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Industry Overview
1. Definition

The frequency converter is a power control device that uses frequency conversion technology and microelectronics technology to control the AC motor by changing the frequency of the motor's working power supply. The frequency converter is mainly composed of rectification (AC to DC), filtering, inverter (DC to AC), braking unit, drive unit, detection unit, micro-processing unit, etc. The frequency converter adjusts the voltage and frequency of the output power supply by the switch of the internal IGBT, and provides the required power supply voltage according to the actual needs of the motor, and then realizes the purpose of soft start, energy saving and consumption reduction of the AC asynchronous motor, and frequency conversion speed regulation. In addition, the inverter also has many protection functions, such as overcurrent, overvoltage, overload protection and so on.
Inverters can be divided into low-voltage, medium-voltage and high-voltage inverters according to the different input voltage levels, and can also be divided into AC-AC inverters and AC-DC inverters by changing the frequency. Inverters are used in a wide range and involve many industries. In the latest "National Economic Industry Classification (GB/T 4754-2017)" released by the National Bureau of Statistics, inverters are classified into electrical machinery and equipment manufacturing (C38) Manufacturing of power transmission and distribution and control equipment (C382), the sub-categories involved include manufacturing of transformers, rectifiers and inductors (C3821), manufacturing of power electronic components (C3824) and manufacturing of other power transmission and distribution and control equipment (C3829), In addition, it is also involved in the manufacture of industrial automatic control system equipment (C4011).

2. Analysis of the industrial chain: the upstream supply of inverters is sufficient, and the downstream applications are extensive
The application fields of frequency converters cover many industries of the national economy. Due to the advantages of high precision, advanced technology, rich functions, high reliability, easy operation, and strong versatility, the frequency converter is superior to any previous speed regulation methods, such as pole-changing speed regulation, voltage regulation, and slip Speed regulation, cascade speed regulation, commutator motor speed regulation, hydraulic coupling speed regulation, etc., so in electric power, public engineering, textile and chemical fiber, building materials, petroleum, chemical industry, food and beverage, tobacco, coal, mechanical processing and other industries , frequency converters are playing an important role.
The upstream industries of frequency converters mainly include frequency conversion transformers, semiconductor components (IGBT), cabinets, automation instruments and other enterprises, all of which are fully competitive industries. Among them, IGBT semiconductor components mainly rely on imports. This component is a basic component, which accounts for a relatively low cost of inverter products, and the supply is sufficient. Therefore, the inverter industry is less restricted by the upstream.

Industry development history: domestic frequency conversion technology continues to develop
Developed countries such as Europe, America, and Japan quickly seized the market by virtue of their advantages in electronic component production and electronic technology. Compared with developed countries, my country's frequency converter industry started relatively late. It was not until the 1990s that frequency converters were gradually recognized by the majority of users. Since the beginning of the 21st century, with the strong support of the country, domestic frequency converter manufacturers are absorbing foreign frequency conversion technology. On the basis of continuous innovation and starting to try independent R&D and production, the production scale and product performance have developed rapidly.
Industry policy background: The inverter industry has been encouraged and supported by the national industrial policy
The frequency converter is a power control device that uses frequency conversion technology and microelectronics technology to control the AC motor by changing the frequency of the motor's working power supply. The frequency converter is mainly composed of rectification (AC to DC), filtering, inverter (DC to AC), braking unit, drive unit, detection unit, micro-processing unit, etc. Inverter products are energy-saving power electronic equipment. They are high-tech products supported by the state and have been encouraged and supported by national industrial policies for a long time. In the process of the country's "12th Five-Year Plan" (2011-2015) to the "14th Five-Year Plan" (2021-2025) on frequency converters, frequency converters have always played an important role in the country's energy-saving and emission-reduction planning. Inverter has a great role in promoting energy saving and emission reduction, which is in line with the national planning and arrangement of energy saving and emission reduction and industrial greening. Therefore, the planning policies related to low-voltage inverters are inseparable from the national energy saving and industrial energy saving and emission reduction. In addition, the "14th Five-Year Plan" puts forward higher requirements for the transformation and upgrading of frequency converters in addition to the requirements for energy conservation and emission reduction.

