Even If You Order Now, Delivery Takes Four Years... Why the World Is Seeking Only 'Made in Korea' Power Equipment [Power Industry Transformation] ③

LS supplies 70% of Korea's data centers
Soaring demand for distribution systems with AI growth
Replacement needs for aging infrastructure add to the surge

Editor's NoteThe power industry is emerging as a leading sector for Korea, following automobiles and semiconductors. For a long time, electricity played only a supporting role in the industrial sector. However, with the explosive increase in demand for electricity driven by the proliferation of artificial intelligence (AI) data centers, electric vehicles, and renewable energy, the power industry has become a key player in the globally sought-after K-industry. The four major domestic power equipment companies, including LS Electric, have secured orders worth 33 trillion won. The industry has established itself as a growth engine contributing to exports and job creation. The focus within the power industry is now on how to establish a virtuous cycle. Securing direct current (DC) technology for more efficient power transmission has become a core challenge. This article examines the challenges faced by Korean companies as the power industry undergoes a major transformation.

"Even if you place an order now, delivery will be possible only four years later."

With the surge in demand for power infrastructure, supply bottlenecks for key power equipment such as transformers are becoming more pronounced. This is largely due to the industry's characteristic of manufacturing products like transformers to customer order, rather than producing them in advance for sale, resulting in significantly longer production lead times.

Data center located in Ashburn, Virginia, USA. Photo by Yonhap News.

According to KOTRA's report on the 'U.S. Transformer Market Trends,' the lead time for transformer manufacturing in the United States has continued to increase over the past two years, with standard transformers now taking up to 32 months and large transformers up to 52 months to deliver. The production process for power equipment is complex, involving design, insulation, assembly, and testing, which extends delivery times. A representative from a domestic power company explained, "Orders for transformers have surged due to the expansion of data centers and eco-friendly energy industries. Currently, it takes three to four years from order to delivery, and even if you order now, it will only be delivered four years later."

The bottleneck in transformer production is spreading to distribution equipment needed on-site. Large-scale data centers must draw high-capacity power directly and distribute it to internal equipment. As a result, dependence on not only transformers but also circuit breakers and switchgear is increasing. The 64 MW-class data center completed this year in Yongin, Gyeonggi Province, is equipped with LS Electric's distribution equipment. It receives 154 kV voltage from the substation and supplies it stably, supporting the power stability of ultra-high-density server facilities. As the pace of global data center expansion accelerates, demand for such high-spec power infrastructure is rising simultaneously.

The 'Made in Korea' brand is also greatly benefiting related companies in the global market. This is because Chinese power equipment is increasingly being excluded from global supply chains, making it difficult to secure alternative suppliers. The U.S. government's recent move to restrict Chinese participation in submarine cable projects due to security concerns is a case in point. An industry insider said, "China is being excluded from suppliers due to security issues, but European companies are unable to significantly expand their production capacity. As supply bottlenecks intensify globally, 'K-Power' is emerging as an alternative."

Domestic companies are also accelerating the expansion of their global manufacturing bases. In April, LS Electric completed a North American business support campus in Bastrop, Texas, and LS Cable & System is investing about 1 trillion won to build a submarine cable factory in Virginia, USA. The holding company LS has also decided to establish a joint venture to enter the Indian market. An LS Electric official stated, "Last year, we achieved about 1.3 trillion won in sales in North America. We plan to use the Bastrop campus and our subsidiary in Cedar City, Utah, as our two main production bases to expand global supply capacity." The ongoing bottleneck in power equipment is also increasing the need for domestic companies to expand overseas.

Globally, supply shortages continue to accumulate. According to Mordor Intelligence, the global power equipment market is expected to grow from USD 33.16 billion (about 4.9 trillion won) this year to USD 42.06 billion (6.2 trillion won) by 2030. The trend of expanding power generation facility capacity due to increased net electricity consumption is another factor worsening bottlenecks. The U.S. Energy Information Administration (EIA) expects global power generation facility capacity to increase by an average of 2.0% per year from 2022 to 2050. In particular, the Americas and Asia-Pacific regions are expected to see increases of 2.1% and 2.5%, respectively, leading to even faster growth in demand for transmission and distribution infrastructure.