Do you all remember that at the Bosch Internet Conference in March 2024, Elon Musk said something like this: “The chip shortage is over, and transformers will become the next hot commodity, with China being the biggest beneficiary.”
At that time, many people thought he was just speaking casually and didn’t take it seriously, but now his words have indeed become a reality.
Unexpectedly, following semiconductors, another item is now in global demand!
In fact, it’s not surprising when you think about it. Just consider how quickly artificial intelligence and electric vehicles are developing; everything requires electricity, right? Once electricity is involved, transformers become essential.
However, in the past, transformers had a low profile in the power grid, not even considered an important supporting role, so there weren’t many manufacturers.
Now, all of a sudden, they have become highly sought after, and it’s hard to find enough ready-made ones!
So, what exactly can transformers be used for? Is it necessary to use them for electricity? We don’t see them in our homes, do we? It’s precisely because we don’t use them at home that people are not very familiar with them.
Let me explain this way: think of a power plant as a water plant by a big river, the power lines as water pipes spread throughout the city, and the pressure regulator in the pipes as the transformer in the circuit.
Take the Three Gorges Hydropower Station (power plant) as an example; it needs to use super thick main pipes with super strong pressure (high-voltage transformers) to transport water to various provinces and cities.
Once the water reaches the provinces and cities, it needs a large pressure regulating station (high-voltage substation) to reduce the pressure before being distributed to districts and counties, and finally to users’ homes.
Look at the phone charger that we all use; it’s actually a transformer that reduces the 220 volts from the socket to the 5 volts that the phone can accept.
See, transformers are not unused at home; they are just hidden in every link of the power grid, concealed within various electrical appliances, and we rarely notice them.
At this point, some may ask, why have transformers suddenly become hot commodities? Why was there not such a high demand before?
This question is also easy to answer; the root cause lies in the energy transition.
Have you noticed that solar and wind power are developing rapidly? Electric vehicle charging stations are everywhere, and data centers are consuming massive amounts of electricity for AI computing power.
These electricity-hungry beasts connecting to the power grid definitely need transformers to stabilize voltage and regulate current.
At the same time, there is also the urgent issue of aging power grids that need to be addressed.
Globally, about 70% of power grid equipment shows significant signs of aging and has exceeded its service life.
Take the United States, for example; transformers in their power grid should normally be replaced after thirty to forty years, but many are still working hard.
Therefore, even without new demand, the replacement of these old devices represents a significant quantity.
From this trend, it appears that the global demand for transformers will only increase, and through some related data analysis, it is expected that in the next decade, as the demand for transformers rises rapidly, Western countries will struggle to keep up with supply, further confirming Musk’s prediction of a “global rush for transformers.”
Looking at the supply issue, it is indeed very tricky. Trying to build new factories to increase production is not very realistic, as it takes at least three to four years from planning to production, which cannot solve the immediate problem.
Western countries have a huge gap in transformer orders and cannot produce them quickly, so they can only rely on imports.
And our country happens to be the largest transformer production base in the world, not only producing quickly and efficiently but also offering lower prices than similar products from other countries, making China the first choice for importing transformers.
This year, our country’s total transformer export has already reached 29.7 billion yuan.
Some may wonder how China has become so powerful in this regard. This is mainly because we have an abundance of the core materials for transformer production, copper and silicon steel, which means we won’t face the same supply chain issues as with chip production. This allows for complete freedom in production; as long as you pay, we can produce as much as you need.
However, producing transformers requires over a hundred processes, many of which need manual or semi-manual work for precise stacking, winding, and insulation treatment, so production speed cannot be too fast.
Although transformer orders are continuously coming in, we are not satisfied with just selling products; we are also focusing on technology to make our products safer and more environmentally friendly.
Additionally, besides selling products, we also have a technology output business, which involves helping customers upgrade their power grids on-site.
Companies like TBEA, XD Group, and Baobian Electric, which are strong leaders in our country, have been carefully cultivated and are now among the top ten globally, becoming industry giants.
These companies, which make us proud, not only secure huge product export orders but also establish production bases in the United States, Mexico, Poland, and other countries, saving a lot on tariffs. Isn’t that a very smart move?
Even more impressive is that these companies have not fallen behind in technology research and brand building; they are now the technological leaders in the global transformer industry, no longer just factories competing on price.
Did you know? The world’s first 500 kV plant-insulated oil transformer has already been put into operation in Guangdong.
This transformer uses plant oil, which is both environmentally friendly and renewable, instead of the traditional mineral oil.
Even the environmentally strict markets in Europe and the United States have given it high praise.
According to relevant data, over 70% of the transformers exported from our country this year are high-efficiency and energy-saving models (with energy efficiency levels of Class 2 and above).
Moreover, there’s even more exciting news: the State Grid and Huawei are working together to integrate AI algorithms and big data technology into transformers. By utilizing sensors and cloud analysis technology, they can remotely monitor the operating conditions of transformers and achieve intelligent maintenance and fault warning, greatly enhancing the stability of the power grid.
Once this smart transformer produced by our country hit the market, it received high recognition, and our companies’ order amounts surged, with contracts from Europe and the United States exceeding 140 contracts.
This truly confirms Musk’s statement that “China may become the biggest beneficiary.”
In fact, this is not that Musk can predict the future; rather, he keenly realized that the energy transition will undoubtedly become an inevitable trend in social and technological development.
How long can the global transformer industry maintain its prosperity? Regarding this question, some experts have analyzed and judged that the tight supply-demand situation for transformers is expected to last until the end of 2026, which undoubtedly presents a valuable opportunity for our country.
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