Hydraulic-magnetic Circuit Breakers and Solutions Report ...

Confidential. © 2018 IHS MarkitTM. All Rights Reserved.

Hydraulic-magnetic Circuit Breakers and Solutions Report –

World Market – 201916 May 2019

Wilmer Zhou, Analyst, +86 21 2422 9035, [email protected]

Regular Report

Manufacturing Technology

mailto:[email protected]


Contents

3 YRAMMUS EVITUCEXE

6 YGOLODOHTEM DNA EPOCS

7 epocS

8 noitatnemges tekraM

ygolodohteM 9

11 STHGILHGIH CIMONOCE LABOLG

21 sthgilhgih cimonoce labolG

31 seirtnuoc dna snoiger niam yb ymonocE

51 segnahc secirp ytidommoc niaM

61 STHGILHGIH SROTCES YRTSUDNI

yawliaR 18

esnefeD 21

moceleT 28

33 retnec atad/TI

83 ygrene evitanretla/VP

24 sMEO lairtsudnI

54 SISYLANA NWODKAERB TEKRAM

64 snoitulos dna stnenopmoc yB

74 snoiger yB

84 elop yB

94 ezis emarf yB

05 epyt gnitnuom yB

15 tnerruc detar yB

25 SDNERT TEKRAM

35 srekaerb tiucric cinortcele yb tnemecalpeR

45 BCMT & BCT dna BCMH neewteb ytilibaegnahcretnI

55 segnahc ecirp dna tsoC

65 TOI lairtsudni dna dirg rewop tramS

75 slennahc selaS

85 TNEMNORIVNE EVITITEPMOC

erahs tekraM 59

06 seinapmoc gnidael eht dna BCMH fo yrotsih trohS

16 XIDNEPPA

16 tsil ynapmoC

Hydraulic-magnetic Circuit Breakers and Solutions Report – World Market – 2019

2


Executive summary


3


Executive summary

Overview:

The global market for hydraulic-magnetic circuit breakers (HMCBs) is mature, highly concentrated, and increasingly niche, with well defined applications.

Demand for hydraulic-magnetic circuit breakers tends to follow the general economic environment.

Although the size of the market for HMCBs is relatively small compared to that for other types of conventional circuit breakers and thermal-magnetic circuit breakers,

the price and profitability of the market are attractive.

The HMCB market has more technical barriers than the market for conventional circuit breakers in product design and manufactur ing.

Market data

The HMCB market in 2018 is estimated to have been worth USD271 million, and USD281 million in 2019, with 3.6% growth.

In revenue terms, HMCB components were approximately 91% of sales in 2018, with solutions being just less than 9%.

IHS Markit forecasts that components will grow at a CAGR of 3.7% and solutions will grow at a CAGR of just over 5% from 2019 to 2023.

In 2018, the EMEA, Americas and Asia Pacific accounted for 29.3%, 37.5%, and 33.2% of the world market, respectively.

Asia Pacific is projected to grow the fastest of the regions over the forecast period, with CAGR 5.1% from 2018 -2023 .

In 2018, the three-largest suppliers were Carling Technologies, Sensata/Airpax, and CBI-Electric, accounting for about an 76.5% of the global market.


4


Executive summary


5

0 20 40 60 80 100 120 140

EMEA

Americas

Asia Pacific

2018 2023

Source: IHS Markit © 2019 IHS Markit

Revenues ($ millions)

Figure 2: The market for hydraulic-magnetic circuit breakers and solutions by region:

World

Data issued: April 2019

0 20 40 60 80 100 120 140

Telecom

Rail

Industrial

PV and alternate energy

IT/Datacenter

Medical

Defense

Others

2018 2023



Figure 3: The market for hydraulic-magnetic circuit breakers and solutions by sector:

World



Scope and methodology


6


Scope

Basis of this study

• This is a comprehensive report providing a view of the current state and future direction of the world market for HMCB components and solutions.

• Base year: Calendar year 2018; Forecast years: 2019 to 2023

• Segmentations: product type, sector, country, number of poles, current type, rated current, frame size, and mounting type

• Market shares: EMEA, the Americas, Asia Pacific

Product scope

• The market is segmented between hydraulic-magnetic components and hydraulic-magnetic solutions.

• Hydraulic-magnetic components provide overload/overcurrent protection for the circuit and will automatically open upon detecting a fault. Hydraulic-magnetic devices are highly reliable and will open at a well-defined current as well as over a wide temperature range (i.e., they are not de-rated by extreme temperatures), which allows them to protect equipment in harsh environments.

• This study includes both miniature circuit breaker hydraulic-magnetic components (100 A and lower rated current, 18 KA and lower breaking capacity) and molded case circuit breakers (higher than 100A rated current, higher than 18 KA breaking capacity).

• Hydraulic-magnetic circuit breaker solutions are system-level products that are made up of at least an enclosure, individual circuit breakers, and a busbar. IHS Markit has not double counted individual hydraulic-magnetic components with hydraulic-magnetic solutions. Due to the small size of the hydraulic-magnetic solution market, it is only possible to present data at a top level and by sector.

Exclusions

• Non-hydraulic-magnetic breaker technology, such as thermal magnetic breakers, magnetic breakers, fuses, and electronic breakers

• Revenues associated with services. This study recognizes revenue from hardware sales only. Revenues derived from NRE (non-recurring engineering) and other services is not included in this study.

• Sales of switchgear accessories, unless included as part of a hydraulic-magnetic solution sale


7


Market segmentation

Defense

Includes land-, air- and sea-based military applications. Breakers used in tanks

and small land vehicles, aircraft, missile applications, and submarines. OEMs

include Northrup Grumman, BAE Systems, and Lockheed-Martin.

Industrial

Sales to discrete automation (industries involving assembly of parts) such as

machinery production, automotive, and HVAC. Sales to process automation

(industries involving chemical change) like oil and gas, chemicals, metals, and

mining. Includes sales to big project segments like marine.

IT/Datacenter

Circuit breakers used in datacenters, server rooms, and network closets. An

application example includes power distribution units.

Medical

The medical sector includes imaging equipment, diagnostic devices, bedside

care devices, therapy, fitness machines, home-healthcare gateways and

peripherals, and other medical equipment.

PV/Alternative energy

Sales to sectors that rely on renewable sources of energy (e.g., wind, solar) to

generate power. An application example includes combiner boxes. OEMs include

SMA and Omron.

Railway

Applications such as critical train control and signaling. Includes non-critical

functionality: ticket machines, barriers, etc. OEMs include Alstom, Finmeccanica,

Siemens Rail, and Bombardier.

Telecom

Applications related to mobile/fixed-line telephony and switches/routers.

Applications include base stations and non-commodity power supplies. OEMs

include NSN, Huawei, ZTE, Alcatel Lucent, Artesyn, and Delta.

Regional segmentation

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study, the following major regions are analyzed: the Americas, EMEA (Europe,

the Middle East, and Africa), and Asia Pacific.

Other

All other sectors that cannot be classified according to the definitions above.

Examples include vending machines and residential circuit protection.


8


Methodology

This report is based largely on primary data collection for quantitative and qualitative analyses. Quantitative data were col lected via completed questionnaires from

major suppliers to the market, while both face-to-face and telephone discussions on the market with manufacturer personnel provided insight and identified qualitative

trends for analysis.

Secondary research was also carried out to extend product and company knowledge by utilizing company annual reports, business and’srerutcafunam,sserplaicnanif

brochures, data books, and other technical literature. For this study, IHS Markit used its in-house library of research reports on a variety of markets as a basis for its

forecasts.

Time frame

The base year for this study is from 1 January 2018 to 31 December 2018.

Point of measurement

IHS Markit measured value at the supplier brand-label level. Therefore, this report excludes revenues generated through distributor mark-up.

Merchant market

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otherscxeeradna”tekramevitpac“ehtdellacnetfoeraselashcuS.ssecorpgniddibneponatuohtiwnoitazinagroemasehtni luded from estimates of market size in

this report.

Exchange rates

Data for this report were collected in local currencies where possible, though most companies reported in US dollars and euros. All data were converted to US dollar

revenues using the average exchange rates for 2018. To be consistent, market data for EMEA, America, and Asia Pacific were analyzed and presented in US dollars.

Forecasts are in nominal dollars at the 2017 and 2018 rates of exchange. The reader is therefore advised to be cautious in comparing actual results to projected

results.


9


Methodology

Project method

Revenues, unit shipments, and average selling prices were analyzed as part of this study to provide further insight on the status of the market and to highlight forecast

development. The main forecast is in units and average selling prices (ASPs), with revenues derived from them.

The ASP of each product segment was generated for the base year 2017 and 2018, based on data and interviews provided by manufacturers of embedded computing

products. Factors that contribute to changes in ASP, including price erosion, input cost changes, and changes in the product mix were assessed to calculate a profile of

changing ASPs for the years 2019 to 2023. Product-level units were forecast along with the projected ASPs, and revenue forecasts were derived from them.

Base-year analysis

For the purpose of statistical analysis, calendar year 2018 has been used as the base year. IHS Markit asked leading suppliers to provide revenue and unit shipment

data for 2018 for product sales and to segment these sales by each category analyzed in this report. These data were compiled to calculate the size of the market in

the base year for each segment.

Forecast methodology

The forecast model used in this report relies heavily on three main sources of information described below.

• Economic data: Nominal GDP, opex (operational expenditure), and capex (capital expenditure) are relevant and available economic indicators that are forecast by

credible sources. The Economics and Country Risk Group at IHS Markit produces a Country Forecasting Tool, from which these data are sourced.

• Electronics market data: Core statistics produced as part of IHS Markit reports have been incorporated into the forecast model where appropriate. Examples

include.stegduB rotceS esnefeD’senaJdna,noitamotuAniserutidnepxElatipaC,koobraeYnoitcejorPyrenihcaMehT,koobraeYgninigamIlacideMehT

• Supplier interviews: Indications of market trends and performance were derived from interviews with leading suppliers to the hydraulic-magnetic component and

solution market.


10


Global economic highlights


11


Global economic highlights

The JPMorgan Global Composite Output Index (compiled by IHS Markit) rose 0.2 point to a four-month high of 52.8 in March 2019, signaling a mild acceleration in the

global economy, led by an acceleration in services output, while manufacturing growth remained sluggish.

IHS Markit expects world real GDP growth to slow from 3.2% in 2018 to 2.8% in 2019-21, as slight downward revisions to forecasts for the United Kingdom, Eurozone,

and Japan are offset by an upward revision to the Russian forecast.

The risk of an escalation in trade conflicts remains high, and if such an escalation occurs, a contraction in world trade could slow the world economy even more. At the

same time, the sell-off in equity and commodity markets, on top of the gradual removal of stimulus by some central banks, means that financial conditions worldwide

are tightening. Combined with heightened political uncertainty, these risks point to a greater probability of a recession in the next few years.


