Company scouting sites in Honam region and elsewhere for power equipment production; some local governments already in talks
Locations assessed for export access and availability of skilled workers
Record earnings driven by big-tech AI data center boom
North American production base to anchor global market push
LS Electric has begun scouting additional domestic sites for power equipment factories, industry sources confirmed Wednesday. The move comes amid an AI data center boom that has generated orders from North American big-tech companies exceeding the company's current production capacity, and is seen as groundwork for adding high-end product lines. LS Electric is understood to have already signed supply agreements with Amazon Web Services, the world's top cloud provider, and xAI, the AI services company founded by Tesla CEO Elon Musk.
Honam region among sites under review as high-end production lines eyed
LS Electric has recently been reviewing agricultural and industrial complexes in the Honam region and other areas as potential sites for new power equipment factories, according to industry sources. "We are looking at multiple regions to secure additional domestic factory sites for power equipment," a company official said, adding that nothing has been finalized. The company has already held meetings with some local governments in the Honam region to discuss available sites and incentives. Specific production items, investment amounts and employment figures have yet to take shape, sources said.
LS Electric currently operates domestic production facilities in Cheongju and Busan. LS Power Solutions, an ultra-high-voltage transformer subsidiary acquired in 2024, has plants in Busan and Ulsan. Late last year, LS Electric invested about 100.8 billion won ($73.6 million) to expand a second production building at its Busan plant in response to growing demand for ultra-high-voltage transformers. The company is also leveraging local production and supply infrastructure to strengthen its presence in the North American market, and plans to pursue investment flexibly depending on market conditions going forward.
Some industry observers believe the push to add a domestic facility reflects plans to expand production lines for high-end power equipment — products that may require the kind of skilled workers difficult to secure at overseas plants. Several of the locations LS Electric is considering also offer good access to export ports, suggesting the company has future export volumes in mind alongside domestic demand.
AI data center boom fuels order surge, raising the bar for new contracts
The AI data center boom is ultimately the biggest driver behind LS Electric's push for additional domestic capacity. South Korean power equipment makers are enjoying an unprecedented boom as global big-tech companies race to expand AI data centers, power demand grows and aging grid infrastructure worldwide requires replacement. The combined order backlog of the three major domestic players — LS Electric, Hyosung Heavy Industries and HD Hyundai Electric — stood at around 36 trillion won in the first half of this year, up roughly 60 percent from a year earlier.
KB Securities noted that big-tech companies have recently been placing orders for power equipment in package form rather than as individual items, and that LS Electric holds a portfolio covering the full range from distribution equipment and high-voltage switchgear to distribution transformers and ultra-high-voltage transformers. The brokerage said LS Electric is reviewing plans to further expand domestic ultra-high-voltage transformer and switchgear capacity and build a new distribution equipment factory in the United States, positioning it to absorb big-tech demand for power equipment.
The outlook for domestic manufacturers has also brightened following an executive order by the Donald Trump administration designating power grid equipment supply chains as a national security matter. The order centers on reducing dependence on high-risk countries and companies for power equipment including transformers, circuit breakers and inverters — a move widely interpreted as targeting China. Last year, US authorities discovered unauthorized communications devices inside some Chinese-made solar inverters during an investigation into equipment connected to the domestic power grid. Industry players believe South Korean companies are unlikely to be caught up in the order's restrictions, and expect demand to keep rising given the supply shortage in the US market.
Record earnings set the stage for faster investment and portfolio expansion
LS Electric posted record first-half sales of 2.95 trillion won and operating profit of 305.1 billion won, driven by a string of orders for ultra-high-voltage transformers and distribution infrastructure. Revenue and profit improved across all business lines, reflecting growth in the US power market, data center investment and rising facility investment in South Korea, with the company describing the power market as having entered a phase of structural growth. For the second quarter alone, sales reached 1.58 trillion won and operating profit 178.5 billion won, also record highs.
North America alone generated quarterly sales of around 400 billion won. Second-quarter new orders came in at 2.1 trillion won, bringing the total order backlog to 7 trillion won. Into the second half of this year, the company has secured an additional 200 billion won or more in new orders from the North American market. Hanwha Investment said the company's customer base is expanding beyond existing big-tech clients to include large local players, and that the full effect of ultra-high-voltage transformer capacity additions and acquisitions completed last year is expected to feed through more meaningfully into earnings this year.
LS Electric is also pursuing data center business expansion alongside efforts to strengthen its core power business and build overseas production bases. In the United States, the company is expanding capacity at its LS Electric Utah factory through 2027 and drawing up production plans for its Bastrop Campus in Texas. The company aims to secure supply chain stability and build trust with big-tech clients through its North American production footprint.
At its annual general meeting in late March, LS Electric formally added data center operations to its business scope, signaling a push to upgrade its portfolio and address power infrastructure demand from data centers. In its semiannual report, the company said it plans to develop the data center business as a key growth driver — expanding power facilities, operational solutions and energy efficiency services for existing domestic customers, while continuing to pursue hyperscale data center project orders in North America and other overseas markets.
keg@heraldcorp.com
