Increased demand for electrical equipment will be tempered by higher import penetration
New York, NY (PRWEB) March 08, 2014
During the five years to 2014, the Electrical Equipment Manufacturing industry was forced to contend with increased competition from abroad and recession-driven declines in demand from downstream customers. Primary consumers of electrical equipment manufacturing products include industries involved in nonresidential construction (IBISWorld reports 23331 to 23332b) and manufacturing facilities. In 2009 and 2010, downturns in these sectors contributed to plunging industry revenue. Nevertheless, revenue has steadily risen since 2010, and is expected to increase at an average annual rate of 3.9% during the five years to 2014. As the economy recovers, demand from downstream industries is expected to continue stimulating industry demand. Revenue is expected to jump 5.4% in 2014 to reach $46.9 billion as industrial production and construction rates continue to increase.
According to IBISWorld Industry Analyst Sarah Kahn, “Despite improving downstream markets, industry sales have been slow to recover due to a loss of domestic market share to imports.” Import penetration has risen due to increased competition from countries with lower wages, which are able to manufacture industry products at lower costs. In response, many US-based companies have offshored production operations to lower-wage countries. Imports are estimated to satisfy 61.8% of domestic demand in 2014, compared with 40.0% in 2009. Increasing import penetration has led to plant closures and consolidations, as some domestic operators have been unable to compete with less expensive imports. Consequently, the number of establishments is expected to decline at an annualized rate of 0.4% to 2,248 in 2014. However, due to consolidations, factory closures and offshoring, overall industry profitability improved from 2009 to 2014.
Moving forward, environmental concerns will drive demand for industry products that are secure and energy efficient, presenting an opportunity for industry operators. “In the five years to 2019, domestic demand for industry products is forecast to increase, underpinned by rising demand for energy-efficient products and the need to replace aging electrical infrastructure,” says Kahn. Over the same period, exports are expected to rise at an annualized rate of 9.5%, further bolstering revenue. Export growth, however, will be somewhat offset by continued import penetration. Even in the event of this potential setback, industry revenue is forecast to grow over the next five years.
For more information, visit IBISWorld’s Electrical Equipment Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
Electrical Equipment Manufacturing industry manufactures power, distribution and specialty transformers; electric motors, generators and motor-generator sets; switchgear and switchboard apparatus; relays; and industrial controls. Electrical equipment manufacturers sell their products to other manufacturing industries, wholesalers and the construction sector.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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