12

Real GDP growth forecast

2016 2017 2018 2019 2020 2021

World 2.7 3.3 3.2 2.8 2.8 2.8

United States 1.6 2.2 2.9 2.3 2.1 1.9

Canada 1.1 3.0 1.8 1.4 1.8 1.9

Eurozone 1.9 2.5 1.8 1.1 1.0 1.2

United Kingdom 1.8 1.8 1.3 0.7 0.9 1.3

China 6.7 6.8 6.6 6.3 6.0 5.9

Japan 0.6 1.9 0.8 0.6 0.5 0.7

India* 8.2 7.2 7.2 7.1 7.0 6.9

Brazil -3.3 1.1 1.1 1.4 1.7 1.7

Russia -0.2 1.5 2.3 1.7 1.9 1.8



Economy by main regions and countries

United States

Real GDP growth is projected to slow from 2.9% in 2018 to 2.3% this year, 2.1% in 2020, and 1.9% in 2021 due to downward revisions to consumer spending on goods, business investment in intellectual property, and government spending. Corrections in vehicle sales and utilities consumptions’ymonoceehtotetubirtnoctemporary weakness. In March, the IHS Markit US Manufacturing PMI fell 0.6 point to 52.4, its lowest level since June 2017, as production and new orders decelerated. Meanwhile, the services PMI fell 0.7 point to 55.3, a level still indicative of strong expansion. The March decrease reflected slower growth in production, new orders, and employment.

Eurozone

Real GDP growth is projected to slow from 1.8% last year to 1.1% in 2019 and 1.0% in 2020 before edging up to 1.2% in 2021. Leading indicators for the industrial sector (PMI and OECD composite leading indicator) remain very weak and consistent with recession, due to uncertainties such as Brexit shock, trade wars, financial market,gnibrutsid era gnirutcafunam rof atad IMP tsetaleht,ymonoces’ynamreGroftratsgnitnioppasidaoteuD.sreviawsnoitcnaslionainarIfodneehtdna,ytilitalov particularly in Germany. In March, the IHS Markit Eurozone Manufacturing PMI dropped 1.8 points to 47.5, its lowest level since April 2013. Declines in production, total new orders, and export orders steepened. The IHS Markit/BME Germany Manufacturing PMI sank to 44.1, as new orders declined at the fastest rate since April 2009.

China

Real GDP growth is projected to slow from 6.6% in 2018 to 6.3% this year, 6.0% in 2020, and 5.9% in 2021. This forecast is unchanged. The Caixin China General Manufacturing PMI increased 0.8 point to 50.8 in March, as growth in production and new orders strengthened and employment and export orders turned up. Meanwhile, the services PMI rebounded 3.3 points to a 14-month high of 54.4, led by accelerating new orders and improving business confidence.

The export decline was due to weaker external demand and frontloading of shipments before expected US tariff hikes in 2018. Weakness in industrial production (IP) generally resides in state-owned firms, low-value manufacturing, and heavy industries. Meanwhile, output of textiles, mining, and rubber and plastics grew just 0.2% y/y, 0.3%, and 2.2%, respectively. High-technology sector output performed better, as special-purpose machinery output rose 10.0% y/y and electric machinery and equipment output increased 8.0% y/y.

The government should be able to stabilize growth with measured stimulus policies, and an agreement with the US to end the trade war is more likely than not given increased pressure on both governments. Much of investments will fund major infrastructure investment projects that the central government will push through expeditiously, including CNY800 billion for railroad investment and CNY1.8 trillion for investments in road and water transport projects.


13


Economy by main regions and countries

Japan

Japan’snI .1202 ni %7.0 dna ,0202 ni %5.0 ,raeysiht%6.0esaercniotdetcejorpsiPDGlaeR,%7.0morf%6.0otnwoddesiversi9102roftsacerofhtworgPDGlaer March, the Nikkei Japan Manufacturing PMI edged up 0.3 point to 49.2, remaining in contraction for a second consecutive month. Production and new domestic and foreign orders declined. Although the services PMI dipped 0.3 point to 52.0, growth in new business orders and employment picked up. The net export contribution to real GDP growth likely turned positive in the first quarter, reflecting a faster contraction of imports than exports. That said, exports of semiconductors and other electrical machinery remain sluggish, reflecting repercussions from US-China trade tensions and other global uncertainties. Japan’s(ISB)xednIyevruSssenisuBsuggests that current business conditions deteriorated for enterprises of all sizes in the first quarter, particularly for manufacturing groupings. Similarly, the Bank of Japan’s.snoitidnocssenisubgnirutcafunamgnitruhdnamedkaewdewohsyevrusnaknaThcraM

India

Real GDP growth slowed to 6.6% y/y during the December quarter from 7.0% y/y in the September quarter. Our forecast of real GDP growth is unchanged at 7.1% in FY2019, 7.0% in FY2020, and 6.9% in FY2021. The Nikkei India Manufacturing PMI retreated 1.7 points to 52.6 in March, while the services PMI fell 0.5 point to 52.0. There are currently no signs of recession in India.

Brazil

Brazil’sPDG laeR .srotces ecivres dna gnirutcafunamfohtlaehehtfoerutcipdeximatniapsyevrusIMPtsetalehT.ecaptsedomataseunitnocyrevocercimonoce growth in projected to gradually pick up from 1.1% in 2018 to 1.4% this year and 1.7% in 2020 and 2021. This forecast is unchanged. The IHS Markit Brazil Manufacturing decreased 0.6 point to 52.8 in March. On the positive side, manufacturing production increased at its fastest pace in a year. The new government of Jair Bolsonaro has sent its pension reform bill to congress. Although it is not too ambitious, it will be revised by lawmakers. The result will be enough to keep markets calm, but not sufficient to bring a boom in investment.

Russia

Real GDP is projected to increase 1.5% this year, 1.7% in 2020, and 1.8% in 2021.RosStat reported a sharp rise in industrial production in February, driven by the extractive sector. The industrial output index rose 4.1% y/y, following gains of 1.1% in January and 2.7% in December 2018. In March, the IHS Markit Russia Manufacturing PMI climbed 1.7 points to 52.8, its highest level since January 2017. Production and new orders accelerated, while business optimism reached the highest level since the survey began in April 2012. In fact, mining, manufacturing, retail sales, and unemployment showed overall weakness at the end of 2018.


14


Main commodity prices changes

Crude oil prices

Global crude oil supplies have been abundant relative to demand since fourth quarter 2018—but this situation is quickly changing. Production cuts from Saudi Arabia, US sanctions onot evitaler ticifed ylppus lio edurc a ot dael lliw egnahcnoitacificepsleufreknub(OMI)s’noitazinagrOemitiraMlanoitanretnIehtfotcapmignimoolehtdna,narIdnaaleuzeneV refinery runs. IHS Markit have raised our price outlook by an average of $4/barrel from third quarter 2019 into the first quarter of 2020. Crude oil refinery runs will exceed crude oil production over this period. In our base case, Brent averages $74/barrel over the last three quarters of 2019 and $66/barrel in 2020. IHS Markit expect that Saudi Arabian production will increase in mid-2019 and serve as a de facto cap on prices in the upper $70s.

Commodity prices

Commodity markets have seen a bounce since the start of the year, reflecting optimism over the outcome of US-Chinese trade negotiations.tovipycilops’evreseRlaredeFehtdnaIHS Markit Materials Price Index (MPI) has risen 6.2% year to date, although the increase was just 2.0% excluding energy. IHS Markit forecast for the MPI has been raised slightly, although the price continues to look relatively flat across 2019.

The early 2019 improvement in sentiment was at odds with fundamentals, which have continued to look lackluster, especially in manufacturing. Slightly weaker demand is being offset by weaker supply-side outlooks in many industries, including rubber, copper, and iron ore.

Commodity markets also seem ambivalent about Brexit. Perhaps this reflects an innate optimism that a solution short of a hard Brexit will be averted, but this complacency opens the possibility of a downward move in prices should a hard Brexit occur.

The iron ore market is seeing a major disruption because of the Vale mine accident in Brazil. Ore prices will remain elevated through mid-year, with a muted ripple effect affecting finished steel prices into the third quarter. Regionally, European steel markets look most exposed because of greater dependence on Brazilian ore.

Commodity influences on Hydraulic-magnetic circuit breakers

The sales price of Hydraulic-magnetic circuit breakers components is partly driven by price changes in the raw materials used in these components, such as plastic resin (which is linked to crude-oil prices), copper, and to a lesser extent and silver (which is linked to Commodity prices).

Higher commodity prices are projected to feed into higher prices for circuit breaker products. IHS Markit assumes suppliers will continue to source raw materials at prices determined by international spot markets – although a risk to the forecast remains that a suppliers may enter into hedging agreements. IHS Markit also assumes suppliers will be able to pass on commodity price increases more to the distributors but not to the end customers.


15


Industry sectors highlights


16


Industry sectors overview

At a global level, IHS Markit projects that every market will grow over the next five years—although, growth will be uneven.

Dynamic industries: telecom, IT/datacenter, solar/renewable.

With significant bargaining power and big orders, telecom is the leading industry for HMCBs. The telecom, IT/datacenter, solar/renewable infrastructure industries are

cyclical. Dynamic factors in these fields include technological innovation, industry standards, government legislation, and the evolution of the mobile telecom

(generations). A rigorous environment, increasing power consumption, and compact designs are important characteristics of the telecom/IT/datacenter applications,

including power distribution units, UPS, and rack systems. PV/alternative energy fluctuate depending on changes in governments policies, subsidiaries, and

regulations.

Stable industries: medical, industrial

The medical equipment market is very stable due to steady demand for medical treatment and continuous government investment. Various and numerous OEMs in

industrial applications (machines, equipment, lighting, vacuum cleaners, industrial controls, power converters, HVAC systems, marine panels, power generators ) will

also continue to provide stable demand for HMCB products.

Close industries: defense, railway

The defense and railway industries are more close and profitable markets for HMCBs suppliers. There are much higher barriers to entry for HMCBs suppliers, such as

agency approvals, military approvals, production licenses, quality certificates, confidentiality qualification certificates, and company background. Military customers also

need the vendors to have local production and custom production capabilities for small order batches. Military and railway customers are very loyal to their qualified

suppliers and products. The HMCBs must meet extreme military specifications such as fungus resistance, humidity, salt spray resistance, and shock vibration

resistance.


17


Industry sectors – Railway


18


Industry sectors – Railway by countries

Overview:

Railway applications, where protection against overload and short circuit is necessary, include HVAC systems, (door) control systems, braking systems, passenger information

systems, and signaling systems.

Global urban swells have created strong demand for upgraded transport infrastructure, with railways being the preferred method of moving large populations around developing cities.