Upstream supply situation: the main raw materials are mainly imported
Overall, the upstream of the frequency converter industry, the main raw materials of the product are transformers, IGBTs, capacitors, housings, etc. The direct material cost of inverter-related enterprises accounts for more than 90% of the main product cost, and fluctuations in raw material prices have a greater impact on the company's operating performance. If the supply and demand of the main raw material market changes or the purchase price fluctuates abnormally, it will have a greater impact on the company's operating performance.
At present, IGBTs and chips of the main raw materials mainly use foreign brands. Although some domestic enterprises have developed and produced IGBT power modules and chips, and the technology has made great progress in recent years, the recognition of domestic brands by users in the market is not as good as that of imported brands. In recent years, my country's production technology has been continuously improved, the distance with foreign products is narrowing, the process of IGBT localization is accelerating, and the monopoly of foreign manufacturers is gradually being broken. my country's IGBT is expected to get rid of import dependence. From the perspective of market size, the global IGBT market size is calculated based on the data disclosed in Infineon’s annual report. With the development of the global IGBT industry in recent years, the global IGBT market size will be about 7.09 billion US dollars in 2021, a year-on-year increase of 6.8 %.
Downstream development: a wide range of downstream applications
From the perspective of downstream application fields, the application fields of inverters are rich, and the main application fields of different types of inverters are different. High-voltage inverters are widely used in metallurgy, electric power, water supply, petroleum, chemical industry, coal and other fields; the application fields of medium-voltage inverters are similar to those of high-voltage inverters. In addition to being used in metallurgy, electric power, petrochemical and other industries, medium-voltage inverters are also It can be used for sewage treatment; the application fields of low-voltage inverters in China are relatively scattered, and they have been widely used in elevators, hoisting machinery, machine tools, textile machinery, air conditioners and other fields.

Industry Development Status
1. Supply: The number of new inverter-related enterprises continues to be at a high level
According to the Chinese enterprise database qichamao, there are currently 1,656 major enterprises in China's inverter industry, of which 2019 is the main registration upsurge. The number of registered enterprises in 2019 is 135, and in 2021 it will be 25.
2. Demand: The market scale is showing an upward trend
From 2012 to 2020, the market size of my country's inverter industry showed an overall upward trend, and saw a slight decline in 2015; after 2016, due to the weak willingness to invest in equipment in downstream industries, the growth rate slowed down. In 2019, the market size of my country's inverter industry was 49.5 billion yuan, a year-on-year increase of 4.7%. In the past two years, the market size growth rate of China's inverter industry has remained at more than 4%. However, due to the impact of the epidemic, the development of the upstream and downstream industries of the inverter industry will be restricted in early 2020. Showing a trend of "reducing first and then rising", the inverter market performed well in the second half of the year. The overall growth rate of the inverter market in 2020 is about 7.47%, that is, the size of China's inverter market in 2020 is about 53.2 billion yuan. In 2021, the scale of China's inverter market will be 59.1 billion yuan, a year-on-year increase of 11.09%.
3. Price: The price gap between import and export continues to expand
In the past few decades, my country's inverter industry has gradually matured from the initial stage to the present, and has developed very rapidly. At the same time, my country's emphasis on energy saving and consumption reduction in recent years has also promoted the development of frequency converters. Especially at the beginning of the 21st century, the growth rate of China's frequency converter market exceeded 20%, and the production technology of frequency converters has also obtained a certain degree of progress. Big improvement. Our country has unique and cheap human resources, which makes our products have certain advantages in terms of price. Therefore, the export prospect of frequency converters is good and the trade surplus is relatively large.
From the perspective of the average import and export price of China's inverters, the average import price will show a fluctuating downward trend from 2017 to 2021, and will reach 1.90 US dollars per unit by 2021; the average export price will show an upward trend year by year from 2017 to 2021. By 2021, it will reach 3.73 US dollars per piece, and the price gap between import and export will continue to widen.

