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Variable Frequency Drives (VFDs) Market in SEA & ANZ to grow over 8.5% till 2021

The Variable Frequency Drive market in the Southeast Asian Region,Australia and New Zealand is poised to grow at a healthy CAGR of 8.5% in the forecast period (2018-2021). The Rapid Urbanization and Industrialization in the region drives the demand for VFD

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Definition / Scope

  • Variable Frequency Drive which is also termed as adjustable frequency drive, “variable-voltage/variable-frequency (VVVF) drive”, variable speed drive, AC drive, micro drive or inverter drive is a type of adjustable-speed drive applied in electro-mechanical drive systems by varying motor input frequency and voltage to control AC motor speed and torque.
  • VFDs can be used for a number of applications ranging from small appliances to large compressors. VFDs when applied in centrifugal load service can make electrical motors in Industrial application efficient(consuming 25% of the world's electrical energy) . VFDs global market penetration is still considered to be low.
  • With the advancement in semiconductor switching devices, drive topologies, simulation and control techniques, and control hardware and software the cost and size of the VFD has been reduced considerably with improved performance. VFDs are made in a number of low-voltage and medium-voltage AC-AC and DC-AC topologies.
  • The global VFD market is poised to reach a market size of USD 24.41 billion by 2021, at a CAGR of 5.87%, from an estimated USD 20.73 billion in 2018.The Countries of South East Asia and Australia,NewZealand is expected to rollick the growth trajectory by posting a CAGR of 7.2% in terms of value and the VFD market is expected to post a growth rate of 8.5%

Types of Variable Frequency Drives

Classification based on the type of drive:

Based on the drive type,VFD is classified into the following types

  1. AC VFD,
  2. DC VFD and
  3. Servo VFD

Of these the AC VFD held market share of 70% of the global variable frequency drive in the year 2014.But the trend is said to discontinue with the penetration of low cost and high performing DC and Servo VFD. It is expected that AC VFD is poised to shed 110 BPS in its market share

Classification based on the voltage range:

On the basis of voltage range,VFD is categorized into

  1. medium voltage range VFD and
  2. low voltage range VFD

The Low Range VFD is expected to post an increase of 7% in terms of revenue.

Classification based on Application Type:

Variable Frequency Drive based on the application type is categorized into the following types:

  1. Standard and
  2. Regenerative

The Regenerative application type is expected to post a higher CAGR growth in terms of both value and volume.

Classification based on power rating:

Based on the power rating variable frequency drive is classified into:

  1. low power drive,
  2. medium power drive and
  3. high power drive.

The low power drive is expected to outperform the market by 2021.The low power drive offers higher energy savings at low cost and improved process control applied across industries such as construction, automation, oil & gas, food & beverage, and pulp & paper.The increase in infrastructure activities in emerging countries would drive the demand for low power drive segment market.

Classification based on end-use application:

By end-use application Variable Frequency Drive is classified into the following types:

  1. Pump,
  2. HVAC,
  3. Fans,
  4. Compressor,
  5. Conveyor and
  6. other

Advantages of VFD

The advantages offered by vfd includes the following:

  1. Energy Savings,
  2. Increased Motor Longevity,
  3. Reduced Power Line disturbances,
  4. Reduced Risk of Motor damage during start and stop and
  5. Elimination of expensive mechanical drive components

Important factors supporting the adoption of Variable Frequency Drives

  • Value Energy usage of any infrastructure project can be reduced by using Variable Frequency Drives.This in turn reduces the energy bills of the end user
  • Comfort The flow of air can be controlled using a VFD and hence can enhance the comfort levels of the residents
  • Health Advanced HVAC system is coupled with VFDs and are implemented to resolve health related issues.
  • Upkeep VFDs reduce the starting torque and stress on the motor,this leads to longer life and lower maintenance costs.
Variable-frequency-drive-market-2.pngVariable-frequency-drive-market-5.png

Market Overview

  • The Southeast Asia,Australia and New Zealand region holds a market share of 30% both in terms of value and volume and is expected to be the lucrative market for variable drive frequency
  • The VFD market in Southeast Asia, Australia and New Zealand is expected to clock a healthy CAGR of 7.2% in terms of value and it is poised to post a growth rate of 8.5%.
  • Expansion of industrial base and manufacturing capacities is driving the growth of VFDs in the Southeast Asia, Australia and New Zealand.
  • The Southeast Asian countries is driven by the emerging economies such as Singapore, Malaysia, Indonesia and Thailand is expected to dominate the variable frequency drives market. Rapid Urbanization and Industrialization are driving the market.
  • Driven by the rapid Urbanization and Industrialization, the countries of Southeast Asia, Australia and New Zealand is the largest market for Variable Frequency Drives among all regions and are expected to continue with their growth path.
Vfd-hotspot4.png

Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet


Top Market Opportunities

  • Opportunities in the Exploration Sector The Oil & gas, metals and mining sector have the need for lowering the energy consumption and to control the Carbon dioxide emission, thereby increasing the need for adoption of Variable Frequency Drive.
  • Opportunities in the Automotive Sector The Variable Frequency Drive is applied for Plug-in and hybrid electric vehicles. The Plug-in and Hybrid electric vehicles or simply PHEVs as they are called shows immense potential for growth in the coming decade. Massive market penetration of PHEVs after 2010 is part of the IEA BLUE Map scenario. PHEV sales per year are expected to reach 5 million by 2020, 25 million by 2030.Thereby showing significant growth potential for VFDs.
  • Opportunities in the HVAC Sector In the HVAC sector the VFD outperforms other types of drives including Eddy current drive, variable inlet vanes, Discharge Damper in terms of energy consumption and serves as the preferred drive for the HVAC sector.
Hvac-vfd.png

Market Drivers

  • Increased Investments from government The Increased investments from the governments of the emerging economies of Southeast Asia, Australia and New Zealand in energy efficiency are expected to augur well for the demand of energy efficient devices thereby increasing the growth of the variable frequency drive market. For Instance, the Government of Singapore has set up Energy Efficiency Fund under the National Environmental Agency to enable companies invest on Energy Efficient Resources and is investing S$ 1 Billion in the first five years to support projects that reduce carbon emissions.The Government of Australia has enforced Local Government Energy Efficiency Program (LGEEP) and has invested US$ 5 Billion for the usage of energy efficient resources. These policies boost the demand for adoption of Variable Frequency Drive.
  • Rising Demand With increasing energy consumption and its unit rate, various industries are now looking for the adoption of variable frequency drives for improved productivity, operation and energy efficiency of machines, this tends to increase the demand for variable frequency drive. Increasing demand for electric motors from various industries such as paper & pulp, marine, discrete manufacturing, cement, and others is likely to increase the demand for VFDs for industrial applications.
  • Upsurge in Energy Prices The rise in the cost of Electrical energy and the increase in the cost of raw materials for generating electrical energy,For instance the electrical energy prices in Singapore has risen from 22.15 cents to 23.65 cents per kwh a rise of 6.9% and similarly in Australia where the energy prices are highest in the world with prices ranging to A$0.50 per kWh, and posting a increase of 130% from last year. This has created the need in the search of energy efficient solutions, VFD has been identified as the solution for the energy crisis, hence the rise in the market of VFD.
  • Focus on Renewable Energy The emerging economies of the Southeast Asia, Australia and New Zealand are focusing on reducing the usage of fossil fuels, consuming electrical energy and enabling efficient usage of electrical energy. The countries of the Southeast Asia, Australia and New Zealand have enforced stringent energy efficiency reforms such as 'Clean Energy', 'Renewable Energy' programmes. These factors have resulted in higher demand for adoption of Variable Frequency Drive which enables efficient usage of electrical energy.
  • Rising Urbanization and Industrialization The Rapid urbanization and industrialization are factors fuelling the demand for variable frequency drives.In the emerging economies of Southeast Asia such as Singapore, Malaysia, Thailand, Taiwan and Philippines there has been high demand for infrastructure with the respective countries clocking 100%, 43%, 40%, 36%, 32% of urbanization rate, This has resulted into higher FDI investments in infrastructure projects, this in addition to the need for energy efficiency has created high demand for VFD.
Urbanization-vfd.PNG

Market Restraints

  • Depleting growth in the Oil & Gas Sector Reduction in the growth of the Oil & Gas sector due to the decline in the oil prices has resulted in the decrease in the exploration and production activities hence acts a restraint on the growth of the VFD market.
  • High Deployment Costs associated with medium voltage variable frequency drives Though the prices of Variable Frequency Drive is in the declining trend, the costs associated with the installation of medium voltage frequency drives is on the upper side. For typical applications of the industrial sector, the costs associated with the deployment of medium voltage frequency drive is expected to be increase in the forecast period.Hence the high price tag of the medium voltage drive is expected to hamper the growth of the Variable Frequency Drive market.
  • Technical Irregularities affecting the growth of the market The technical drawbacks associated with the start and stop of the Variable Frequency Drive is hindering the adoption of VFD, thereby acting as the market restraint.