Asia Pacific is driving the growth of railway investment, with about 35% of global expenditure being made in the region. The logistics and transportation market in the Americas is

driven largely by the United States, followed by Latin America. Rail transportation is primarily used for freight shipments in the region, and passenger operations play a very minimal

role.

China: According to China's 13th Five Year Plan (2016-2020), the country intends to invest about USD503 billion to expand its high-speed railway systems by 2020. This plan

includes approximately 3,000 km of new construction in China's urban rail transit system. China Railway Corporation (CRC) increased the length of its network route by 3,038 km,

surpassing its initial 2017 target of 2,100 km by the end of the year. Having the largest high-speed railway (HSR) networks at nearly 25,000 km, more than 1,710 million passengers

used bullet trains during 2017 in China. The country invested about USD112.7 billion during 2018 to further enhance the railway infrastructure.

India: In March 2017, India's railway minister outlined the country's plans to invest about USD140 billion in railway network modernization by 2022. India's suburban railway networks

are limited to seven major cities, with the aging Mumbai suburban railway system transporting about 6.5 million passengers daily, the highest passenger density in the world.

Electrification is a high priority for the Indian government as it seeks to make its railways more environmentally friendly and reduce its dependency on imported petroleum products.

As stated by the Ministry of Railways Annual Report (2016-17), 25,367 route km had been electrified by March 2017, accounting for 37.7% of the total railway network. The

government is also focusing on signaling and controls to enhance the safety of its railways.

Australia: Australia has an extensive rail network, with total route lengths of 33,168 km. It has well-connected rail lines, primarily used for transporting bulk commodities such as iron

ore, coal, and passenger transportation. The Pilbara region alone accounts for about 60% of total Australian freight transport by tons, followed by Queensland with about 20%.

Australia is also developing the Sydney Metro Northwest rail link, which has an estimated project cost of USD8.3 billion and is expected to open by 2019. This project includes the

construction of 15 km twin tunnels between Bella Vista and Epping. CPB John Holland Dragados was awarded a USD1.15 billion contract for its construction.

Europe: The European transport sector has led the way in its field, with 8.9 billion regional and suburban passengers carried in Europe during 2016. Total track length in the

European Union stood at approximately 230,000 km, while 53% of railways in Europe were listed by the European rail market monitoring system as being electrified.


19


Industry sectors – Railway by countries

US: With an operating route length of more than 250,000 km, the United States has the largest rail network infrastructure in the world. Freight line operations

constitute about 80% of total rail network, while the total passenger network spans about 35,000 km. In 2017 an estimated USD22 billion was spent on America's

freight rail industry. The freight rail network consists of 538 railroads (seven Class I railroads, 21 regional railroads, and 510 local railroads) mainly operated by Union

Pacific Railroad and BNSF Railway. Passenger operations are primarily managed by Amtrak.

Project focus: California High-Speed Rail Network: The California High-Speed Rail Authority is in the process of building a high-speed network, which would be the

first of its kind in the region. Construction began in 2015 and completion is expected by 2029. The network will run from San Francisco to the Los Angeles basin in

under three hours at speeds potentially higher than 200 mph. It will reduce congestion costs of approximately USD20 billion a year, and the hope is that it will carry

117 million passengers annually by 2030.

UK: A decade of unmatched growth has improved performance, and record numbers of passengers have been travelling on the UK mainline railway network. Rail

journeys have almost doubled in the past 20 years. The government is electrifying the railway routes and phasing out diesel engines. 43 km of rail line was electrified

in 2017, taking the overall total to 5,374 km by the end of that year. Electrifying not only cuts the emission of carbon dioxide gas but also decreases operating costs

with the added bonus of reducing journey times. By 2020 about three-quarters of all passenger km will be run by electric trains.

Russia: State-owned Russian Railways is divided into 17 regional railways and accounts for 2.5% of Russia's GDP. It is the largest commercial employer in Russia

with about 835,800 employees. Russian Railways owns and runs nearly all the locomotives in Russia, comprising about 13,990 units. Russian Railways is preceded

only by the United States railways in track length and is the world's third-largest railway in terms of freight turnover behind the United States and China.

In July 2018 Russian Railways signed a contract with China Rail Corporation as part of an initiative to unite the countries over the development of regular trade in the

freight market and shipments of e-commerce goods. Later that month, the first cargo, containing LED light bulbs and office supplies, was shipped by Russian

Railways subsidiary RZD Logistics from Beijing to Moscow. The event followed a meeting between Lu Dongfu, managing director of China Railways, and Russian

Railways president Oleg Belozyorov in Beijing in June 2017 to discuss electronic data exchange in the rail sector.


20


Industry sectors – Defense


21


Industry sectors – Defense industry in Japan

Overview

Jane's analysis suggests that Japan locally produces around 75% of its procured military equipment, with the remainder sourced mainly from the US and some from

Europe. Japanese industry is strongest in the land and sea domains with nearly all the equipment operated by the JGSDF and the JMSDF sourced from domestic

companies, while aircraft in operation with the JASDF are sourced mainly from the US.

A dozen major corporations compete for nearly the entire national defense procurement, maintenance, and support budgets. Accordingly, in Japan's defense market

the price of goods and barriers to entry are both high, and business links between the major corporations and the state are close. Furthermore, collaboration in

development and production is relatively commonplace, and there is a strong tendency for major corporations to diversify into technologically related markets.

Tier 1 firms in Japan wield strong influence in the defense sector and have well-established relationships with both the end-users and tier 2/3 suppliers, many of which

operate in a small market space. Lower tier components are typically sourced from domestic companies unless a capability gap exists, and numerous foreign firms

operate in Japan and have helped fill these gaps.

The development of Japan's defense industry is partly a responsibility of the Ministry of Defense's Acquisition, Technology and Logistics Agency (ATLA). This agency,

which became operational in October 2015, oversees procurement, research and development, maintenance programs, international joint development programs, and

exports.

Principal companies

Japan has a small number of Tier 1 suppliers that undertake all major indigenous procurement programs. These companies include Mitsubishi Heavy Industries (MHI),

Kawasaki Heavy Industries (KHI), and Subaru (formerly Fuji Heavy Industries).

Major tier 2 suppliers include Mitsubishi Precision, Mitsubishi Electronic, Shimadzu, Yokogawa, NEC, Japan Aerospace Corp, Hitachi Kokusai Electric, Tokyo Aircraft

Instruments, Tokyo Keiki, Kaigai Corporation, Kanematsu, Sumisho Corporation, and Japan Radio Co. The number of companies involved in defense activities in

Japan is estimated by Jane's to be several hundred with a workforce of at least 250,000 people.


22


Industry sectors – Defense industry in China

Overview

China's defense industry base has made significant gains over the past decade. Notable milestones include the emergence of high-profile, ostensibly indigenously

developed military platforms such as the J-20 combat aircraft, new submarines, and main battle tanks.

China's indigenous defense programs demonstrate increased capability to produce military equipment largely copied or imitated from foreign designs but a shortfall in

some areas of innovative design and development. As a result, China remains dependent on underlying foreign technologies to f ill the capability gaps. The gaps are

apparent in the development and production of some major systems such as aero-engines and a wide range of 4th and 5th generation technologies that will enable

China to reach its "informationization" goal, such as those related to command and control, combat management, stealth, advanced communications and networking

systems, electro-optical, sensors, and signals intelligence. The most recent defense white paper, published in 2015, outlines three areas of priority development areas

for the PLA. These include maritime capabilities, space, and cyber-related capabilities.

Principal companies

China's defense industrial base is dominated by 10 enterprises owned and operated by the State Council, all of which are of substantial size and scope. As a measure

of the magnitude of the industrial base, just one of these enterprises, the China Aerospace Science and Industry Corporation (CASIC), claims to own 620 subsidiaries

across the country. The 10 state enterprises and their thousands of subsidiaries dominate activities in developing, building, and maintaining all the indigenously

sourced military equipment supplied to the Chinese military forces. The private sector has been allowed to be involved in defense industrial activities since the early

2000s but the bureaucratic certification process and restrictions on what sensitivities the private sector can be exposed to have meant that its participation has been

limited to manufacturing components and auxiliary products. The total size of the Chinese defense industry base - including state- and privately owned companies - is

estimated by Jane's to be at least 10,000 firms, employing about 3.5 million people.


23


Industry sectors – Defense industry in United States

Overview

The US has the world's largest and most technologically advanced defense industrial base. Its defense industrial base is enormously complex, deeply layered and globally connected.

Military production, sustainment and research capabilities rest in both the private and government sector, with US industry capable of producing the full range of defense and security

products and services across all domains, from bullets and clothing to stealth fighters, nuclear aircraft carriers, cyber and space systems. It is arguable that the US is the only country

in the world that can claim true self-sufficiency in defense production.

The scale and diversity of the US defense industrial base means it is difficult to quantify its size precisely. The US's National Defense Industrial Association states it has 1,600

corporate members and over 86,000 individuals from the spectrum of the defense and national industrial base.

As a result it appears that the majority of companies with significant exposure to the US defense market have reacted with a combination of three principal strategies: (1) internal

restructuring, cost cutting, and operational improvement aimed at maintaining or increasing margins; (2) a move to greater levels of exports, if possible supported by the US Foreign

Military Sales (FMS) system; (3) a move into adjacent sectors such as security, healthcare, or civil applications.

Principal companies

At,nitraMdeehkcoL)”semirp-repus“evifehteraniahclairtsudniehtfopoteht Boeing, Northrop Grumman, Raytheon, and General Dynamics), formed during a wave of M&A activity

in the early 1990s. Beneath these sit the remaining industrial tiers, consisting of thousands of companies from major system manufacturers down to raw materials providers.

The US government is concerned about the potential impact of the declining defense budget on companies in the lower tiers, and there appears to be a desire within government to

avoid losing key capabilities. While the government would prefer the market to act and is keen to encourage consolidation among the lower tier companies, it is firmly against any

mergers among the big five.

Mirroring this trend in the age of austerity, US firms have also acquired foreign firms, established foreign subsidiaries, and engaged in industrial participation programs in the search

for new markets. The result of the two processes is that US defense industrial capabilities are increasingly enmeshed in the globalized supply chain.

There is also an inextricable meshing of defense and commercial supply chains, driven by the rapid pace of technology development in the commercial sector, a desire to take

advantage of lower costs of commercial production and diversification of defense firms into commercial markets and vice versa.


24


Industry sectors – Defense industry in France

Overview

France possesses a highly developed and technically sophisticated defense industry capable of independently producing the most advanced and complex systems. It

is one of the few countries in the world that can boast a full spectrum of capabilities in all military and security domains, including the design and development of

nuclear systems. France has a strong position too in the global defense market. It achieved orders of EUR69.3 billion between 2010 and 2017 and consistently ranks

around the top of European countries.

