| Public and infrastructure applications power European UPS market's revival
Today, however, niche growth opportunities, particularly in public and infrastructure applications, are injecting optimism into the mature EUR 503.0 million European UPS market. According to latest findings by Frost & Sullivan (http://power.frost.com), the focus has simultaneously shifted from vendors of large UPS systems to small and medium UPS equipment suppliers. Supported by robust UPS sales to hospitals, railways, airports, tunnels and public buildings, public and infrastructure end-user sectors accounted for 20.9 per cent of the total UPS revenues in 2003. Continued opportunities in this sector are likely to be based on increased government spending (especially in the United Kingdom), expanding public investments on IT equipment and investment in airport infrastructure to support increasing no-frills airline traffic. Adding to potential UPS revenue streams is the anticipated recovery of the commercial sector in the short-term. Investments in 3G licences by telecom companies are poised to drive corresponding expenditure on building 3G infrastructure and trigger renewed demand for UPS equipment. Completing the upbeat prognosis, the need for improved network connectivity is set to spur demand for UPS systems from the financial sector. From a geographic perspective, significant growth prospects await UPS manufacturers in EU accession countries. Infrastructure and manufacturing investments are expected to boost UPS sales in Central and Eastern Europe. Reinforcing this positive trend are the healthy sales forecast for small high-growth segments in the more mature Western European market. A string of grid failures across Europe has made end users of electricity, especially corporations that use sensitive electronic equipment, keenly aware of the importance of power protection. This too is likely to spur greater uptake of UPS systems over the long term. Buoyed by these trends, the European market for UPS is forecast to reach €733.0 million in 2010. Contracting opportunities for sales of larger units, the growing appeal of decentralised power protection and end users' preference for incremental investments are combining to make the 10 kVA to 75 kVA power range the largest revenue-generating segment in the overall market. This has had profound repercussions in the competitive arena. Traditional market leaders, whose emphasis was on supplying large units, have lost ground to companies catering to the low- to mid-range market. Aware of their growing appeal, several competitors are actively seeking to launch products in the small and medium power range. "The added advantage of this is that companies are able to obtain a more stable revenue stream than if they concentrate on larger systems. This move is also expected to be an attempt by some of the more established participants to fend off competition from emerging, price-focussed participants such as APC, Riello and Salicru," observe Frost & Sullivan analysts Colin O'Hanlon and Anne-Corinne Barbier. "As companies start re-investing in power quality equipment, sales of large UPS are likely to pick up. In the near term, the market is likely to remain focused on below-200 kVA units offering good sales prospects for the new models about to be launched by market participants," Mr. O'Hanlon adds. Aggressive competition for revenues has led to intensifying price pressures. Low product differentiation has caused reduced prices and falling profit margins. Companies have taken recourse to innovative strategies, including offering comprehensive service packages to augment their revenues. "Squeezing of prices has forced market participants to take a more pragmatic approach and many are now looking to supplement income from equipment sales with revenues derived from servicing the existing installed base," explains Ms. Barbier. "For instance, servicing now makes up almost 30 per cent of Chloride Power Protection's revenues and the other major participants have seen similar trends in their sales mix." For Chloride, RWE Piller, Socomec-Sicon, MGE UPS System, AEG, Riello Elettronica group, Newave and other market participants, there is cause for optimism. The projected stability in prices - after a steep fall over the last three years - could be further indication that the European UPS market is well on the road to recovery.
•Date:
12th March 2004 •Region: UK/W.Europe •Type:
Article •Topic: Power
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