The U.S. government is intensifying efforts to boost domestic production of key power grid equipment, including transformers, drawing attention to the North American production strategies of domestic electrical equipment companies.
According to industry sources, the U.S. Department of Energy (DOE) announced on August 13 that it is launching a power grid supply chain enhancement program worth up to $375 million. This initiative will support the production of distribution and power transformers, as well as transformer components, materials, and other essential power grid equipment.
The core of this policy is to expand domestic production and reduce reliance on imports. The DOE aims to lower dependence on foreign suppliers by increasing local production and supply of critical power grid components, targeting a reduction of import volumes and procurement times by up to 10%.
Domestic companies are responding with varied strategies. Hyosung Heavy Industries and HD Hyundai Electric are directly producing high-voltage transformers in the U.S., while LS Electric and Iljin Electric plan to maintain their domestic production.
Hyosung Heavy Industries is relatively well-positioned to respond to the U.S. localization trend. The company acquired a high-voltage transformer plant in Tennessee from Japan's Mitsubishi in 2020. It completed its first expansion in 2024 and is currently undergoing a second expansion to more than double its production capacity. A third expansion is planned to further increase capacity by 2028.
HD Hyundai Electric established a transformer manufacturing plant in Alabama in 2011, becoming the first in the domestic electrical equipment industry to do so. In March of this year, the company began construction on a second plant to meet rising demand for North American electrical equipment. The new facility is expected to increase high-voltage transformer production capacity by 50% upon its completion in April 2024.
LS Electric is expanding its production base in Utah and Texas, but its local production focuses primarily on switchgear and circuit breakers. The company is enhancing its production capacity for high-voltage transformers at its Busan plant, which has been boosted to approximately 800 billion won through plant expansions and the acquisition of LS Power Solutions. LS Electric has stated that it does not plan to produce high-voltage transformers in the U.S.
Iljin Electric also intends to maintain domestic production rather than establish local manufacturing in the U.S. While the company has been increasing overseas orders for transformers due to recent investments in the U.S. power grid and the growth of data centers, it continues to produce high-voltage transformers domestically. Iljin Electric has confirmed that it is not discussing the establishment of high-voltage transformer production facilities in the U.S.
Industry forecasts suggest that the U.S. push for increased domestic production is unlikely to have an immediate negative impact on domestic companies. In the short term, as U.S. investments in the power grid expand, domestic firms are expected to see increased order opportunities. The demand for transformers is rapidly rising due to the proliferation of artificial intelligence (AI) data centers and the replacement of aging power grids, making it difficult for U.S. production capacity alone to meet this demand.
However, if the U.S. government accelerates its program worth $375 million to foster domestic suppliers and increase the use of American-made components and materials, the necessity for local production could become a key variable in competitive bidding in the long term. Coupled with tariffs and trade policies, this could lead to changes in the local production strategies of companies that currently export after domestic production.
An industry insider noted, "Given the current supplier-dominated market and the backlog of orders secured by domestic companies, the likelihood of a demand decrease in the short term is low. However, with ongoing trade variables such as tariffs, the need for expanding local production bases cannot be ruled out in the long term."
* This article has been translated by AI.
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