysis, compact AC drives grew the most in Asia & Oceania (excluding Japan), with a 24% growth in 2021, while the average growth of compact drives in the other regions was 13.5%. Compact and standard AC drives typically take a larger share of the Asia & Oceania LV drives market than other regional markets because of the nature of the LV drives market in said region. Asia & Oceania is extremely price sensitive, more so than other regions, and is also a global manufacturing hub, where there will be high demand from discrete sectors.

Drive manufacturers are targeting to invest in the compact AC drives market in key industries such as the machine building sector, which includes food and beverage and textile machinery. This industry performed extremely well in Asia & Oceania in 2021 thanks to the high domestic and international demand.

Compact AC drives within this region are placed in a very price-sensitive position in a highly competitive market. Because of the competition, drive suppliers have developed lower-end and lower-priced drive products to accommodate the market landscape of this region and to avoid potentially losing market share to other players.

What Omdia expects for the LV drives market in the future

Currently, growing order backlogs and supply chain issues, which are brought about by geopolitical factors, are propelling the LV drives market. Although there have been improvements in the lead time and the customer demand is high, component shortages still pose a threat. Omdia expects the component shortages to be resolved in 2Q23. Once this issue has been mostly resolved, Omdia expects the growth of compact AC drives to eventually slow down as market normalization occurs. Omdia projects the CAGR 2021–26 for compact AC drives to be 4.7%.

Despite the optimism in the current compact AC drives market, Omdia expects the growth in the premium AC drives market to outpace compact AC drives by 2023 because of the rebound in the energy sector and the upcoming investments in the infrastructure sector, which will promote the growth of premium AC drives. Sustainability and decarbonization initiatives around the globe will lead investments in renewable energy sectors and increase the focus on energy-efficient systems in heavy industries. Therefore, the demand for premium AC drives with better specifications will rebound in the next few years.

Figure 2: Global market by product type in 2021 and 2026 Figure 2: Global market by product type in 2021 and 2026 Source: Omdia

Appendix

Further reading

Low Voltage Drives Report – 2022 Analysis (September 2022)

Author

Rachel See, Research Analyst, Electric Motor Systems

askananalyst@omdia.com