Industry Challenges

  • Continuous decline in vendors profit margin The increasing price of the raw materials and the production costs of the variable frequency drive is putting a dent on the profit margins of the vendors.
  • Availability of alternative technologies The Availability of alternative technologies such as Eddy Current Variable Speed Drives, variable inlet vanes, Discharge Damper is posing a threat on the growth of the variable frequency drive market considerably.
  • Easy availability at low cost The easy and surplus availability of Variable frequency drive at low cost is a serious threat for the growth of the VFD market.
  • Emphasis on local consumption The local industries and construction players prefer low cost alternatives over VFD, the inability of the vendors to sell VFD to reach the Infrastructure and Industrial players raises questions over the growth of the market.

Technology Trends

Introduction of motor-drive combo packages

The motor-drive combo packages offers matched Simotics motor and sinamics significantly improves the energy efficiency of the VFD by generating high torque with a compact body and are ideal for quick acceleration and response.

Emerging technologies in Variable Frequency Drives

  • Improved power semiconductors like IGBTs (insulated gate bipolar transistors) that are hybrid BJT/MOSFET devices. This can switch off and on hundreds of amperes within thousands of time each second, even when it is controlled by the digital signals.
  • Quicker microprocessor control by utilization of 32-bit microprocessors at the high clock speeds. This in turn allows a regenerative regulator for processing complex mathematical algorithms required for finest control of the power factor, power, motor torque, total harmonic distortion, voltage and current.
  • PWM (pulse width modulation) vector AFC (adjustable-frequency controller) usage speed feedback from motor to the control motoring as well as regenerative torque in linear torque-current area for many drives. Various others utilize complex control algorithms for calculating the motor speed and load, thus reducing the necessity for the motor speed feedback. Nevertheless, these usually have lower reaction compared to designs with feedback.

Factors for Choosing the best Variable Frequency Drive

The following table lists the best Variable frequency drives based on its application

Vfd-best1.PNGRegional breakdown -vfd.png

Pricing Trends

  • Variable frequency drive, also named frequency inverter, variable speed drive etc, is a common device for controlling AC motor in variable speed running to save electricity bills, the pricing is in big differences among different manufacturers & suppliers, It maybe compared in terms of quality & cost before buying a VFD. Generally,cost per hp is decreased along with the VFD capacity increased.
  • From the cost aspect, the vector VFDs generally cost more than general purpose drives, but this difference is shrinking as vector VFDs increase in popularity.

Regulatory Trends

The emerging economies of the Southeast Asia, Australia and New Zealand are focusing on reducing the usage of fossil fuels, consuming electrical energy and enabling efficient usage of electrical energy,The countries of the Southeast Asia,Australia and New Zealand have enforced stringent energy efficiency reforms such as 'Clean Energy','Renewable Energy' programmes.

For instance the Government of Australia has introduced Renewable Energy Target Scheme to meet the renewable energy needs of the country and the Government of Singapore has set up Clean Energy Programme to decrease the usage of fossil fuel for electricity generation. These factors have resulted in higher demand for adoption of Variable Frequency Drive which enables efficient usage of electrical energy.

Market Size and Forecast

  • The countries in the region of Southeast Asia, Australia and New Zealand held the major market share of 30% of the total Variable Frequency Drive market. The Market size held by the region is USD 6.3 Billion in 2018.
  • The countries of Southeast Asia, Australia and New Zealand led the variable frequency drives market in 2018 and this trend is expected to continue till 2021. The Southeast Asia,Australia and New Zealand is expected to grow at the fastest pace among all regions during the forecast period.This growth is attributed to increasing government mandates to conserve electricity through energy efficiency norms and rapid industrialization and urbanization.
  • As the economies of Southeast Asian countries,Australia and New Zealand are reviving from the downturn, rapid growth is expected in the automotive industry, oil and gas, power generation sectors are expected to contribute significantly to the rising demand for VFDs in the region.
  • The rapid industrialization activities in the emerging economies of Southeast Asia,Australia and New Zealand is expected to drive the demand for low voltage VFD in the region.
Vfd-growthrate1.pngVariable-frequency-drive-market6.png

Market Outlook

  • The VFD market in emerging economies is expected to clock a healthy CAGR of 7.2% and the variable Frequency Drive is expected to bolster growth rate of 8.5%
  • The market size of the Variable Frequency Drive in the region of Southeast Asia, Australia and New Zealand is set to increase from USD 6.3 Billion in 2018 to USD 8.05 Billion in 2021.
  • Driven by factors such as stringent norms from the regional governments for energy efficiency, rapid Urbanization and Industrialization,Increased Demand the Variable Frequency Drive market is set to bolster in growth in the region of Southeast Asia,Australia and New Zealand.
  • Demand for VFD is expected to be rising in the Oil & gas exploration sector, metals & mining sector, Automotive sector and HVAC segments of the economy.
Vfd-outlook2.jpg

Competitive Landscape

  • Owing to the presence of large automation vendors, the variable frequency drives market appears quite fragmented. Most vendors offer end-to-end solutions and products and many core vendors provide variable frequency drives to manufacturing industries based on their requirements. Large international vendors currently lead the market based on quality, durability, reliability, and technological innovations.