The defense sector in France is vast. In its broadest sense, the sector directly employs 200,000 people (circa 4% of the total industrial workforce) in a dozen large

defense corporations and a further 4,000 small and medium sized enterprises with defense exposure across the country. France states that 30% of activity relates to

aerospace domains; 30% to electronics; 20% to naval activities; and the remainder to land, space and missile systems (Source: Rapport au Parlement 2018 sur le

Exportation d'Armement).

Principal companies

Paris guards its industrial independence and actively promotes and protects its domestic industry's interests through stewardship and direct shareholdings. The French

state holds significant shareholdings in Safran (11%); DCNS (rebranded Naval Group from June 2017 - 62.25%); STX France (Chantiers de l'Atlantique from 2018 -

34% directly); Thales (26%); and Airbus Group (formerly EADS - 11%). France also holds a 100% stake in land systems group Nexter, which merged its interests with

Krauss-Maffei Wegmann of Germany in December 2015. The merger created an entity called KMW Nexter Defense Systems, of which the French state and the

Wegmann family each hold 50%.

France's indirect shareholdings should also be taken into account. In the case of Naval Group, for example, France holds 26% of Thales, which in turn holds 35% of

Naval Group. STX France (Chantiers de l'Atlantique) is 34% owned by the French state and 10% owned by Naval Group. The state also owns and operates the

Commissariat à l'Énergie Atomique et aux Énergies Alternatives (Atomic Energy and Alternative Energies Commission), known as the CEA. The military applications

division (DAM) of CEA is responsible for France's nuclear weapons and naval nuclear reactors.


25


Industry sectors – Defense industry in Germany

Overview

The country's defense industries have played a significant role in European consolidation, notably through the activities of TKMS in the naval markets, KMW and

Rheinmetall in the land systems and armaments sectors, and through DASA's participation in EADS (Airbus Group from 2015) from 2000 in aerospace domains.

Germany's defense industries have a strong export profile, though military exports remain a contentious issue in Germany. The sector's capabilities are broad and

extend from subsystems production to final platform production and development in land, sea, and air domains.

During the late 1990s and 2000s, Germany's defense industrial base underwent significant consolidation driven by the flat budgets in Germany and Europe, as well as

the German government's desire to support European defense industrial integration. Following a period of intensive consolidat ion, Germany's industrial base provides

capabilities in ship and submarine building, armored vehicles up to and including MBTs; military engines (aero, naval, and land); C4ISR; mission systems;

communications; electronics; missile systems; and ammunition. Although Germany does not independently produce combat aircraft, EADS Deutschland is a member

of the Eurofighter consortium with responsibility for the construction of Germany's Eurofighter fleet, and Airbus Deutschland is involved with A400M transport aircraft.

Principal companies

Germany's defense industry comprises around 200 companies, with eight major players. The German defense and security sector employs a workforce of some

135,700 people and a further 273,000 within the wider supply chain (source: Bundesverband der Deutschen Sicherheits und Verteidigungsindustrie).


26


Industry sectors – Defense industry in United Kingdom

Overview

The UK is Europe's biggest defense market with support and equipment spending of around GBP16 billion per annum. The UK defense industries directly employ

around 142,000 people and support a further 110,000 jobs. The sector has a combined turnover of around GBP23 billion with exports accounting for around a quarter

of this figure (source: Industry for Defense and a Prosperous Britain, December 2017).

The UK is also routinely ranked as one of the world's leading exporters of military materiel with a consistent position in the global top five. UK defense export orders

totaled GBP55.1 billion between 2011 and 2017 (UK government figures).

The UK has a comprehensive industrial base, covering almost every area of defense production. However as it has sought to become more efficient in its procurement

practices, this breadth of competencies has become unsustainable and the UK government has sought to focus on certain key areas ofelihw”ytilibapacngierevos“

opening others to competition. Support of industry is focused around developing industrial base capabilities in aerospace, communications and networking, high

technology engineering, and systems integration, with a reduced emphasis on more traditional, lower value-added manufacturing capabilities.

As a result of increased competition in procurement and rising development costs for new weapon systems, UK industry has undergone a major transformation from

self-sufficiency to international co-operation. The UK government has, for example, allowed its armored vehicle manufacturing capability to fade, preferring to import

foreign systems and awarding key upgrade and sustainment programs to the UK arms of US companies.

Principal companies

The combat aircraft and naval markets are dominated domestically by BAE Systems, though other European prime contractors such as Thales and Leonardo (formerly

Finmeccanica) have a very strong presence (both have at times claimed to be the country's second largest defense organizations, based on footprint or sales).

Beyond the prime contractors, there is also strong capability in the lower tiers of the defense supply chain with the UK trade organization ADS representing almost

1,000 defense-related organizations.


27


Industry sectors – Telecom


28


Industry sectors – History of upturns and downturns in Telecom

This telecom industry has changed dramatically as it has gone through upturns, downturns, bubbles, and bursts.

Toward the end of the 1990s, the telecom industry experienced an enormous global boom. By 2001, it moved from boom to bust. Investment in the U.S. telecom sector

declined by 44.5% from 2001 to 2004.

After a steadily investment cycle from 2004 to 2007, 2009 and 2010 were the first and second years of a disinvestment cycle during the financial crisis.

A new investment cycle started in 2011, and ended in 2015. Since that time, capex has been flat or slightly decreasing when forex noise is removed.

As anticipated, global telecom capex decreased 0.5% in 2017 due to low single-digit growth in EMEA and North America. In addition, capex was flat in CALA. Any

growth was not enough to offset a China-driven.YoY%4.31denilcedxepacmoceletlatots’anihC.cificaPaisAnienilced

Driven by 5G and fiber, worldwide capex is expected to peak at $360 billion in 2021 and decline to $353B in 2022. This new pattern will lead to a 5-year CAGR of

0.9%. Total CY18-CY22 capex will be $1.8 trillion.


29

Exhibit 4 Updated theoretical capex cycle model

© 2019 IHS MarkitSource: IHS Markit


Industry sectors – Telecom forecast by region

North America ($96 billion, +3.6% YoY): As AT&T cuts capex by $2 billion (guidance is at $23 billion, down from $25 billion in 2018) and Verizon stays flat at $17

billion, fuel will come from Sprint/T-Mobile and the cable MSOs. Though 5G and network transformation, including OSS/BSS 5G preparation, will drive capex, AT&T

and Verizon have made it clear that they will not hike their capex. In fact, Verizon is ploughing billions of its $17 billion capital expenditure into its 5G rollout program

and is struggling to balance this investment with ongoing debts in excess of $110 billion. And finally, the combined capex of Sprint and T-Mobile resulting from their

merger.xepac’seititneetarapesowtehtfomusehtnahtrellamseblliw

EMEA ($86.7nófeleT,ailatImoceleT,egnarO,moceleTehcstueD)5giBehtgnomasriahclacisumniagaecnos’tI:(YoY%9.0+,noillib ica, and Vodafone) with low

single-digit capex increases at Deutsche Telekom and Orange to offset double-digit declines at Telefónica. In the meantime, big fiber rollouts will continue across

Europe. BT/EE is kicking off its major core network transformation project, with one single core for fixed broadband, mobile, and Wi-Fi. The level of investment in

Russia should remain stable with some upside potential, and the Middle East will continue to drive 5G rollouts.

Asia Pacific ($133.9txen dna puC dlroW ybguR s’raeysiht,napaJnI.htworgehtfotsometarenegaidnItnetxeemosotdna,aeroKhtuoS,ailartsuA:(YoY%2+,noillib

year’stahtemussasrebmunruodna,dracdliwehtsianihC,laususA.stuodliubkrowtenG5cidaropslautcnupgnirblliwscipmylO capex stays flat, which is the most

positive 2019 outlook we have for now. Capex in China is supposed to decline again this year, but the ongoing geopolitical situation is prompting the Chinese

government to put pressure on its three service providers to accelerate 5G rollouts. 2019 looks better if we include 5G in the total. Only China Mobile and China

Telecom provided a number (CNY9 billion, or USD1.3 billion) for potential 5G spending that is excluded from their total capex outlay for 2019. Massive 5G trials that will

dwarf every other rollout are planned and will not come cheap. Somebody will have to pay the hefty bill.

CALA ($31.6 billion, +1.1% YoY): We expect moderate investment in the region as cash flow will be used for debt payment. Propelled by a growing economy, Brazil

willni detcepxe tnemtsevni emos htiw adnegaehtnooslasiG5.secivresdnabdaorbelibomdnadexifretsafelbaneotsedargpukrowtenroftaess’revirdehtekater

Brazil and Chile for mining, farming, and smart grid use cases.

Suppliers of Hydraulic-magnetic circuit breakers in telecom:

The upturns and downturns of telecom investment will cause the demand for HMCBs in telecommunications equipment increase or decline significantly. Carling

Technologies and Sensata/Airpax are the leading players in the telecom market. With the rise of Chinese telecom equipment suppliers, new technologies evolution,

and 5G shifting, there will be opportunities for other suppliers.


30


Industry sectors – 5G infrastructure development and forecasts

• 2019: Total telecom infrastructure investment to bottom at $49.6 billion, down 4.1% from 2018

• Total 5G infrastructure investment is expected to grow from $3.5 billion in 2019 to a peak of $19.6 billion in 2023.

• 2020: 5G brings the total market back to positive territory with growth of 0.4% YoY and generates $10.2 billion in total revenue, up from $3.5 billion in 2019

• Japan and Korea are the first Asian countries to deploy 5G between 2018 and 2020, using a mix of sub-6GHz (3.5 GHz) and 28 GHz NRs.

• Japan will launch moderate trials during the Rugby World Cup.

• South91021QnideyolpedstinuRNG5K06nahteromhtiwtaess’revirdehtnisiaeroK

• The.sRNG5htiwaeroKhtuoShtiwpugnihctacsidnaAWFG5htiwtaess’revirdehtnisiSU

• China’ssi anihC .raey txen hcnual laicremmoc-erpaybdewollof,raeysihtslairtevissamrof(noillib4$)noillib9YNCdetegdubhcaeevahseinapmocmocelet

gearing up for massive trials with more than 20K 5G NR units, followed by commercial trials in 2020.

• Europe and The Middle East are also adding some fuel to our forecast.

• Huawei finished 2018 with 31% of the global mobile infrastructure market, which includes 2G, 3G and 4G hardware macrocell networks. Huawei was followed by

Ericsson with 27% and Nokia with 22%.


31


Industry sectors – 5G infrastructure development and forecasts


32


Industry sectors – IT/data center


33


Industry sectors – IT/Data center related products forecast

Server market growth

According to the IHS Markit Data Center Compute Intelligence Service, data server unit shipments grew 7.4% in the first three quarters of 2018 compared to the first

three of 2017. IHS Markit expects the data center server equipment market to accelerate worldwide as the number of connected devices ramps up, the effect of multi-

tenancy is further diminished, and the average annual increase in compute capacity per general purpose CPU slows.

