Power Dev Power Dev, Nov. issue : 16

NOVEMBER 2011 ISSUE N°3 ANAL YST CORNER Energy-hungry China to fuel inverter powerhouses Government support is set to spawn two or three vertically integrated giants in each industry relying on power electronics, explain Yole Développement’s Brice Le Gouic and Wenbin Ding. I Brice Le Gouic, Market & Technology Analyst, Yole Développement n just seven years between 2000 and 2007, China tripled its total electricity consumption from 1,081 TWh to 3,246 TWh, according to International Energy Agency (IEA) estimates. As the country continues its phenomenal rate of economic growth, the IEA predicts that this fi gure will triple again by 2035. China’s Energy Research Institute predicts that oil demand will grow from 8.7 million barrels per day in 2010 to 13 million barrels per day in 2020, as increased prosperity mobilizes transport. And in 2009, the country’s overall energy consumption eclipsed the US to become the world’s highest, the IEA said. “The stakes are really high for energy today in China,” underlined Yole Développement analyst Brice Le Gouic. “It’s really important for the population and the country.” Feeding China’s growing hunger for energy demands improved infrastructure, but other concerns are interwoven in delivering it. One concern is limiting CO 2 emissions that increased fossil fuel energy use would bring by displacing it with renewable electricity generation, and then using that energy to power transport. The country is already taking steps towards addressing that concern. “The wind market size in China already represents about 26 per cent of the global market, making it the largest national market,” said Wenbin Ding, market & technology analyst. China is also about to become a leading photovoltaic market, Le Gouic noted. Another concern is delivering the desired level of national economic growth that is set to drive the increased energy demand. In its attempt to achieve this, the country is seeking to meet its domestic demands predominantly with domestic production. The companies that emerge can then export their products, bringing revenues into the country. As part of that, China has evolved a strategy seeking to develop and protect its own power electronics industry. “Typically the government is providing fi nancial support to the leading companies inside China,” Le Gouic told Power Dev’. “In industries like photovoltaic power generation (PV), in electric vehicles and hybrid electric vehicles (EV/HEV) or in rail, there are lots of companies manufacturing systems and/or inverters. But the government supports them. For example, in photovoltaics the government provides support, and obviously the manufacturing costs in China are much lower. The overall manufacturing cost that results for the companies is 20 per cent or 30 per cent of that for European or US companies.” The government subsidies are not intended to build a broad, interconnected web of component, module and system manufacturers, however. Instead, ultimately there will be just a few leading companies in each sector, who will be highly vertically-integrated. Shenzhen-based automobile producer BYD is a good early example of the kind of companies that can be expected to dominate in the future. BYD’s vertical integration currently sees its production repertoire embrace batteries, inverters, power modules and diodes, as well as cars. “We think that today there are maybe ten car manufacturers in China, but few of them have this level of integration,” Le Gouic said. “We expect in ten years’ time only two or three of them will remain.” Wenbin Ding, Market & Technology Analyst, Yole Développement Learning from, not committing to, outside suppliers The current government support allows Chinese companies to develop the necessary technology for this kind of strategy. “They are doing their own development while also trying to understand technologies from Europe, the US and Japan,” Le Gouic commented. “For example, in PV and EV/HEV they start off by purchasing IGBT modules, which go inside the inverter, and try to understand the technology. Next, they manufacture the modules themselves, and only purchase the IGBT and diode die, and use their own modules to assemble the inverter. The next step is purchasing silicon wafers, manufacturing the diodes, and only purchasing the IGBT die. The last step is to manufacture the IGBT, which they are not doing at the moment.” Yole Développement predicts that BYD could be the fi rst Chinese company able to produce IBGT dies domestically, exploiting them in EV/HEV applications. However Ding said other possible candidates like Jiaxing-based power module producer Starpower Semiconductor are poised to enter this arena. “There are also some other small companies working on that, like Silvermicro, and POWER Dev’ 16

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