The Indian UPS market looking upwards

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The Indian power sector is facing an acute shortage, where the peak and non-peak electricity shortfalls were approximately between 8.5 to 9.8 per cent during 2010-11 (Source: CEA). Inadequate power generation, issues with land acquisition for new power plants, fuel shortage, and high transmission and distribution losses are some of the contributors to this situation. The increasing power deficit, the low and erratic quality of power supply, and the unanticipated power cuts throughout the country are driving the growth of the backup power industry in India, of which, UPS systems are a major constituent. The Indian UPS market is highly competitive, fragmented, and fast growing, with both multinational and Indian suppliers competing for space. There are close to 300 organised suppliers of UPS systems in India.

Monday, December 12, 2011: A UPS system is not just about backup power during contingencies, but is also about the quality of power. UPS systems also serve as power regulators, which prevent the undesirable effects of power anomalies and ensure that a constant amount of electrical power is supplied. Associated electronic and electrical devices connected to the UPS system are usually mission critical in nature and cannot be shut down unexpectedly.

The Indian UPS market was estimated to be worth between US$ 550-600 million in 2010-11. It is showing an upward trend and is projected to exhibit robust growth after the flat growth rates of the preceding years. This is the result of steady demand from sectors such as the government and infrastructure, information technology and IT enabled services (IT/ITeS), banking, financial services and insurance (BFSI), manufacturing, telecom, power, oil and gas, etc.

Opportunities in UPS market

The upward trend in the Indian UPS market is expected to continue, with consistent growth projected over the coming 2-3 years as a result of steady demand from various end user sectors. The computerisation initiatives taken by the Central and state governments, besides the public sector undertakings, are among the major factors driving the UPS market. The SME segment is also showing a positive growth trend and will fuel the demand for UPS systems in the coming years.

IT/ITeS is an important segment which is now spreading across B and C class cities in the country. This is creating a major demand for the enterprise range of UPS systems. The major application in this segment is for data centres, which comprises a core operation. The growth of this sector is also likely to continue in the future.

The BFSI sector is another important segment that has been investing heavily in IT infrastructure to provide better service to end users and also to comply with the various government regulations. Apart from private and nationalised banks, the cooperative banks have also started investing substantially in their IT infrastructure to provide better service.

In the sub-1 kVA power range, the competition is very severe due to low entry barriers for new suppliers. Increased laptop sales at the expense of desktop sales has affected the sub-1 kVA segment. The higher power range segment with ratings of more than 20 kVA requires specialised technical knowledge for both sales and service. The 50 kVA range onwards is dominated by multinational suppliers and there are very few Indian players in this space.

Price, after sales service, and timely delivery are the key differentiating factors in the Indian UPS market. In order to cater to the industrial applications, customisation is another very important differentiating factor.

A major challenge faced by Indian UPS suppliers is the import of cheaper systems from China and Taiwan. Increasing raw material prices, an increase in battery prices, and the higher cost of manpower have all resulted in shrinking supplier margins.

Anindya Das, Industry manager, energy and power systems practice, Frost & Sullivan, South Asia, Middle East and North Africa

Technological innovations

Modular UPS systems are gradually gaining prominence among end users and are slowly replacing conventional UPS systems, primarily due to the hot swapping features and the flexibility they offer in terms of redundancy. The introduction of multi-level redundancies in the UPS system, and the increased use of insulated gate bipolar transistor (IGBT) rectifiers are some of the technological innovations shaping the UPS industry. The market is also moving towards high efficiency transformer-less UPS systems, especially in the 50 to 200 kVA range and the above-200 kVA range, due to space constraints and also due to the growing trend of LEED (Leadership in Energy and Environmental Design) certification of buildings.

The growth in the IT and ITeS, BFSI, and telecom sectors is also driving current technology trends, such as the adoption of green technology solutions (incorporating higher wattage per cubic inch since real estate costs are escalating), advance and remote monitoring systems, as well as focusing on reliability. The UPS industry is also advancing towards power quality audits, thermograph surveys, etc. In order to meet end user preferences on reducing downtime, increasing energy savings and systems efficiency, suppliers are making an effort to incorporate these concerns in their products.

Market players in the segment

In the years to come, the UPS market is expected to get more organised, achieve greater standardisation of products, and enjoy higher consumer awareness. The market is being consolidated globally and this is impacting India as well. Indian suppliers, to stay ahead in the market, are exploring opportunities for collaboration with MNCs by forming joint ventures, and technical or distribution tie-ups. This could lead to a win-win situation for both Indian companies as well as MNCs.

The increased penetration of desktops in tier II and III cities is also fuelling the growth of the sub-1 kVA UPS systems. Indian suppliers, armed with a very well oiled distribution network across tier I, II and III cities, are competing with MNCs by offering customised products and prompt after sales service. Even in the 5 kVA range, suppliers are making an effort to offer some unique features to differentiate themselves in this highly ‘commoditised’ market. The unique features include battery discharge protection, full charge to overcharge, overload protection, etc.

The entry of a large number of smaller suppliers, especially in the sub-1 kVA and 1-5 kVA ranges, has resulted in increased competition and superior product quality. The top suppliers in this market segment are offering superior products, possess wide sales channels, and offer prompt after sales support. The 5-20 kVA range segment is highly competitive with both Indian as well as MNCs operating in this space.

MNCs dominate the ‘more than 50 kVA’ market, where product quality and technology is very important. Most end users in this segment are very price sensitive. The only exception is when the UPS systems are used for mission critical applications, where quality and high reliability is absolutely essential. Currently, Indian

UPS suppliers are not focusing on the 20 kVA power range, but are soon expected to explore this market to avoid the cut-throat competition and shrinking margins in the lower power range market.

International UPS trends

A flywheel driven UPS system is used for applications that require high backup power (generally 200 kVA and above) for short duration power system outages in mission-critical applications. The flywheel driven UPS system typically does not include batteries, and the backup time is usually a few seconds.

Flywheel based UPS systems have been witnessing strong growth over the past few years in Europe and North America, where acceptance as well as customer awareness is on the rise, especially in Europe. In India, customer awareness is low, and another factor hindering market penetration is the high price compared to existing technologies, like the static UPS.

Quality, reliability and prompt after sales service at aggressive prices, all made available through a wide distribution network, is the formula for success in the growing UPS market in India. Demand from the small office home office (SOHO), and the small and medium business (SMB)/small and medium enterprises (SMEs) sectors, is due to increased PC penetration, IT infrastructure investments, and IT network upgrades.

Other initiatives, such as making India a health tourism destination and the introduction of IT enabled services in the public sector (initiated by the Indian government), have led to an increased demand for high power range UPS systems.

Servicing of the higher power range UPS systems (above 20 kVA), which is an essential requirement for end users, offers UPS suppliers a good opportunity to create a loyal customer base, thereby increasing chances for repeat sales in the future. It is also important for suppliers to offer customised solutions to end user groups to survive and sustain higher growth in this fiercely competitive market.

The market is expected to witness intense competition in terms of price to attract end users, especially in the lower kVA ranges. Price, after sales service, and availability across the country are becoming the key differentiating factors in the market. Despite minor challenges, such as the increase in raw material and human resource costs, the market prospects will remain upbeat.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

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