Regionally, data center server equipment unit shipments grew in all regions, with highest growth in Asia and lowest growth in the Americas. Rising server shipments will

positively affect IT rack and enclosure and rack PDU shipments.

UPS quarterly index

Three phase UPS, which correlates most closely with data center growth (compared to single phase UPS, which is used more in other types of applications), is

estimated to have grown 4.6% globally in the first three quarters of 2018 compared to the first three quarters of 2017.

The EMEA and Asia UPS markets grew while the Americas market declined year-over-year. However, the three phase UPS market is likely to grow in the Americas as

well, based on initial reporting data for Q4 2018. The index reflects growth from the thirteen participating suppliers that account for approximately 60% of global

revenues.


34


Industry sectors – Cloud continues to drive demand for IT/data centers

On-premises cloud: The on-premises enterprise data center (DC) is alive and flourishing. IHS Markit is seeing a continuation of the enterprise DC growth phase. The

transformation of the on-premises DC to a cloud architecture continues, and the enterprise DC will be considered a first-class citizen as enterprises build their multi-

clouds. The on-premises DC continues to evolve with server diversity set to increase.

Off-premises cloud: Large cloud and colocation data center service providers like AWS, Microsoft, Alibaba, Tencent, Equinix, and Digital Reality continue to rapidly

expand their global data center footprint. Cloud service providers began deploying quick, scalable data centers capable of greater efficiency and utilization while

remaining economical. This enabled cloud service providers to offer agile data center services to enterprises as a cost-effective solution for massive and rapid digital

transformation. This is one of the factors driving adoption of off-premise cloud services, and it is driving high growth for this market.

• Enterprises are driven to adopt off-premises cloud services to increase their business agility and reduce costs. We forecast the off-premises cloud service market to

reach $414 billion in CY22 with a five-year CAGR of 19.9%.

• Infrastructure as a Service (IaaS) is already a proven growth engine for the broader market with 40% revenue growth in 2016 and 36% projected for 2017. Newer,

more innovative and specialized cloud service offerings will drive further adoption in the coming years as companies leverage the benefits of new developer tools

and hardware tailored for artificial intelligence and machine learning that can only be supplied by specific cloud service providers (CSPs).

• Cloud service providers (CSPs) are continually looking for ways to innovate by integrating machine learning (ML) and artificial intelligence (AI) techniques into their

services. These techniques give providers a clear way to differentiate themselves by building teams of highly skilled experts that most enterprises cannot duplicate.

• In addition, we continue to see new technologies such as artificial intelligence (AI) and machine learning (ML) incorporated into applications. These applications

consume network bandwidth in a very dynamic and unpredictable manner and make new demands on servers for increased parallel computation.


35


Industry sectors – Influence of trends on IT/data centers

Distributed IT architectures: Edge and Hybrid data center deployments

Not all enterprises are embracing the cloud. Security remains a top concern for many enterprises and is inhibiting those that deal with sensitive data. Additionally, certain low latency applications such as high frequency trading are not best served by cloud service providers. While most applications do not require the few millisecond response time needed from an in-house data center, those that do are often not close enough to centralized cloud data centers to comply with this need. For these reasons, a hybrid approach to cloud and data center management is taking hold. This means that more companies are employing both on-premises data centers and off-premises cloud services to manage their IT infrastructure. The next generation of data center deployments is coming in a more distributed approach, often utilizing a combination of cloud and colocation services, on-premises compute, and edge data center deployments. This will commonly”tuo-sthgil“lareveseriuqerdata centers, needing to be managed and operated remotely.

Machine learning and AI in data centers

Machine learning will play a critical role in the automation and management of these data centers. Specifically, ML will enable thesenurotsretnecatad”tuo-sthgil“efficiently, with predicative failure and preventative maintenance alerts to reduce downtime, while also reducing the resources required to manage such a footprint.

Cooling has become the primary place to start applying ML to data center infrastructure. Cooling consumes around 25% of power a data center uses. Data centers are dynamic environments, with changing IT loads, fluctuating internal and external temperatures, variable fan and pump speeds, and different sensor locations. DCIM (data center infrastructure management) tools have been helpful in collecting, managing, and providing data visualizations, but are still only tools to inform human operated data center decisions. Data center cooling integrated with machine learning helped to reduce human errors, and overall power and costs associated with cooling..seicneiciffe gnilooc gninut no desucof gnieb fo daetsni sremotsuc ruo no emit erom dneps nac snaicinhcet etis-nos’rodnevretnecatadehT

Software defined storage

Software defined storage provides significant efficiencies allowing physical blocks of storage (located within servers or in separate network attached storage arrays) to be managed as a single pool of resources, an important pillar of the cloud architected data center. The agility and automation of software defined storage is expected to lead to higher bandwidth demands for DCI as enterprises implement automated disaster recovery strategies requiring data replication and from VM and container movement between DC sites. The selection of orchestration software by enterprise IT teams is underway, and the choice for physical and virtual switching in the DC will be dependent on the orchestration software selected. Vendors who have their own orchestration software will need to strive to be the platform of choice for enterprises.


36


Industry sectors – Next generation IT/data centers

Due to the rapidly evolving requirements of data center management and operation, as well as the increased complexity of the deployment models, the infrastructure behind data centerswol dna ,ycneiciffe dna ytilibailer hgih ,ytilibalacs dipar ,noitazilitu tessa-hgih ,tsoc-wolerastnemyolpedretnecatadfonoitarenegtxenehtrof”sevahtsum“ehT.gnitpadasi maintenance and ease of operation. Infrastructure is being designed to meet these needs, and when utilized in conjunction with each other are shaping next generation data center deployments to optimize space, asset utilization, efficiency, and scalability. Below are the trends and technology advancements in infrastructure for data centers:

Uninterruptible power supplies

High density UPS systems – smaller footprint

Modular UPS systems – scalable and flexible configurations, ease of maintenance

Lithium-ion batteries – saves space, weighs less, does not require dedicated battery room with cooling, lower TCO than traditional VRLA

Thermal

Adoption of air handlers for core data centers – smaller internal footprint, increased operational efficiency, lower TCO

High density cooling applications – smaller footprint, allows for higher density racks

Row and rack cooling at the edge – smaller footprint and easily scaled

Racks and Enclosures

Taller, wider, and deeper racks and enclosures – transition in rack height from 42U to 48U, also wider and deeper racks allow for better cabling and cooling management

Light industrial enclosures – increasing in adoption at the edge where many environments are not conducive to IT equipment

Pre-integrated systems – increased speed and ease of deployment of rack power distribution units

rPDUs in zero U space – creates additional space for IT

Increasing adoption of intelligent rPDUs – measuring and making improvements to efficiency, easier power capacity planning, remote management

Increasing adoption of rPDUs rated > 5 kW – rack power density is steadily on the rise with high density application upwards of 40 kW now possible


37


Industry sectors – PV/alternative energy


38


Industry sectors – PV/alternative energy market overview

Overview:

IHS Markit has increased global PV inverter shipments by 4.1 GW to reach 39.1 GW in 2018 due to stronger shipments than previously expected in the first three quarters of 2018, particularly in China. However, although the outlook in China has improved, the global PV inverter market outlook remains volatile due to policy and tariff uncertainty. The increased forecast was driven primarily by stronger than expected demand in major markets including China, Mexico and Australia. However, tariff uncertainty and reduction in feed-in-tariffs has resulted in a decreased outlook for the Indian and Japan markets.

IHS Markit has increased the outlook for PV inverter revenues by $381 million in 2018 due to strong inverter demand and shipments. Global revenues are expected to reach $6.9 billion in 2018. Although the revenue outlook was stronger than expected in 2018, PV inverter suppliers continue to face price pressure. Global average prices are forecast to fall to $0.05/W in 2022 as a result of increased competition and continued innovation to release higher powered products.

Regions:

EMEA was the fastest growing region in the first three quarters of 2018. Renewed growth in installations such as in Germany and Spain and a growing inverter replacement market are driving shipments in the region. While overall PV inverter shipments in the Asia region declined in the first nine months, the residential and commercial segments, particularly in China, grew. The region is expected to continue growth in 2019, driven by renewed growth in utility installations in China, India and Australia. Key markets in the Americas region include Mexico and Brazil, which have had a strong increase in demand for three-phase high power inverters.

Tariff uncertainty in the United States is a challenge for inverter suppliers seeking to solidify production strategies to meet demand in the United States. However those inverter suppliers with a significant amount of their production in China are implementing plans to produce inverters outside this market to serve the US market.

Suppliers:

The global supplier competitive landscape has shifted slightly as western suppliers have increased market share due to Chinese suppliers being negatively affected by lower domestic demand. However, they continue to internationalize and have quickly increased activity, particularly in EMEA and key Asian markets such as India and Japan. PV inverter suppliers overall continue to be faced with several challenges including component shortages, volatile demand in key markets, uncertainty around grid regulations, and increasing competition and price pressure. Three-phase low power inverters are expected to take an increasing share across system types as suppliers release both higher power and 1500V-rated inverters. Meanwhile, suppliers are seeking new growth opportunities in parallel industries such as energy storage and partnerships with module suppliers.


39


Industry sectors – PV/alternative energy: EPC, operation and maintenance

Overview:

In 2018, the 30 largest EPC providers installed 19 GW of non-residential PV, representing 21% of the total market. This slight decline from 23% in 2017 demonstrates the increasing fragmentation at a global scale. Part of the fragmentation comes from China, where the ten largest companies had a combined 13% of the market, down from 18% in 2017. Another factor is the growth of PV installations in new markets, where local companies enter the PV EPC business, such as in Australia.

• Sterling and Wilson overtook TBEA as the largest EPC provider globally, with a market share of 3%. The position is a result of continued leadership in the Indian PV market, combined with large projects overseas, most notably the 1.2 GW Sweihan project in Abu Dhabi.

• Long-standing EPC leader and inverter manufacturer TBEA maintains a global market share of 2% despite the slow-down in the Chinese market. Overseas projects in markets like Egypt offset some of the domestic market decline.

• Sungrow also demonstrates the importance of its EPC business in parallel with inverter manufacturing by ranking second in China and third globally with 1% of the market.

Regions:

In 2018, the non-residential PV market outside of China grew by 34%, mainly as a result of growth in India, Australia, Europe, the Middle East, and Latin America. This has enabled established EPC providers to grow globally, as well as opened up opportunities for local entrants. Sharp declines in module prices in 2018 resulted in even lower EPC offers for 2018, but companies caution that supply contracts remain volatile and that module prices have stabilized for 2019. Australian engineering company RCR Tomlinson sailed up as the largest domestic EPC provider in 2018, only to enter into administration in November 2018. The exit of RCR has opened a void in this growing market, which international companies are now competing to fill.

