The global energy transition is accelerating, with rapid developments in AI, renewable energy, and electric vehicles. Previously overlooked, transformers have now become a hard currency in the global economy. Three years ago, Elon Musk predicted that after the chip shortage, transformers would be next, and now this has come true. There is a severe shortage of transformers worldwide, directly slowing down energy construction and technological development, while China, through technological innovation and strong production capacity, has become the biggest beneficiary.
Countries are ramping up efforts in green energy, with significant investments in wind and solar energy, but transformers have become a bottleneck in the industry. This seemingly ordinary device is actually the core equipment of power systems, primarily responsible for converting different voltages to ensure effective transmission and use of electricity.
The rise of emerging industries such as AI, big data, and 5G has led to a surge in demand for transformers, resulting in a complete imbalance between supply and demand. In particular, AI supercomputing centers consume electricity comparable to the daily usage of a medium-sized city. Giants like Musk’s Tesla, SpaceX, as well as Google and Microsoft, are all rapidly building supercomputing centers. These centers require dedicated large transformers to meet the demands of ultra-high power electricity conversion, and as AI computing power doubles, electricity demand will also double. The future global demand for high-efficiency transformers will only increase.
The development of solar and wind energy has further exacerbated the shortage. Photovoltaic power stations are widely distributed, each requiring multiple transformers, leading to a demand that is 1.8 times that of thermal power plants. Countries like Germany and Denmark, which are leaders in wind energy, have already encountered situations where wind farms cannot connect to the grid due to a lack of transformers, resulting in wasted green electricity.
The sales of electric vehicles are skyrocketing, with each fast-charging station requiring dedicated transformers. In 2024, over 17 million new electric vehicles are expected to be added globally, leading to a surge in demand for small transformers. The EU plans to build a fast-charging station every 60 kilometers by 2025, further exacerbating the transformer shortage.
As the world searches for transformer suppliers, China has become a savior. Previously, China relied on imports of oriented silicon steel sheets— the core material of transformers, known as the “chip of the power industry.” However, the Baosteel team began breakthroughs in 2008, achieving self-sufficiency in this material. China has also made significant progress in the R&D of new products such as vegetable oil transformers and ultra-high voltage transformers.
In 2024, China’s transformer export value is expected to reach 29.7 billion yuan, a 51% increase, with exports to Europe surging by 138%. Changzhou in Jiangsu is known as the Transformer Capital of the World, housing 282 large-scale enterprises, accounting for 13% of the national total output, forming a complete industrial chain capable of producing various types of transformers for export worldwide, with power companies from Germany, Japan, and other countries seeking cooperation.
The United States previously imposed a 104% tariff on Chinese transformers in an attempt to protect its domestic industry, but this ultimately led to difficulties for itself. Areas like Texas faced transformer shortages, halting grid renovation and data center expansion projects, resulting in significant losses, and they eventually had to exempt some tariffs. Currently, U.S. energy infrastructure still relies on the cost-effectiveness and technological advantages of Chinese transformers.
The global demand for renewable energy, AI computing power, and electric vehicles continues to rise, presenting a broad market outlook for transformers. With its technological and production capacity advantages, China stands at the forefront of the energy revolution, becoming an important driver of global energy transformation. In this global wave of “electric power wealth,” China will undoubtedly be the biggest beneficiary.