AI power boom drives $31bn backlog for Korea’s power equipment makers

Global data center expansion is driving a surge in power demand, creating a major opportunity for South Korean power equipment makers as aging grids and supply shortages worsen, particularly in the United States.

According to market research firm TrendForce on Monday, global data center power demand is expected to rise 31 percent this year to 161 gigawatts (GW), with demand expected to grow by more than 30 percent next year.

Artificial Intelligence (AI) servers are projected to account for 33.4 percent of total data center power demand this year, up from 25 percent last year, and 40 percent next year.

The gap between data center power demand and grid capacity is expected to begin widening this year and expand rapidly from 2028.

The United States faces additional pressure from an aging power grid. Its reliance on imports of large transformers with capacities above 10,000 kilovolt-amperes (kVA) has risen sharply since 2022 and now exceeds 90 percent, as domestic production has failed to keep pace with demand.

The U.S. Energy Department estimates that lead times for major power equipment have exceeded two years, while prices for some transformers have increased four- to nine-fold over the past five years.

Korean power equipment makers HD Hyundai Electric Co., Hyosung Heavy Industries Corp. and LS Electric Co., are expanding local production to capitalize on the growing demand. Their combined order backlog rose more than sevenfold from 5.7 trillion won ($4.2 billion) at the end of 2021 to 43 trillion won in the first half of this year.

The three companies’ combined operating margin reached 15.5 percent in the first half, helped by orders from the highly profitable U.S. market.

HD Hyundai Electric established its North American production unit in Montgomery, Alabama, in 2011, becoming the first Korean power equipment maker to build a transformer plant in the U.S.

It held the largest share of the U.S. market for extra-high-voltage transformers above 100 megavolt-amperes (MVA) for the second consecutive year, with a 17.2 percent share in 2024 and 25.7 percent in 2025.

HD Hyundai Electric is investing about 385 billion won to build a second plant on a 29,000-square-meter site in Alabama. Scheduled for completion in April next year, the facility will increase its North American transformer production capacity by 50 percent and add the ability to manufacture 765-kV products.

Hyosung Heavy Industries is expanding production at its Memphis, Tennessee, plant, which it acquired from Mitsubishi Electric in 2020. The facility is the only plant in the U.S. capable of designing and manufacturing 765-kW extra-high-voltage transformers.

Hyosung plans to increase transformer production capacity by more than 50 percent by 2028, with the expanded facility expected to generate more than 850 billion won in annual U.S. sales from 2029.

The company has also partnered with U.S. power infrastructure firm Quanta Services Inc. to establish a local production base for ultra-high-voltage circuit breakers. The joint venture, established in July, will begin manufacturing 72.5-800 kV circuit breakers at Quanta’s Canonsburg, Pennsylvania, plant in October.

Hyosung Heavy Industries’ North American sales exceeded 1 trillion won for the first time last year. In February, it signed a 787 billion won contract with a major U.S. transmission operator to supply 765-kW transformers, reactors, and other equipment, reportedly the largest single project secured by a Korean company in the U.S.

While competitors focus on the extra-high-voltage transformer market, LS Electric is expanding its local production capabilities to strengthen its position in the U.S. distribution equipment market. Distribution equipment is gaining importance as AI data centers require reliable systems for power distribution and circuit protection.

LS Electric acquired a U.S. distribution-panel maker in Cedar City, Utah, in 2022 and opened its Bastrop Campus in Texas, last year, bringing together production research and design capabilities for power distribution equipment.