In North America, the O&M market consolidates further. The top-seven O&M providers increased their aggregate market share from 2016 to 2017 by four percentage points to 54%. First Solar remained by far the leading O&M provider in North America, capturing 19% of the market in 2017, and likely to have reached 23% at the end of 2018.

In Europe, the consolidation trend in the operation and maintenance (O&M) segment continues, but the market remains fragmented across the region. In 2015, the twenty largest portfolios held 17% of the total installed base. In 2017, this share had increased to 20%.


40


Industry sectors – Energy storage systems and charging points

Grid-connected energy storage market forecasts

The grid-connected energy storage market is projected to grow from annual revenues of USD3.7 billion in 2018 to USD8.4 billion in 2025 globally. The market for grid-

connected residential and commercial energy storage systems is growing fast globally. Growth will be driven by demand for grid-connected intelligent systems that

have the capability to optimize rate tariff structures for customers and participate in aggregated services with utilities and grid operators.

By region

The US market alone will install over 850 MW of residential energy storage from 2018 to 2022. The United States will remain the largest market globally with strong

uptake in utility-scale solar plus storage and behind-the-meter systems. Highly attractive returns could be achieved by using a battery to reduce peak demand charges,

and identifying examples where a system could have a payback period as short as one year. However, project economics are highly sensitive and customer specific,

while the returns can also vary dramatically by state based on electricity tariff structures and by policy.

Growth will be strongest in Asia Pacific. An acceleration in the Chinese market, as well as the Australian and Japanese residential markets is driving short-term

demand.

In EMEA, the German market will dominate the commercial and industrial (C&I) segment, while new opportunities are developing in Africa, where off-grid solutions

combining on-site generation and storage for remote businesses are becoming more prevalent. With growth in Germany and the United Kingdom expected to stagnate

in 2019, the opportunity in EMEA is diversifying geographically.

Charging point

The electric vehicle (EV) charging station market is greatly affected by how many electric vehicles are in operation. Currently, the EV market is driven by legislation and

the incentives available. Some countries, such as Norway and Netherlands, have announced or voted to ban internal combustion engine (ICE) vehicles sales by 2025.

This drive for EVs through incentives and gradual banning of ICE vehicles has meant that these two countries are leaders of the IHS Markit Automotive Plug-in EV

Index (PEV Index). Lack of incentives can also be a reason for a reduction in sales. This can be seen in the United States, where annual registrations of EVs, plug-in

hybrid EVs (PHEVs), and hybrid EVs (HEVs) have fallen. Companies are looking to install energy storage systems to reduce network connection costs for EV charging

infrastructure and to reduce peak demand from fast-charging points.


41


Industry sectors – Industrial OEMs


42


Industry sectors – Industrial OEMs sectors overview

Broad spectrum of industrial OEMs

HMCBs are widely used in many general industrial sectors and serve a broad spectrum of OEMs, including industrial controls, recreational vehicles, HVAC, refrigeration, marine, information processing, electronic power supply, over-the-road trucking, construction, agricultural, power generators, welder, audio & visual, lighting, test & measurement equipment, meteorological equipment, QC calibration equipment, construction, agricultural, battery chargers, compressors, motor controllers, conveyor belts, printing presses, robotics, precision operation, sorters.

Overview of global machinery production

2019 will be a tough year for machine builders, with overall global machine production revenues growing at a compound annual growth rate (CAGR) of 2.1% from 2017 and reaching $1.6 trillion in 2022. Year-over-year eurozone machine production revenues are expected to contract slightly by 0.4% in 2019. Growth in Asia Pacific will be in the low single digits, as growth in China, the largest contributor to the machine tools market, is expected to remain in the single digits, at least until 2020. The machine tools category was 5.7% of all global machinery production revenues in 2019. After the global economic downturn in 2015, a short 5.5% year-over-year growth spurt in 2017 helped revenues to climb to their highest level. However, the year-over-year growth rate fell to 3.4% in 2018. It is expected to decline by 0.4% in 2019.

Uncertainties from main downstream industries

The largest downstream industries for the machinery sector are automotive and electronics. The poor sales of automobiles in late 2018, and the downward-trending market for smartphones and PCs, is reflected in the latest sales and production revenue estimates from IHS Markit. Other broad underlying factors for the downturn include a weaker global trade environment, increased geopolitical tensions, lower investor confidence, and declining global vehicle sales.

Uncertainties from main machinery production countries

The top producing and consuming countries for this type of machinery, Germany and China, have been hit especially hard by the industry downturn. In the fourth quartertsacerof si eunever noitcudorp yrenihcamlatots’yrtnuocehT.wolhtnom-13aotdeppils(IMP)xednisreganamgnisahcrupgnirutcafunams’ynamreG,8102fo to contract by 0.3% in 2019, with machine tools revenues growing at just 0.7%, year-over-year.ni enilced labolg eht yb desuacsawecnamrofreproops’ynamreG automotive manufacturing. While it is difficult to isolate the main reason for the declining growth in this industry, changes in the way new vehicles are regulated is an obvious candidate. Machinery production in China is also facing tremendous downward pressure, due to slowing investment, sluggish growth in downstream industries, and the Sino-US trade war. China is also dealing with many of the same problems Germany is facing, including contracting automotive sales and weaker global trade.


43


Industry sectors – Industrial OEMs sectors by main machine type

The machine tool sector consists of metal cutting and forming machinery. In terms of demand, key drivers in metal markets will remain intrinsically related to the future performance

of the motor vehicle, construction, and packaging sectors. The market performance of the machine tool sector is highly dependent on commodity prices, macroeconomic conditions,

and sector performance (e.g., automotive, construction, aerospace, and ship building). According to the IHS Markit Economy and Country Risk (ECR) group, a global recession is

highly unlikely to occur in 2019. However, due to weaker global trade, pollical uncertainties, and other headwinds, global machine tools production revenues will only begin to improve

in late 2020 or early 2021.

Materials handling equipment, particularly for conveying and lifting, will grow steadily through 2022. Conveying equipment is still projected to grow fastest because of a growing

middle class, and the growth of online retail giants like Amazon, eBay, and Alibaba. Growing demand for packaging and growing food and beverage production has propelled the

adoption of high-tech conveyors with better throughput rates. Low-cost airfares signal that more people are traveling by air, which is increasing demand for conveyor systems that

handle baggage at airports. Intelligent conveyors have arrived that can organize products without standard separators or expensive robotics, enabling a smaller footprint and

consuming less power.

The cranes and hoists sub-sector has been affected by a reduction in capital expenditure in the shipping industry, which accounted for much of the market for such machinery. The

large secondhand crane and hoist market in Asia Pacific is also declining as seen by its low sales of new cluster equipment for products like bridges and gantry cranes. This will

bump up shipping cost and hurt port equipment sales even more. China has invested $20 billion around Europe and Asia to aid its One Belt One Road project. This represents a

increase in Chinese investment overseas, which will definitely benefit the sales of material handling machinery to the shipping industry and may prompt its recovery.

The food and beverage sector accounts for more than 50% of packaging machinery on a revenue basis. Stricter regulations have increased the cost of machine maintenance and

production, which will bolster future investment in the food and beverage sectors, such as creating greater demand for machinery that include cleaning systems that are more hygienic

and efficient. Additionally, the rise of using e-commerce is also set to boost sales by incorporating fully customized labels. The HP Indigo 3000 creates the distilled value,

individualization, and premium feel of a normal product. The results can be seen in a rather successful campaign by Coca-Cola, where you can print a custom name to a bottle. It also

opens doors to how a packaging company can control the customer experience.

Medical: Hydraulic-magnetic circuit breakers can also be used in various kinds of manufacturing machines, such as medical equipment. The hydraulic magnetic circuit breakers must

comply with medical quality and design standards, as well as the performance and reliability specifications of the medical industry.

The power generators industry is a mature market with stable market performance. There are as many strict technical requirements for hydraulic-magnetic circuit breakers in the

power generator market as in other industries like defense, railway, telecom, and data centers. Some Chinese suppliers like Zhejiang BSB focus on the low power generator market

and offer competitive prices. Normally, hydraulic-magnetic circuit breakers in power generators are within the specifications of 50/60 HZ, 230/400V below, and 30/50A.


44


Market breakdown analysis


45


World market by component and solution

The HMCBs market is segmented between hydraulic-magnetic components and

hydraulic-magnetic solutions. Hydraulic-magnetic circuit breaker solutions are

system-level products that are made up of at least an enclosure, individual circuit

breakers, and busbar. IHS Markit has not double counted individual hydraulic-

magnetic components with hydraulic-magnetic solutions.

The HMCB market is dominated by components. The solution market is quite

small. Each solution will replace approximately 10-15 individual replacement

hydraulic-magnetic components. Therefore, the replacement effect is relatively

strong. IHS Markit forecasts that components will continue to dominate because

the.ledomssenisub”sMEOotllestceriD“ehtotkcitsslennahcselas

The attractions to solutions is obvious for suppliers. Suppliers of hydraulic-

magnetic components are moving up the value chain where possible. Solution

sales offer higher profit margins, and perhaps more significantly, allow them to

more easily retain customers because solutions are more difficult to have design

outsourced (i.e., few off-the-shelf designs exist and the ones that do are not

compatible between vendors). Normally, suppliers have a broad portfolio of circuit

breakers, or a circuit protection product portfolio, or even more comprehensive

product lines, which naturally become solutions for customers. On the other side,

the customer needs a total solution to shorten the time to deployment and

installation, lower maintenance cost and risks, and shorten the time to market.


46

0 50 100 150 200 250 300 350

Components

Solutions

2018 2023



Figure 1: The market for hydraulic-magnetic circuit breakers and solutions by product

type: World



World market by region

HMCB products have geographical and application characteristics obviously. The HMCBs market can be further broken down by region and by application. The HMCB market has become much more fragmented with small batches, because they are tailored with the appropriate product features for a particular application or regional market.

The IT/datacenter, telecom, defense, and medical sectors outperform the average market in the United States. The Railway industry performs well in China, Southeast Asia, India, and Australia. Industrial machines provide lots of opportunities in Germany, China, and Japan. On the contrary, Africa, South America, and The Middle East have less Industrial machine opportunities.

The same industry might have different requirements by region. In the United States residential builders tend to use only thermal circuit breakers, but in South Africa residential builders use lots of HMCBs.

Markets can no longer be categorized simply as North American or European or Asian. Various performance and safety standards from around the world must be considered. Most countries have regulatory agencies that determine the safety and performance standards required for products used in that country, such as UL (Underwriter Laboratories Inc.) in the United States, and TÜV Rheinland in Europe, VDE in Germany, China Compulsory Certification in China, and Canadian Standards Association(CSA) in Canada, South African Bureau of Standards (SABS) in South Africa, Verband Deutscher Elektrotechniker (VDE) in Germany, and Schweizerischer Elektrotechnischer Verein (SEV) in Switzerland. There are also some specific ones like UL489, UL489A, UL1500.

