Hyosung to double transformer output to conquer US market

MEMPHIS, Tenn. -- South Korea’s major power system and machinery conglomerate Hyosung Heavy Industries Corp. plans to nearly double its annual transformer output in the US to over 250 units in two years, gearing up for a surge in transformer demand during the artificial intelligence boom.

Hyosung HICO Ltd., Hyosung Heavy Industries’ transformer-manufacturing operation in the US, plans to ramp up the annual transformer production capacity of its plant in Memphis, Tennessee, to more than 250 units – from the current 130 – before 2027.

In the first phase, it will expand the capacity by 53.5% to 200 units by early 2026, and then over 250 in the following year, which would cost the company hundreds of billions of Korean won (hundreds of millions of US dollars) in total.

After it completes the plant’s capacity expansion, Hyosung HICO is expected to command more than a 10% share in the US transformer market versus last year’s 6%, said Jason E. Neal, president of Hyosung HICO.

Neal projects that Hyosung’s transformer sales and output in the US would beat those of the market’s current top two, Siemens and General Electric (GE), within two years to become the largest US transformer producer and seller.

His confidence lies in the company’s huge five-year transformer order backlog, driven by strong replacement demand for aging power equipment and installation demand from AI-driven new data centers set to spring up across the US.

TRANSFORMER DEMAND WILL REMAIN HIGH FOR A WHILE

A transformer is an essential part of an electrical system as it changes the voltage level of electricity produced by power plants for the efficient transmission of electrical energy. The cost to build each unit ranges from 6 billion to 20 billion won ($14 million).

Hyosung HICO is the only US producer of 765-kilovolt (kV) transformers, which cost about 20 billion won per unit.

The company has recently bagged an order to manufacture the ultra-high-voltage transformer from one of the top five US utility companies.  

Hyosung moved much faster than its competitors in making bold investments to develop ultra-high-voltage transformers while others hesitated, said Hyosung HICO president.

The company’s transformers are highly sought after by its customers in the US, where it has been supplying them to US utility companies since 1999.

Hyosung is expected to win more transformer orders in the US.

The US government under President Donald Trump has decided to simultaneously build more liquefied natural gas (LNG), renewable energy and nuclear power plants to cope with mounting electricity demand from data centers powering AI.

Transformers are required to run power plants and data centers.

Further, over 70% of the US electricity grids are more than 25 years old, meaning that the demand to replace old transformers with new ones is set to increase further in the next decade.

Encouraged by the rosy outlook, Hyosung's cross-town rival HD Hyundai Electric Co. also announced a plan earlier this year to invest about half of its 2024 operating profit, estimated at 720 billion won, to bump up its transformer output at its US plant in Alabama to 150 units a year from the current 100.

NO TARIFFS

Hyosung is poised to win more transformer orders in the US without worrying about tariffs thanks to its transformer plant in Tennessee.

Hyosung acquired the Memphis plant from Japan’s Mitsubishi Electric Power Products for $45 million in 2020 to avoid heavy tariffs the first Trump administration threatened to impose on imports.

The brave investment has proved to be a stroke of genius.

Driven by the increasing price of transformers on their high demand, Hyosung Heavy Industries’ operating profit hit its historic high of 362.5 billion won in 2024, and this year’s profit is forecast to exceed 500 billion won, according to market analysts.

Its operating profit in 2020 stood at 44.1 billion won.

Backed by the strong demand for transformers, Hyosung plans to transform its Memphis plant into a place where it can produce not only transformers but also other power equipment such as industrial circuit breakers and static synchronous compensators (statcom) to beef up profitability, the company said.

Write to Woo-Sub Kim at duter@hankyung.com

Sookyung Seo edited this article.