Power-Supply Industry Continues March to Consolidation

May 1, 2007
The power-supply industry is in the throes of acquisitions. In the last few years, some significant ones have taken place: TDK acquired Lambda Electronics;

The power-supply industry is in the throes of acquisitions. In the last few years, some significant ones have taken place: TDK acquired Lambda Electronics; SL Industries, parent of Condor DC Power Supplies, acquired Ault; Emerson Network Power, a division of Emerson, acquired Artesyn Technologies; Power-One acquired Magnetek's Power Electronics Division; Schneider Electric acquired American Power Conversion (APC); Lite-On Technology acquired Li Shin and Logah; and recently, Eltek Energy acquired Valere Power.

All of these acquisitions suggest a major trend toward consolidation of the power-supply industry. Even before these deals took place, the industry was already consolidated in certain business sectors. And even now, the industry remains highly fragmented in other segments, so the level of consolidation and its impact on the industry varies by sector.

Consider three broadly defined sectors of the power-supply industry: universal power supplies (UPS), telecom power and OEM power. Of these three, the UPS sector is the most consolidated. Before the APC acquisition, the top four companies — APC, Liebert (Emerson's division), Eaton Powerware (Eaton's division) and MGE (Schneider's division) — had more than 80% of the market share.

With APC's acquisition, the same market share is now held by the top three power-supply companies. Schneider, with its MGE and APC divisions, now commands about a 50% market share. No other company in the power-supply industry in any major segment can claim such a large market share. Beyond the top three UPS players, most other companies in this segment are significantly smaller and primarily serve niche applications.

Telecom power is the second-most consolidated segment of the power-supply industry. Emerson Electric started this consolidation trend with its acquisitions of highly prominent captive-power divisions of switch/networking manufacturers. They included Nortel, Ericsson and Avansys, a division of the Chinese networking company Huawei.

Later, Emerson acquired Marconi, cementing its role as the largest telecom power company in the world. Eltek Energy's acquisition of Valere has created a $500 million telecom power company, placing itself as a strong second to Emerson. During the last five years, Valere became the fastest-growing telecom power company in the world, with sales reaching $88 million. With this acquisition, the top five companies now command about a 55% market share of telecom power.

In contrast to the UPS and telecom power sectors, the situation in the OEM power segment is very different. That's because of the size of this sector, the number of participants, and the fragmentation of this segment into ac-dc and dc-dc products — many companies make one product type, but not the other. Then too, there's the strong influence of semiconductor companies. The OEM power segment is a $25 billion market, and just the fact that it includes more than 500 participants suggests that the OEM power-supply business has a long way to go before it can be deemed consolidated.

Currently the top 15 power-supply companies in this sector command only about 37% of the market share. And despite all the acquisitions, the market share gained by the top 15 companies has only increased marginally, because of the size of the market and the number of companies involved. So even now, major opportunities remain for acquisition and consolidation.

Also note that relatively few companies participate across all three sectors. The two main companies who have considerable market presence are Emerson Electric and Delta Electronics. Still, their market shares for the entire industry are only about 10% and 7.5%, respectively.

So, where does the power-supply industry as a whole stand today? The two main segments — telecom power and UPS — are highly consolidated, while OEM power is slowly moving toward that ultimate destination. It will accelerate if and when the industry standardizes along a few product lines.

For the last 60 years, the mighty and the meek have co-mingled in the power-supply business, creating an industry structure that could be likened to a chaotic bazaar. Within this open and diverse environment, newcomers like Vicor and Valere were able to prosper with innovation and drive, while behemoths like Zenith and TRW fell. But with further consolidation, the structure of the power-supply industry is likely to undergo fundamental change. And if that happens, will it change its soul, too?

Mohan Mankikar has been a part of the power-supply industry for more than 25 years and has written numerous articles. He can be reached at [email protected].


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