Industry Competitive Landscape
1. Regional competition: Inverter companies are mainly concentrated in the Yangtze River Delta and Pearl River Delta
According to the Chinese enterprise database Qichamao, at present, Chinese frequency converter enterprises are mainly distributed in the Yangtze River Delta and Pearl River Delta regions, especially represented by Zhejiang and Guangdong. As of September 9, 2022, there are 467 related inverter companies in Zhejiang and 182 in Guangdong.
Frequency converters are the best products for speed governors and starters. The production bases are concentrated in the Yangtze River Delta and Pearl River Delta, and the Pearl River Delta is more than the Yangtze River Delta; Sichuan, Shandong and Liaoning also have certain strengths in the production of frequency converters; Beijing's high-voltage The layout of the inverter industry was relatively early, and the development of the domestic high-voltage inverter industry is relatively mature. From the perspective of the industrial chain layout of listed companies, the upstream and midstream enterprises of the inverter industry are mainly distributed in Guangdong and other places, while the downstream fields of inverters are mainly distributed in Beijing.
2. Enterprise competition: Inovance Technology and INVT are the main domestic leading enterprises
At present, foreign brands in the domestic frequency converter industry occupy a relatively large market share, while domestic brands occupy a relatively small market share. According to historical data, the market size of China's inverter industry in 2021 is about 59 billion yuan. According to this scale, among companies that have divested their independent inverter business, Inovance Technology's market share exceeds 5%, and INVT's share is about 3%; Veichuang Electric and other five companies accounted for about 2% in total.

Industry development prospect and trend forecast
1. The inverter industry is in the growth stage, and the market has great potential for development
At present, the number of manufacturers in my country's frequency converter industry is increasing, and the development speed is relatively fast, especially in coastal open provinces and cities such as Guangdong, Shandong, Shanghai, Jiangsu and other places. In addition, well-known foreign manufacturers have come to China for joint ventures and investment to build factories in order to reduce costs and supply the domestic market at better prices, and have already squeezed out a considerable market share, such as Hitachi, Delta, etc. From the perspective of technology, domestic manufacturers still have a big gap compared with foreign large companies in terms of scientific research and development, process design, and processing and manufacturing capabilities of power electronic products. The technology of the inverter is backward, and the current domestic inverters are of low grade , The core components are controlled by others, and the production of semiconductor power devices required by domestic machines mainly depends on imports. From the perspective of users, whether it is metallurgy, building materials, mining, petroleum and petrochemical or electric power, there is still a certain distance from the real popularization, so the development potential of the inverter market is still huge. my country's inverter industry is in the growth stage of the industry life cycle and is gradually becoming mature.2. The advantages of "energy saving and consumption reduction" continue to highlight
In recent years, my country's annual gross industrial production value has continued to increase, but the energy consumption ratio has remained high. The high energy consumption ratio has become a bottleneck restricting my country's economic development. For this reason, the country has invested a lot of money to support energy-saving and consumption-reducing projects. More and more widely used in all walks of life, it can not only improve the process, prolong the service life of equipment, improve work efficiency, etc., the most important thing is that it can "save energy and reduce consumption", which has been recognized by the majority of users, and deeply attention. Qianzhan predicts that in the next few years, the inverter market with high-efficiency and energy-saving functions will continue to grow driven by policies. By 2027, the market size of inverters will exceed 90 billion yuan, and the compound annual growth rate from 2022 to 2027 will be 7.44%. .

3. Policy support and the development of emerging industries will bring new opportunities for industry development
Under the guidance of the country's "14th Five-Year Plan" and the long-term goal of 2035, with the support of national policies such as "carbon peaking, carbon neutrality" and import substitution, the inverter industry will actively develop and deploy new industry fields At the same time, it will also increase investment in green manufacturing technology transformation with the goal of intelligent manufacturing and digital transformation of industrial manufacturing. Affected by the country's "double carbon" policy, the demand for energy conservation and emission reduction in various industries has increased. At the same time, the proposal of the "Motor Energy Efficiency Improvement Plan" will usher in new growth space for the inverter market.