A 765kV ultra-high-voltage transformer made by Hyosung Heavy Industries, installed on the US power transmission grid. [Hyosung Heavy Industries]
A 765kV ultra-high-voltage transformer made by Hyosung Heavy Industries, installed on the US power transmission grid. [Hyosung Heavy Industries]

South Korea's three leading power equipment makers have all posted double-digit operating profit margins, riding a transformer boom fueled by AI data center demand, and are now sharply expanding their US capital investment plans.

HD Hyundai Electric leads with 25% margin

According to semiannual reports filed Wednesday, the three companies recorded the following first-half operating profit margins: HD Hyundai Electric at 25.0% (545.3 billion won, $386 million), LS Electric at 10.3% (305.1 billion won) and Hyosung Heavy Industries at 13.6% (416.6 billion won). It marks the first time all three have simultaneously posted double-digit margins.

Compared with the first half of last year, HD Hyundai Electric's margin rose 2.8 percentage points from 22.2% (427.3 billion won), LS Electric's climbed 1.5 percentage points from 8.8% (195.9 billion won), and Hyosung Heavy Industries' gained 3.4 percentage points from 10.3% (266.6 billion won).

The three companies have maintained what the industry calls "super-supplier" status in the power equipment market, where ultra-high-voltage transformers — critical infrastructure for AI data centers — remain in short supply. With demand outpacing supply, the manufacturers have been able to raise prices year after year.

The pricing power is reflected in trade data. South Korea exported 39,747 metric tons of ultra-high-voltage transformers through July this year, earning $822.32 million. The per-ton unit price came to $26,890 — up 6.2% from last year's $19,470 and more than 132% above the 2021 level of $8,923.

An HD Hyundai Electric official said at an earnings conference call in February that "customers' requirements are growing and the size of transformers they want is getting larger, so there are many positive factors for rising order prices." Although the Donald Trump administration imposed a 25% tariff on transformers last year, that rate was cut to 15% in June on the grounds of insufficient power infrastructure, further boosting profitability.

US investment accelerates as expansion budgets rise 30%

An ultra-high-voltage transformer being produced at LS Electric's Busan facility. [LS Electric]
An ultra-high-voltage transformer being produced at LS Electric's Busan facility. [LS Electric]

All three companies have significantly expanded their capital investment plans, with North America as the primary focus. HD Hyundai Electric had initially announced 291.8 billion won in total investment for its second factory under construction in Alabama, but its latest semiannual report raised that figure by 32% to 385.2 billion won.

Domestic capital spending, by contrast, edged lower. The budget for the Cheongju distribution campus project was trimmed from 118.4 billion won to 116.5 billion won, while the budget for automating medium- and low-voltage circuit breaker production fell from 21.4 billion won to 19.6 billion won. "Given the overwhelming share of North American sales, this appears to be a strategy of concentrating investment there," an industry official said.

Hyosung Heavy Industries also sharply increased investment in its US subsidiary, Hyosung Hico. The budget for a first-phase expansion project, targeted for completion in December, rose 31.7% from a year earlier to $67.16 million, while the budget for a second-phase project due for completion in June 2028 grew 15.0% to $180.11 million.


klee@heraldcorp.com