Competitive Factors

  • New product launches is the most commonly adopted strategy by the top players to attract customers for adopting the Variable Frequency Drive.
  • Adequate Pricing is the apt strategy for attracting the customers of the "price sensitive" region of Southeast Asia, Australia and New Zealand.
  • Offering Value added services such as after-sales service are critical and determines the customer's choice of Drive.
  • A simple user interface and simpler programming would ensure customer satisfaction thereby engendering customer loyalty, which in turn would drive the sales of the Variable Frequency Drive

Key Market Players

The key market players in the Variable Frequency Drive market includes:

  • ABB is a Swiss-Swedish multinational corporation headquartered in Zurich, Switzerland, operating mainly in robotics, power, heavy electrical equipment and automation technology areas. It is ranked 341st in the Fortune Global 500 list of 2018 and has been a global Fortune 500 company for 24 years.
  • Siemens is a German conglomerate company headquartered in Berlin and Munich and the largest industrial manufacturing company in Europe with branch offices abroad.The principal divisions of the company are Industry, Energy, Healthcare (Siemens Healthineers), and Infrastructure & Cities, which represent the main activities of the company
  • Schneider Toshiba is a Japanese multinational conglomerate headquartered in Tokyo, Japan. Its diversified products and services include information technology and communications equipment and systems, electronic components and materials, power systems, industrial and social infrastructure systems, consumer electronics, household appliances, medical equipment, office equipment, as well as lighting and logistics.
  • Rockwell Automation is an American provider of industrial automation and information products. Brands include Allen-Bradley and Rockwell Software.
  • Danfoss manufactures products and provides services used in cooling food, air conditioning, heating buildings, controlling electric motors, gas compressors, variable-frequency drives and powering mobile machinery. The company is also active in the field of solar and wind power as well as district heating and cooling infrastructure.
  • Yaskawa is a Japanese manufacturer of servos, motion controllers, AC motor drives, switches and industrial robots. Their Motoman robots are heavy duty industrial robots used in welding, packaging, assembly, coating, cutting, material handling and general automation.
  • Vacon is a global manufacturer of variable-speed AC drives for adjustable control of electric motors, and inverters for producing energy from renewable sources. The company has headquarters in Vaasa, Finland
  • Converteam manufactures products and provides services used in cooling food, air conditioning, heating buildings, controlling electric motors, gas compressors, variable-frequency drives and powering mobile machinery.
  • Mitusubishi Electric is a Japanese multinational electronics and electrical equipment manufacturing company headquartered in Tokyo, Japan. It is one of the core companies of Mitsubishi.Mitsubishi Electric manufactures electric and architectural equipment, and is a major worldwide producer of photovoltaic panels
  • Fuji perating under the brand name FE, is a Japanese electrical equipment company, manufacturing pressure transmitters, flowmeters, gas analyzers, controllers, inverters, pumps, generators, ICs, motors, and power equipment

Strategic Conclusion

The Variable Frequency Drive market in southeast Asian countries,Australia and New Zealand have to find way to circumvent serious bottlenecks for sustained growth.The availability of cheaper alternative technologies is pricking the growth of the market.The major drawback comes in the form of easy availability of Variable Frequency Drive at lower cost. The major challenge comes in the emphasis on local consumption.

The Rapid Urbanization and Industrialization in the region of Southeast Asia,Australia and New Zealand is expected to fuel the growth of the VFD market. The Variable Frequency Drive market is set to rapidly grow at a CAGR of 8.5% primarily driven by factors such as stringent norms on energy efficiency by the governments of the region,increased demand from the automotive and construction sector.

Factors such as increasing investments from the governments of the region on reforms such as 'Clean Energy' and 'Renewable Energy' programmes, upsurge in Energy prices drives the demand for Variable Frequency Drives.

Further Reading

Appendix

  • USD - US Dollar
  • VFD - Variable Frequency Drive
  • CAGR - Compounded Annual Growth Rate
  • IGBT - Insulated gate bipolar transistors


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