Markets for uninterruptible power supply (UPS) systems, which are used for back-up power during blackouts and brownouts, face an uncertain short-term future as they attempt to ride out the current economic downturn.
Telecommunications and information technology markets are the main end-user industries for UPS systems. Although infrastructure investments in these areas rose through 2000, capital spending has diminished significantly, forcing UPS suppliers to develop new market strategies that can withstand a period of slow economic growth.
New analysis from Frost & Sullivan (World UPS Markets) reveals that this industry generated revenues totalling $5,92 bn in 2000. After a dip in revenues, total industry revenues are expected to recover by 2003 and rise steadily through 2007.
"Continued energy crises could help stimulate the UPS markets," says industry analyst Farah Saeed. "End-users now realise the importance of back-up equipment in ensuring consistent and reliable power."
The imbalance of supply and demand for energy in California led to rolling blackouts in 2001; beyond the US, countries such as Brazil are also facing problems meeting energy needs with their current power supply.
"These blackouts have meant not only the potential loss of productivity but also possible damage to expensive, sensitive equipment," continues Saeed. "As long as regions have blackouts, UPS systems will experience positive sales."
Market participants will have to overcome price declines and poor product differentiation to maintain profits. The core technology for UPS systems has existed for more than 40 years. Though suppliers have introduced more manageable, compact, and reliable systems over the years, there are now very few features to distinguish one product from another.
"Suppliers are grouping UPSs with complementary products such as air conditioners and batteries or after-sales and monitoring services," says Saeed. "By marketing themselves as total solutions providers, companies could differentiate their products from those of their competitors."