The global variable frequency drive (VFD) market was valued at USD 19.62 billion in 2017 and is projected to reach USD 27.57 billion by 2023, at a CAGR of 5.87%, during the forecast period.
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Aging Power Infrastructure
The growing energy demand has resulted in the need for stable and reliable T&D networks. Uninterrupted power can only be ensured through a system capable of handling sudden power shoots and drops. According to the US Department of Energy (DoE) and the North American Electric Reliability Corp. (NERC), the US experiences more blackouts than any other developed countries, as the number of power outages lasting more than an hour has increased steadily in the country over the past few years. These blackouts cost American businesses around USD 150 billion per year. The main reasons behind the increasing number of blackouts are aging infrastructure, lack of investments, and lack of clear policy to modernize the grid. The demand for electricity has grown by 10% over the past decade, even though there are more energy-efficient products and buildings when compared with previous years. Recent regulations to reduce/limit the number of power blackouts and upgrade the aged power networks across the globe, particularly in North America, Europe, and parts of Asia Pacific, is enhancing the entire value chain across the power sector equipment. One such regulation is the US Energy Independence and Security Act (2007), which mandates energy equipment standard and encourages the development and investment funds in intelligent electric network technologies, as well as promotes the use of VFDs.
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Gray Market Providing Low-Quality and Cheap Products
The variable frequency drive market is highly fragmented with a large number of local and international players, where product quality is a primary parameter for differentiation. The organized sector mainly targets industrial buyers and maintains higher product quality by following various industrial standards of the product, while the unorganized sector offers a cheaper alternative to entering into low-priced and local untapped markets. Local manufacturers in most countries target the unorganized sector and compete strongly with the global suppliers in the respective markets. Leading market players are currently facing strong competition from such unorganized new players in the market, supplying cheap and low-quality products. These gray market players overpower the big players in terms of price competitiveness and local distribution network maintained by them, which is a major challenge for the variable frequency drive market.
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