In several markets around the world, both UL and IEC components are accepted by local codes. Choice of components is dictated by historic practice, but IHS Markit forecasts that IEC components will gain some market share at the expense of the corresponding UL components, resulting in lower prices due to changes in the product mix (IEC circuit breakers are typically less expensive). This is largely driven by the ease of replacement. IEC components are typically interchangeable, but UL components are typically not.


47

0 20 40 60 80 100 120 140

EMEA

Americas

Asia Pacific

2018 2023



Figure 2: The market for hydraulic-magnetic circuit breakers and solutions by region:

World



World market by pole

HMCBsybdetanimodllitssitekramBCMHehT.”selop"elpitlumroenoevahnac

“oneyb dewollof ,erahs tsegral eht era stcudorp elop-owT.stcudorp”elopeerhtot

one-pole and three-pole products.

A pole consists of a delay tube and the exterior attachments. Each pole is a

completely separate circuit that can be protected simultaneously by an HMCB.

The number of poles corresponds with the number of live conductors in the

circuit being protected: single phase with one live conductor, single-phase with

two live conductors, or three-phases. In some instances, one HMCB with two

poles can substitute for two HMCBs with one pole.

Over time, OEMs have become more safety conscious, and globally, selected

regions have demanded ground fault protection. Suppliers of HMCBs are

reacting by adding current sensing technology to their products. This is expected

to lead to a slight increase in two-pole and four-pole breakers as this functionality

is added (replacing some one-pole and three-pole breakers, respectively). This

will,tnemgesselop”xisotruof“ehtnideifissalcsrekaerbfohtworgrehgihotdael

as well as lead to some modest ASP increases.


48

0 50 100 150 200 250 300

one to three

four to six

2018 2023



Figure 6: The market for hydraulic-magnetic circuit breakers by number of poles: World



World market by frame size

Standard CB format:

ThefosBCMH,larenegnI.”tamrofBCdradnats“erasezisemarfnommoctsom

one frame size cannot be substituted for HMCBs of another frame size due to

differences in size, amperage capacity, and industry standards.

Small squared:

Lots of the customers from the telecom, IT/datacenter, industrial machine,

railway, computers & peripherals, medical equipment, machine tools, and

process control instrumentation segments demand a compact design or modular

design for HMCBs.

OEM customers need extra space to install key devices in their cabinets. Railway

customers need to release more room to their passenger carriages, which can

increase the number of seats, make room for wheelchairs or bikes, and improve

comfort. Therefore, HMCB manufacturers would like to provide HMCBs with

more.”derauqsllams“sahcus,egakcaprellamsanignitarrewop

Custom design:

Even with the same frame sizes, there are a multitude of configurations sold.

Note that a vendor could roughly provide 30,000 to 40,000 different

configurations for the many particular applications, often ordered in very small

quantities.dnayratilimehtniyllaicepse,lamronsi”ngisedmotsuc“ehT

aerospace industries.


49

0 20 40 60 80 100 120 140 160 180

Small squared

Long rectangular

Standard CB format

Large CB format

Custom format

2018 2023



Figure 7: The market for hydraulic-magnetic circuit breakers by form factor: World



World market by mounting type

Installation modes are diverse, and the basic requirements are easily installed into equipment. Thelacirotsih,stibahs’remotsucehtnosdnepedepytgnitnuom practices, and legacy equipment. Therefore, HMCB vendors try to provide multiple mounting options and configurations to allow customers to customize their machines to meet actual needs.

Front screw

“Frontcitamotuarofelbatiussitidna,tnanimoddnalanoitidarttsomehtsi”wercsscrewdriver.scitsiretcarahcnoitcurtsnoc"tnorfdaed“sallewsa,ylbmessa

DIN rail

DIN rail is growing fast, driven by demand from the railway industry. DIN stands for Deutsche-Industrie-Norm, which is originally a German industrial standard. It only fits a certain dimension of the product. The main advantage of this type is versatility. DIN rails are used by many different types of electrical and communications equipment, and they are mainstream in industrial settings.

The DIN rail mounting type can be quickly and easily mounted or removed, which results in efficient and economical wiring. It can be easily integrated into nearly any control or protection system. DIN rail also has the advantage of a modular design.

Snap-in

Snap-in allows for the rapid and simple installation and removal of the breaker without advanced control and protection measures.


50

0 50 100 150 200 250

DIN rail

Front screw

Rear screw

Threadneck panel

Snap-in

2018 2023



Figure 8: The market for hydraulic-magnetic circuit breakers by mounting position:

World



World market by rated current

The rated current is the maximum current the circuit breaker allows without

tripping. A single breaker may be rated for several voltages or may be compatible

with both AC and DC voltages.

Mostnihtiw”A001nahtssel“fotnerrucdetarehtrednugnikrowllitserasBCMH

majority applications and equipment in many industries.

The rated current of HMCBs more than 100A is suitable for critical application in

telecom,”dedaoltaeh“roroodtuorehtodnagninoitidnocria,noitatropsnart

equipment.


51

0 50 100 150 200 250 300 350

100A or less

Greater than 100A

2018 2023



Figure 10: The market for hydraulic-magnetic circuit breakers by rated current: World



Market trends


52


Market trends – Replacement by electronic circuit breakers

Historically, circuit breakers have been used as electromechanical devices and this largely remains the case today. The main change is a slow move from switch to electronic circuit breaker. Interest in this has been awakened since the deluge of publicity given to Industry 4.0 and the Industrial Internet of Things (IoT), but the percentage of units used this way remains very small and is projected to increase slowly.

IHS Markit does not believe electronic breakers will have a significant effect on replacement in the market over the next five years, but this risk becomes more important over the long term, especially in the industrial automation vertical market. Some substitution effects have already occurred in telecom, and this trend is expected to continue, but it will take a long time.

Most OEMs have been satisfied with the basic safety provided by the overcurrent/overload protection of HMCB technology. Over time, OEMs have become more safety conscious about electronic circuit breakers. On the other side, suppliers of HMCBs are reacting by adding current sensing technology to their products.

Advantages:

Electronic circuit breakers have an advantage over hydraulic-magnetic components because they are not de-rated by extreme temperatures.

Electronic circuit breakers can provide a faster response to a fault. In addition, they are programmable.

Electronic circuit breakers can be easily integrated into a network to provide performance and diagnostic data, which is especially valuable in factory automation applications to shorten the downtime and more easily collect and exchange data in a smart manufacturing environment.

Disadvantages:

There remain concern that electronic breakers are unsafe due a lack of visible separation and they might not open in all specified fault conditions.

In industries outside of industrial automation, the extra diagnostic capabilities probably are not valuable enough to justify the extra expense.

The price of an electronic circuit breaker with a very small power rating is less for an HMCB, but the price for an electronic circuit breaker with a medium or high power rating is higher than for an HMCB with the same power rating.

It takes time for electronic circuit breakers to be certificated as meeting various regulations and standards.


53


Market trends – Interchangeability between HMCB and TCB & TMCB

Interchangeability

TMCBs and TCBs can substitute for HMCBs in some electrical equipment, typically where less demanding response times to the electrical overcharge are permissible and ambient temperatures are stable. TCBs and TMCBs cannot substitute for HMCBs in many products where the user requires the tripping characteristics available only through HMCBs. On the other hand, HMCBs can substitute for TMCBs and TCBs in many uses as long as price differences are small. Moreover, once a product is designed, interchangeability is very low. Even prior to design, performance characteristics or industry standards may prevent the use of a TCB or TMCB instead of an HMCB.

There are some differences between HMCB and TCB & TMCB:

Temperature: The operating temperature range of thermal circuit breakers is -10°C to 60°C, while HMCB is -40°C to 85°C (32-185°F).noitcetorpdaolrevos’BCMHnAis independent of temperature.

Tripping mechanism: The tripping mechanism in a TCB is a strip containing two different metals (a "bimetal"), which warps in response to heat. TMCBs use a three-sided piece of metal surrounded by a bi-metal plate. The delay tube permits HMCBs to provide a more precisely-calibrated tripping performance than do TCBs or TMCBs. HMCBs have a better direct current short circuit rating than TCBs or TMCBs. HMCBs also provide a lower handle force than TCBs and TMCBs, allowing HMCBs to function as a switch in some instances. Because their tripping mechanism is not activated by heat, HMCBs are not subject to the nuisance tripping due to changes in ambient temperature that can occur in TCBs and TMCBs.

Structure: HMCBs are made of 50-70 individual components including those necessary for the more sophisticated delay tube mechanism, whereas TCBs and TMCBs are made up of only 20-30 individual components. HMCBs offer better DC short circuit protection than TCBs or TMCBs. HMCBs generally are available with handle (actuator) and terminal offerings far in excess of the offerings for TCBs or TMCBs.

Applications: An,stnemnorivneeniramsahcussnoitacilpparofnoituloselbatiusasreffodnaerutarepmetfotnednepednisinoitcetorpdaolrevos’BCMH transportation, generator rooms, and any industrial location with temperature or moisture extremes. HMCBs are used primarily by original equipment manufacturers in equipment applications, including telecommunications, power equipment, base transceiver stations, UPS systems, datacom/server equipment, HVAC systems, railway equipment, marine panels, and power generators. Uses in many of these industries require particular trip time characteristics to accommodate different conditions and requirements. TCBs primarily are used as supplementary protectors and generally are not capable of branch circuit protection. TMCBs primarily are used in wire protection applications.


54


Market trends – Cost and price changes

HMCB prices can fluctuate based on demand factors such as the macroeconomy, business cycle, vertical industry demand fluctuations, and the size of an order. Prices of HMCBs also differ by a number of product features, including the voltage and ampere ratings, the frame size, and the number of poles.

Complicated price comparisons: Gathering meaningful pricing data for this industry is complicated by the multitude of configurations in which HMCBs are sold. As noted, the sole producer reported selling 40,000 to 50,000 different configurations in a year. The very large volume discounts provided by suppliers in this market, which might result in price discounts of 50 to 60%. Furthermore, the payment terms are quite different depending on the industry, region, and customer, which also result in price differences.

Competition from new entrants: Suppliers from China increased their share of the market with low prices. The total market average selling price has been lowered due to Chinese vendors gaining share from competition with traditional players, Chinese OEMs (customers of hydraulic-magnetic breakers) increasing their relative importance in the world market, and the rise of industries advantageous to Chinese suppliers such as telecom, industrial machines, and railway.

Through rebranding or outsourcing, big name companies like Schneider Electric, TE Connectivity Potter & Brumfield Relays, Weidmuller, Phoenix Contact, and Omron also announced HMCB products to enrich their full LV product portfolios. Due to their limited market share and business models, they do not have too much influence over prices.

