The shift in manufacturing to Asia, especially China, to improve cost efficiencies, coupled with China's growing economy is boosting the market demand for AC-DC converters in China, according to a new report released Wednesday from Frost & Sullivan.
The report notes that while demand is showing growth in China, the growth in other Asian countries such as South Korea, Japan and Taiwan, is increasing at a slower pace.
Frost & Sullivan's analysis shows that the North Asia Power Converters and SPS (switching power supplies) market had revenues of $788.8 million in 2005, and is forecasted to reach $1.20 billion by 2012.
"The demand from end-user markets such as consumer electronics, telecommunications and industrial applications acts as a major driver for the AC-DC power converters market," said Frost & Sullivan Research Analyst John Ong. "In addition, the boom in China's manufacturing sector has created a niche for it in the power electronics market which consequently drives demand for AC-DC converters."
China's improved manufacturing capability and its corresponding effects on the power electronics market will probably increase the demand for SPS products, particularly in the low to medium range.
Currently, AC-DC converters are facing substitution from other technologies such as DC-DC converters, which offer better power densities and efficiencies, while SPS products are challenged by shrinking profit margins due to a increases in raw material prices, according to the report
"Due to better power densities and efficiencies of DC-DC converters, there has been a reduction in the use of AC-DC converters in certain applications," explained Ong. "The prices of raw materials such as copper and steel have increased substantially over the past 3 years. As a result, there is a rise in the costs of production for the manufacturers which reduces the profit margins and hampers revenue growth of the market."
The report suggests that companies looking to enter this market should focus on improving and introducing more efficient and technologically advanced products, if they want to capture niche segments of the market, especially in the higher power range.