Quanning Electric's Forecast for the Frequency Converter Industry in 2013

In 2012, due to the global economic downturn, the frequency converter industry experienced an overall decline. Leading companies saw a drop of approximately 10%–15%, while some small and medium-sized enterprises even faced declines exceeding 30%. As the year draws to a close, the industry’s downturn appears inevitable. Facing the upcoming year of 2013, what changes will occur in the frequency converter market environment, and will there be a turnaround? As a company specializing in the R&D and production of frequency converter-specific contactors, Quanning Electric offers a brief forecast for the 2013 frequency converter industry based on its understanding of the sector and relevant domestic and international factors, for reference by industry players in decision-making.

Quanning Electric believes that 2013 will be a relatively optimistic year, reflected mainly in the following aspects.

**I. Macroeconomic Outlook**  

Most analysts agree that the Chinese economy has bottomed out and is likely to rebound in the fourth quarter. In 2013, China is expected not only to achieve the official growth target of 7.5% but also to drive global economic recovery. As earlier government policies gradually take effect, the Chinese economy will stabilize further, reducing the risk of a hard landing.

After the 18th National Congress, the government is expected to introduce favorable policies such as tax reductions to support private enterprises, which will contribute to macroeconomic improvement. Supported by national energy-saving and emission-reduction policies, the frequency converter industry will accelerate its development amid favorable fundamentals. Therefore, from a macroeconomic perspective, Quanning Electric predicts a positive market environment for the frequency converter industry in the coming year, with overall industry growth expected to exceed 30%.

**II. Price Competition: Increased Participation by Wenzhou Enterprises**  

In recent years, several enterprises from Wenzhou or founded by Wenzhou entrepreneurs have entered the frequency converter industry, such as Chint, Delixi, Renle, and Ziri. Among them, Chint and Delixi dominate the domestic low-voltage electrical appliance market, boasting strong financial resources, extensive experience in price competition, and well-established sales networks. Renle also ranks among the top players in the domestic soft starter industry. With increased R&D investment, continuous improvements in product performance and quality, and their price advantages, these companies are poised to impact the domestic frequency converter market.

Currently, the frequency converter industry is evolving from a landscape dominated by foreign brands over 30 years ago to one where foreign brands remain dominant but domestic brands are growing steadily. Compared to foreign brands, domestic brands hold a clearer advantage in pricing.

From the procurement habits of most users, they either prioritize brand and quality or focus on price and affordability. Domestic first-tier brands face the dual challenge of competing fiercely with foreign brands in the mid-to-high-end market while also contending with Wenzhou enterprises in the low-to-mid-end market on price.

Based on trends in the low-voltage electrical appliance market, Quanning Electric predicts that domestic first-tier frequency converter brands must align their product performance and quality with foreign brands while learning cost-control strategies from Wenzhou enterprises to break through. Otherwise, they risk being squeezed by both foreign brands and Wenzhou enterprises in the near future.

 **III. Product Landscape**  

The theoretical technological gap between domestic and foreign frequency converter enterprises is not significant. However, differences remain in development and production capabilities. As domestic first-tier brands increasingly prioritize R&D and invest more heavily, this gap is gradually narrowing. Currently, domestic frequency converter products are trending from small to large, from low to high, and from general-purpose to specialized applications.

- **From Small to Large**: Refers to the increase in product power ratings. Based on Quanning Electric’s observations, most enterprises focus their R&D efforts on high-capacity products, primarily because low-capacity products offer relatively lower profits, and after-sales service for quality issues can eliminate profits entirely. In contrast, high-capacity products provide slightly higher margins and have become the mainstay for many companies.

- **From Low to High**: Has two meanings. First, products are evolving from low-end to high-end. Second, there is a shift from low-voltage to high-voltage frequency converters. Domestic frequency converters have traditionally been low-end, focusing on low-voltage, small-capacity products. However, in recent years, domestic first-tier brands have increased investment in advanced, high-voltage, and high-capacity frequency converters, achieving notable successes.

- **From General to Specialized**: Refers to the transition from general-purpose to application-specific machines. Compared to foreign companies, domestic enterprises have a shorter history in the electrical drive field, lack flagship products, and do not offer complete electrical equipment packages. Frequency converter technology remains relatively underdeveloped. Although many companies have invested significant resources in R&D, efforts are fragmented, failing to form a cohesive technological advantage or scale. Generally, frequency converters require 3–5 years to mature, and their reliability and stability must be proven through practice and time.

Most domestic frequency converters imitate foreign products, lacking innovation, and currently cannot compete with foreign brands in quality. To address these shortcomings, many frequency converter manufacturers avoid general-purpose models and focus on specialized ones, achieving commendable results. Examples include frequency converters for water supply, elevators, central air conditioning, and machine tools. These specialized products have captured a certain market share, and their development prospects should not be underestimated.

 **IV. Brand Competition and Market Trends**  

The main brands currently active in the domestic frequency converter market include:

1. **European Brands**: Represented by ABB, Siemens, Schneider, and Danfoss. They hold about 30% of the market share, primarily in the high-end segment. Due to pricing pressures and the gradual improvement of domestic product performance, European brands are expected to gradually lose market share, with some segments being taken over by domestic brands.

2. **Japanese Brands**: Represented by Fuji, Mitsubishi, Yaskawa, and Sanken. Japanese companies entered the Chinese market early and introduced products tailored to local conditions. They still hold about 30% market share, and some Japanese brand frequency converters are priced lower than domestic ones, making them highly competitive. However, recent tensions in Sino-Japanese relations, especially following the Diaoyu Islands incident, have led to a decline in the market share of Japanese brands. Domestic brands should seize this opportunity to capture market share quickly. Otherwise, some Japanese customers, such as state-owned enterprises and government departments with ample budgets, may opt for European brands, while others might turn to Taiwanese brands.

3. **Taiwanese Brands**: Represented by Tai’an, Delta, and Puchuan. They hold about 10% of the market share. Taiwanese brands focus on mid-range products with moderate pricing and stable operations, and their market share is expected to remain steady.

4. **Domestic Brands**: Represented by Invt, Inovance, Euratech, Hiconics, and Zhongshan Mingyang. They hold about 30% of the market share, mainly in the low-to-mid-end segment. Although there is a technological gap between domestic and European/American companies, it is gradually narrowing. From a procurement perspective, many large domestic enterprises, especially private ones, prefer domestic frequency converters due to their significant price advantages over foreign brands. In contrast, government and military sectors often prioritize brands and tend to purchase foreign products. Therefore, domestic frequency converter manufacturers should strengthen their sales efforts toward government and military enterprises, developing products tailored to their needs to capture a larger share of this market.

Domestic frequency converter enterprises are primarily concentrated in Shenzhen and East China, with notable companies also in Shandong and Beijing. In recent years, Shenzhen has seen rapid growth in frequency converter enterprises. Besides industry leaders Invt and Inovance, companies such as Yineng, Lanhai Huateng, Alpha, and Sinexcel have also developed rapidly, gaining market influence. However, overall, domestic frequency converter companies remain relatively small in scale, lacking heavyweight players capable of dominating the market.

In the long term, as domestic enterprises continue to improve their product technology and performance and expand their brand recognition, world-class frequency converter companies are sure to emerge in the near future.

**Conclusion**  

Quanning Electric has always been committed to creating internationally leading frequency converter-specific contactors, continuously improving product technology, and ensuring stringent quality control. With the company’s development, Quanning Electric’s series of frequency converter-specific contactors are gaining increasing recognition and adoption by customers. Moving forward, Quanning Electric will strive to provide customers with more advanced, reliable, and high-quality products.