A rise in import penetration will slightly offset increased demand for electrical equipment.
Los Angeles, CA (PRWEB) February 25, 2013
The Electrical Equipment Manufacturing industry was forced to contend with increased competition from abroad and recession-driven declines in demand from downstream customers during the past five years. Nonresidential construction and manufacturing facilities purchase the sophisticated electrical equipment manufactured by this industry. Consequently, in 2009 and 2010 downturns in these sectors contributed to industry revenue plunging. While revenue has been on the rise since 2010, it will decline at an estimated average annual rate of 1.4% during the five years to 2013. “As the economy recovers, demand from downstream industries is expected to continue rebounding, stimulating industry demand,” says IBISWorld industry analyst Caitlin Newsom. Revenue is expected to jump 6.0% in 2013 to reach $44.5 billion as industrial production and construction rates continue to increase. Industry sales have been slow to recover due to a loss of domestic market share to imports. Import penetration has risen due to rising competition from countries with lower wages, which are able to produce industry products more cheaply.
Due to this, many companies transferred some of their production from the United States to lower-cost countries. Imports are estimated to satisfy 49.5% of domestic demand in 2013, compared with 40.8% in 2008. Increasing import penetration has led to plant closures and consolidation, as some domestic operators have been unable to compete with cheaper imports. Consequently, the number of establishments is expected to decline at an annualized rate of 1.1% to 2,246 in 2013. However, due to consolidation, factories closing and companies offshoring to countries with lower wage costs, overall industry profitability improved from 2008 to 2013. According to Newsom, going forward, environmental concerns will drive demand for industry products that are secure and energy-efficient, presenting an opportunity for industry manufacturers. In the five years to 2018, domestic demand for industry products is forecast to increase at an average annual rate of 3.7%, underpinned by growing demand for energy-efficient products and the need to replace aging electrical infrastructure. Over the same period, export growth will rise at an annualized rate of 6.7%, bolstering revenue. However, this will be partly offset by continued increases in imports. Even with this potential setback, industry revenue is forecast to grow through 2018.
The Electrical Equipment Manufacturing industry has a low-level of market share concentration. In 2013, the four largest companies in this industry are expected to account for about 28.8% of industry revenue. This number has increased from 21.7% in 2008 due to a myriad of factors, but primarily because of acquisition activityBecause the market share concentration of the industry is rising, which means firms are consolidating and exiting the market, the industry is likely to be in the declining phase of its life cycle. IBISWorld estimates that more than 2,242 firms will compete for the remaining 71.2% of the market in 2013. For more information, visit IBISWorld’s Electrical Equipment Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
This 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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