The power electronics market – made up of devices, components and applications that control motors, provide energy savings and convert currents – is expected to grow rapidly over the coming years. By 2018 it will be worth $217 billion, up from $146 billion in 2012, Roland Berger forecasts. The market’s growth is backed by demand from the electrification of cars, industrial 4.0 transformation and environmental regulation.
In a recent report from Roland Berger, titled ‘Powering Ahead: developments in power electronics mean a prospective bonanza for smart players the strategy’, the consulting firm explores the current power electronic market – in terms of its performance as well as the key economic factors expected to drive future growth in the industry as a whole.
Broadly, the power electronics market is made up of three key segments – electronic components, actuators and system integration. The three segments contain elements such as special materials such as power modules and special float-zone (FZ) silicon ingots, used in the production of special integrated circuits; inverters, drives and converters; and power components such as chips, power modules, chokes and sensors.
Annual growth in actuators is expected to be the highest, at 9%, increasing the total market value from $43 billion in 2012 to $71 billion in 2018. Electronic components come in second, growing at 6% between 2012 and 2018, with market value up from $78 to $112 billion. System integration will see the lowest growth at 5% annually, up from $25 billion to $33 billion. Roland Berger foresees the whole power electronics market to grow an average 7% annually in the same period, to a total market value of about $217 billion by 2018. During this time, margins are also expected to remain healthy, at between 15-20%.
The first major creator of demand is the wider move by manufacturers to implement an industry 4.0 transformation. Industry 4.0 is currently seeing massive investment across Europe and stands to offer manufacturers major advantages in cost and productivity. The transformation of manufacturing into industry 4.0 manufacturing is expected to employ considerable power electronic infrastructure. As many of the new tools will be robotic, demand for such components is expected to increase markedly. This will result in a growing robotics market, up from $34 billion today to $70 billion by 2025. Furthermore, many of the devices used in the creation of industry 4.0 devices and ecosystems will themselves be rigorously tested for their efficiency as the technology aims to make the production process more transparent.
Another area in which demand for power electronics is set to grow is the automotive industry. Sustainability regulations place an emphasis on increasing power efficiency and reducing the use of combustion as a means of generating locomotion. With the rise of electronic vehicles, the demand for power electronics is expected to increase as well. Besides environmental issues driving automotive electrification, companies are considering ways in which to both reduce their costs as well as provide environmental benefits. One such tool is to use power electronic sensors and devices to reduce unnecessary consumption and drive efficiency savings. The massive automotive market and wider environmental demand is expected to create further future demand for the industry.
Staying in the market
Increases in growth and demand are expected to mean different things for different players according to the report. For established players the report highlights that close contact with the needs of customers is key, thereby providing dialogue for possible shared R&D projects. “Demonstrating innovative products and agile, efficient development processes is a way for established market players to emphasise their technology expertise and sustain their quality advantage,” explains Michael Alexander, Partner in Roland Berger’s Engineered Products & High Tech practice. “Aside from that, players should increase their software competency and keep their cost base flexible to make them quicker able to adapt to sudden changes.”
New entrants seeking to capture market share will need a good capital base as well as a niche market in which to operate as well as deliver innovative solutions to companies if they want to hold their own in the market. One way into the market is to enter into a relationship with already existing players to provide a safe haven in which to develop into the market. Creative value for their buyers continues to be a key trait for successful market entrants. “As far as new market players are concerned, we recommend starting out with sufficient resources to enable long-range actions. The competitive power electronics market is an environment where it pays to take the long view,” emphasises Wolfgang Bernhart, Partner in Roland Berger Automotive practice.