The global site of the UK's leading magazine for automation, motion engineering and power transmission
23 September, 2021

Component and transport woes raise VSD prices by 2–5%

06 July, 2021

Prices of variable-speed drives (VSDs) have risen by 2–5% as drives manufacturers continue to battle component shortages, rising materials costs and transportation problems. The latest analysis from Interact Analysis suggests that high-performance drives, which need more powerful processors, have been hit harder than general-purpose drives which use simpler processors that are easier to source.

According to Interact, revenues in the global drives market fell by 5–10% in 2020 as a result of the Covid-19 pandemic. While the first half of the year saw a steep drop in sales, many suppliers experienced a strong performance during the second half of the year.

Now, as economies reopen, the after-effects of Covid-19 are becoming “glaringly apparent”, according to Interact analyst, Brianna Jackson. Global shutdowns hindered production around the world, she says in a blog, leaving manufacturers unprepared to meet the increase in demand when markets started to bounce back.

Almost all drive components are experiencing shortages and/or raised prices, according to Interact. This means that end-product lead times and prices are rising as drive suppliers work to protect what margin they can, while continuing to serve their core customers.

The semiconductor shortage is continuing to be a major concern for drives manufacturers. As many major economies return to a sense of normalcy, demand for semiconductors is rising sharply, while supplies are still lagging.

Global semiconductor production rose during 2020, despite Covid-19, and has continued to grow in 2021, but the industry is still unable to produce at levels to satisfy demand.

As well as affecting the supply of the IGBT power devices that are vital to drives, the semiconductor shortage has also affected the availability of microprocessors. Research by Interact suggests that general-purpose drives are better protected from the semiconductor shortage than high-performance systems because their components are easier to source.

One problem faced by drives suppliers has been the soaring cost of container transport

Interact predicts that the product mix in the drives market will skew towards general-purpose drives, while high-performance drives will continue to face component sourcing issues. It expects this to be a short-term issue that will be resolved as the situation begins to normalise. The supply chain is also experiencing price hikes for materials such as steel, copper and even cardboard.

These trends have left drives suppliers resorting to spot buying to procure components and materials. One work-around that is gaining increased traction is re-branding. Some drives suppliers that have coped better with the supply problems have found a new revenue stream offering products for rebranding to suppliers that are struggling to produce their own.

The cost of transporting goods has become another major headache with drives vendors having difficulty securing shipping containers, as well as facing double-digit increases in transportation costs. The situation was made worse by the blockage of the Suez Canal earlier this year, and the price for hiring a 40ft container has risen nearly four-fold over past year, recently peaking at around $6,000.

The rising transportation costs, coupled with component shortages, have caused drive suppliers to pass the costs onto consumers, raising drives prices by 2–5%.

Interact Analysis:  Twitter  LinkedIn




Magazine
  • To view a digital copy of the latest issue of Drives & Controls, click here.

    To visit the digital library of past issues, click here

    To subscribe to the magazine, click here

     

Exhibition

Drives Show 2022The next Drives & Controls Exhibition and Conference will take place in Birmingham, UK, from 5-7 April, 2022. For more information on the event, visit the Show Web site

Poll

"Do you think that robots create or destroy jobs?"

Newsletter
Newsletter

Events

Most Read Articles