China’s power equipment firms ride AI-driven boom amid demand from US, emerging markets

The race to develop artificial intelligence has pushed governments and technology giants to build new electricity plants and upgrade their decades-old grid networks, creating significant opportunities for Chinese power equipment companies, according to analysts.\nChinese firms have been benefiting from the spillover of a US order boom, which was driven by US President Donald Trump’s push for tech leaders like Meta and SoftBank to invest in AI infrastructure.\n“The US buys products from Japan and South Korea instead of China amid geopolitical tensions,” said Pierre Lau Hin-tat, China equity strategist and head of Asian utilities and clean energy research at Citigroup Global Markets. “Now the pipeline for Japanese and Korean firms is as long as three years, so companies from emerging markets turn to mainland suppliers.”\nLau added that the upcycle for Chinese suppliers would be sustained “as long as Trump remains the person in charge”.\n\nChina exported US$7.3 billion worth of transformers and US$4.3 billion worth of high-voltage gas-insulated switchgears (GIS) in the first 10 months of the year, up 37.8 per cent and 28.5 per cent, respectively, from a year earlier. That compares with a 5.3 per cent rise in overall outbound shipments.\nTransformers are critical components for transmitting electricity remotely and efficiently, while GIS offers safer solutions to manage electricity and support the integration of volatile power generated by wind and solar energy.\nThanks to strong overseas demand, power transmission and distribution equipment giant Sieyuan Electric, for example, saw its revenue jump about 33 per cent and its net profit soar 47 per cent for the first nine months of the year compared with a year earlier. The Shenzhen-listed company’s exports already surpassed domestic sales in the first half.\nLooking ahead, JPMorgan Chase said leading Chinese power equipment makers, together with their Asian peers, could continue to expand in developed markets over a long cycle.\nThe US, in particular, could face a shortfall of up to 20 per cent from data centres alone until 2028, according to Morgan Stanley’s estimates.\nFurthermore, US transformers had been in use for an average of 38 years, creating an urgent replacement demand, Citi said in a report.\nEmerging markets are also expected to offer growth opportunities. The digital infrastructure market in Latin America was projected to reach US$12.4 billion by 2027, financial advisory firm Delphos said, while Barclays expected the annual foreign direct investment in Asia-Pacific data centres to jump from US$35 billion in 2024 to US$62 billion by 2030.\nIn the first four months of the year, over 60 per cent of sales of Chinese power equipment makers came from Asia, Africa, Latin America and the Middle East, said Weng Xin, a researcher at CSPI Pengyuan, in a note.\nChinese power grid equipment manufacturers were also supported by megaprojects in emerging markets, Weng said.\nIn April 2024, State Grid Corporation of China launched a tender for two direct current converter station projects in Saudi Arabia, with an estimated value of over 3 billion yuan (US$422 million). In the same month, the state-owned power giant signed a franchise agreement to invest US$3.6 billion to build an ultra-high-voltage direct current power transmission line in northeastern Brazil.\nCiti’s Lau said Chinese power grid suppliers received orders equivalent to 12 to 18 months of capacity, compared with up to three years for their Japanese and Korean counterparts.\nLau cautioned that Chinese companies could face slower customer payments for orders from some developing countries, which may hurt their cash flow.\nBut for the long term, JPMorgan projected earnings visibility for Asian power equipment companies at least until the end of this decade, noting that power generation would likely remain a critical bottleneck for data centre growth.\n