Product mix: Telecom HMCBs are generally the lowest-cost product types analyzed in this study because the large telecom/networking OEMs have significant negotiating power over their suppliers and can generally drive prices downward. There are many standard HMCB products in portfolios, which allows vendors to reduce manufacturing cost.

Manufacturing cost: The production process for HMCBs is more labor-intensive than that for TCBs or TMCBs, particularly the production of delay tubes, which is done by hand by skilled workers. Some models of HMCBs can be produced on automated lines. Many stages between stations have been automated, with the exception of final assembly. HMCB suppliers continue to focus on increasing productivity in lower-cost manufacturing regions. Before the 2000s, Airpax (later acquired by Sensata Technology), Carling technologies and Eaton shifted the majority of its production to Mexico. These international companies started shifting their assembly factories to China.

Oil and commodity prices: The manufacturing cost of HMCB components and solutions is driven by carbon, certain alloy steel wire rod, copper strip, steel strip, iron rod (driven by commodity prices), enameled wire, and plastic and resin (driven by oil prices). Oil and commodity prices increased have slightly in 2019, which is being offset by changes among competitors and the product mix. IHS Markit projects that hydraulic-magnetic circuit breaker prices will decrease slightly.


55


Market trends – Smart power grid and Industrial IoT

IIOT growth

IHS Markit forecast that the installed base of IoT devices will exceed 120 billion in 2030. Industrial sectors such as smart power grid and smart manufacturing are

generating massive amounts of data. Global data transmission is expected to increase from around 20-25% YoY to ~50% on average per year over the next 15 years.

Technology for data capture and analysis opens up new opportunities for optimization and monetization. Some core energy IoT use cases include monitoring

unmanned platforms through connected smart devices and smart sensors. The opportunity is to analyze large volumes of data in near real time and consequently

provide updates and modifications to processes, individual recommendations, and efficiently utilize owned assets.

Connected smart HMCBs

With the development of Industry 4.0, smart power grid and industrial IoT, hydraulic-magnetic circuit breakers will also evolve to be digitalized, connected, and smart.

With help from smart connected hydraulic-magnetic circuit breakers, the smart power grid and smart manufacturing can realize applications of telemetry, remote

signaling, remote adjustment, remote control, etc.

Predictive maintenance could also be an application with the introduction of connected hydraulic-magnetic circuit breakers, which can collect various parameters

(current, voltage, power rating, power factor, etc.) in real-time and transfer this information to central controllers. The operating of various protection functions can also

be set and modified on line. The fault parameters detected by the protection circuit can be stored and analyzed at the edge or on the cloud.

The above potential applications of hydraulic electromagnetic circuit breakers can reduce accidents, shorten downtime, improve power supply reliability, reduce

network loss, improve power supply quality, and reduce operation and maintenance costs.


56


Market trends – Sales channels

“Direct sale to OEMs” dominate the market

There is some overlap in the channels of distribution through which HMCBs and TCBs are sold, but relatively little between the channels through which HMCBs and

TMCBs are sold. “Direct.sreilppus rekaerb tiucric citengam-ciluardyhroflennahcselastnanimodehtllissi”sMEOotelas

About 80% of HMCBs are sold directly to OEMs, while 20% are sold to distributors. About 40% of TCBs are sold to OEMs and 60% to distributors and nearly all

TMCBs are sold directly to distributors and large retailers.

E-commerce is rising

E-commerce is becoming a rising sales channel for hydraulic-magnetic circuit breaker suppliers, especially for long-tail markets or emerging markets. E-commerce

platforms can sell standard products with worldwide networks to meet medium or small-sizedyrev htiw stnemeriuqer kcots dna ylppus gniog-no ro emit-enos’remotsuc

short lead times. The hydraulic-magnetic circuit breaker suppliers can focus on their key accounts and satisfy them with custom solutions or services.

On the e-commerce platform Digi-Key, we found HMCBs from Carling Technologies, Sensata-Airpax, Weidmüller, American Electrical Inc, IDEC, E-T-A, Phoenix

Contact, Omron Automation, and TE Connectivity (Potter & Brumfield Relays). On the e-commerce platform Mouser, we found HMCBs from Carling Technologies, E-T-

A, and TE Connectivity (Potter & Brumfield Relays).

Sensata-Airpax, Carling Technologies, and E-T-A use online distributors. Sensata-Airpax uses online distributors Digi-Key, CarAllied Electronics, Carlton-Bates, and

Master Electronics. Products from Sensata-Airpax and Carling Technologies can also be found on the e-commerce platforms of many big electronics distributors such

as Avnet, Arrow, and Element14.


57


Competitive environment


58


Competitive environment: Market share

Leading suppliers for the global market

Carling technologies, Sensata/Airpax, and CBI Electric are the leading suppliers in the global market, followed by several international companies such as

Eaton/Heinemann and E-T-A. With broad HMCB portfolios and worldwide networks, these international companies serve most industries and regions.

Medium players for specific markets

There are some medium or small regional players such as Nadar, Chinehow, and Zhejiang BSB in China; Nikko and IDEC in Japan; Mors Smitt in Europe; Daeyruk in

Korea; and Comestero Sistemi in Italy. Most of the regional players focus on their regional markets or vertical industries. Zhejiang BSB focuses on the power generator

application and Mors Smitt focuses on the European railway market. Nikko focuses on the Japanese market. Nadar and CBI Electr ic have share in the Chinese railway

market.

New entrants

Through rebranding or outsourcing, big name companies like Schneider Electric, TE Connectivity Potter & Brumfield Relays, Weidmuller, Phoenix Contacts, and

Omron announced HMCB products to enrich their full low voltage circuit breaker product portfolios,. Most of them outsource to tradi tional HMCB suppliers. Their target

is to enrich their product portfolios to cover all circuit breakers, from HMCB to TCB and TMCB, and provide total solutions. Therefore, these new entrants still have

limited market share.


59



Table 25: Market share estimates for hydraulic-magnetic circuit breakers and solutions: World

Suppliers' share of the market in 2018

2018

1 Sensata 29.0%

1 Carling Tech 29.0%

3 CBI Electric 18.5%

4 ETA 9.5%

5 Eaton 2.5%

5 Zhejiang SBS 2.5%

7 Heinemann Canada 2.0%

7 Nader 2.0%

Others 5.0%2018 market size: $271.4 million

Data

issued:

April 2019


Table 26: Market share estimates for hydraulic-magnetic circuit breakers and solutions: EMEASuppliers' share of the market in 2018

2018



3 ETA 18.0%

4 Sensata 13.5%

5 Eaton 5.5%


Data

issued:

April 2019



60



Table 27: Market share estimates for hydraulic-magnetic circuit breakers and solutions: AmericasSuppliers' share of the market in 2018

2018

1 Sensata 40.0%


3 ETA 8.5%

4 CBI Electric 6.5%

5 Heinemann Canada 5.5%


Data

issued:

April 2019


Table 28: Market share estimates for hydraulic-magnetic circuit breakers and solutions: Asia PacificSuppliers' share of the market in 2018

2018

1 Sensata 30.0%



4 Zhejiang SBS 7.0%

5 Nader 5.5%

6 Chinehow 4.0%

7 ETA 2.5%





61


Competitive environment: Short history of HMCBs and the leading

companies

Heineman/Eaton

In the 1930s, Heineman Electric Company invented the hydraulic magnetic circuit breaker (HMCB).

Up to the 1970s, Heineman led the HMCB market and established global joint ventures.

In 1992, Eaton acquired Heinemann Electric Co.

In 1997, Eaton acquired Rheodata S.A. and sells the most of its HMCBs under the name Heinemann Rheodata.

CBI Electric

In 1949, Heineman established the joint venture Heineman Electric South Africa, which was a founder of Circuit Breaker Industries (CBI Electric), which is acquired by Reynaud, Ltd.

In 1947, Westinghouse invented thermal magnetic circuit breakers. Westinghouse licensed its thermal magnetic technology to producers worldwide, including the small South African company Hooks Electrical Industries. In 1986, Reynaud merged with Hooks Electrical Industries, then named Circuit Breaker Industries (CBI).

CBI continued the tradition of producing and selling HMCBs and thermal magnetic circuit breakers at the same plants using the technology invented by its predecessors, Heineman and Westinghouse. CBI Electric becomes a wholly owned company of Reunert Limited.

Heinemann Electric Pty Ltd was established in Australia in 1959.

In 2004, Heinemann Electric Pty Ltd was acquired by CBI Electric.

Airpax/Sensata

Airpax Corporation was founded in 1947 in Maryland.

Sanken-Airpax was established in 1968 by Sanken Electric and Airpax to manufacture HMCBs in Japan. In 2006, Airpax Corporation bought shares corresponding to 50% of their joint venture, leaving Airpax as the sole shareholder of Sanken-Airpax.

Sensata Technologies Inc. acquired Airpax Holdings Inc. in 26 June 2007.

Carling Technologies

In 1978, Carling begins engineering and manufacturing circuit breakers with some technologies from Heineman.


62


Appendix – Vendors of HMCBs


63

Appendix 1: Vendors of hydraulic-magnetic components and solutionsList of companies specifically considered within this report

Company Headquarters Website

Carling Technologies (Inc Mors Smitt) USA - Plainsville carlingtech.com

CBI-Electric South Africa - Bloemfontein cbi-electric.com

Chinehow China - Zhejiang chinehow.com

COMESTERO SISTEMI Italy - Vimercate comesterosistemi.com

Daeyruk South Korea - Seoul circuitprotector.net/cp.htm

Eaton Ireland - Dublin eaton.com

E-T-A Germany - Altdorf e-t-a.de

Heinemann Canada Canada - Montreal heinemann-electric.com

IDEC Japan - Matsumoto idec.com

Nader China - Shanghai sh-liangxin.com

Nikko Japan - Kanagawa nikko-el.co.jp

Sensata/Airpax USA - Massachusetts sensata.com

Zhejiang SBS China - Lishui chinabsb.comData issued: April 2019


IHS Markit Customer Care

[email protected]

Americas: +1 800 IHS CARE (+1 800 447 2273)

Europe, Middle East, and Africa: +44 (0) 1344 328 300

Asia and the Pacific Rim: +604 291 3600

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The information contained in this presentation is confidential. Any unauthorized use, disclosure, reproduction, or dissemination, in full or in part, in any media or by any means, without the prior written permission of IHS Markit Ltd. or any of its aff iliates ("IHS Markit") is

strictly prohibited. IHS Markit owns all IHS Markit logos and trade names contained in this presentation that are subject to license. Opinions, statements, estimates, and projections in this presentation (including other media) are solely those of the individual author(s) at the

time of writing and do not necessarily reflect the opinions of IHS Markit. Neither IHS Markit nor the author(s) has any obligation to update this presentation in the event that any content, opinion, statement, estimate, or projection (collectively, "information") changes or

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