In recent times, the global power transformer market has experienced increasingly severe supply shortages. According to a report by the Financial Times on January 3, the market, which had traditionally been oversupplied with typical delivery times of 6 to 8 months, is now grappling with a surge in demand driven by rapid growth in data centers. This has extended delivery cycles to 3 to 4 years.

Transformers, critical for adjusting voltage levels, enable electricity to flow efficiently from power plants to end users. Norwegian consultancy Rystad Energy forecasts that the global transformer market could grow significantly from its current size of $48 billion to $67 billion by 2030. Analysts at the firm highlight that transformers represent the most acute supply shortage among key grid infrastructure components. With production expansion facing challenges, the industry is under unprecedented pressure, and shortages are expected to persist at least until the end of 2026.

The Financial Times notes that transformer manufacturing is a labor-intensive process requiring specialized winding machines, which take years to procure and prepare. Manufacturers are cautious about overinvestment. Andreas Hildebrand, CEO of Hitachi Energy—a subsidiary of the world’s largest transformer manufacturer, Hitachi—told the Financial Times that transformer producers are struggling to scale up capacity to meet the growing demand from data centers. He described the industry as “overburdened.” Hitachi Energy plans to invest $6 billion and hire 15,000 new employees over the next three years to expand capacity. Hildebrand believes that the transformer industry is unlikely to face overcapacity issues in the short term.

In June, the U.S. National Infrastructure Advisory Council reported unprecedented supply-demand imbalances for power transformers, posing significant threats to the stability and reliability of the U.S. electric grid. Additionally, the National Renewable Energy Laboratory projected earlier this year that by 2050, the supply of distribution transformers will need to increase by 160% to 260% from 2021 levels to meet the energy demands of residential, commercial, industrial, and transportation sectors in the U.S. The advisory council suggested that boosting domestic production of transformers and related critical components would be the best solution to address supply shortages.

The Financial Times also highlighted the surge in China's transformer exports over the past two years. A report by Zheshang Securities from the first half of this year indicates that Chinese transformer manufacturers benefit from stable raw material supplies, low production costs, and strong technical capabilities. Against the backdrop of a global supply-demand imbalance, Chinese firms are seizing a historic opportunity to expand internationally. In 2022, China's transformer exports reached RMB 37.3 billion, a year-on-year growth of 27%. With the global transformer market expected to continue growing, Chinese manufacturers are poised to increase their market share abroad.

However, there remain barriers for Chinese electrical equipment entering foreign markets, particularly in the early stages. According to a report by Soochow Securities, Chinese transformer companies face challenges such as distribution channels, product certifications, and tariffs when venturing overseas. Nonetheless, the long-term prospects of overseas markets are highly attractive. A research note published by CICC in August noted that China is currently the largest transformer exporter to the EU. With an established performance record and brand reputation, Chinese companies are well-positioned to further penetrate European markets by leveraging their technological expertise and cost advantages.