Hyosung Heavy buys transformer plant in U.S.

Hyosung Heavy Industries’ transformer factory in Tennessee. [HYOSUNG]

Hyosung Heavy Industries acquired a U.S. production plant for high-voltage transformers in Memphis to cope with increasing demand and tightening trade regulations.

This is the company’s first production site in the United States. Hyosung paid $46.5 million for the plant, previously owned by Japan’s Mitsubishi Electric Power Products.

The Tennessee factory is slated to start production of core-type high-voltage transformers from the first half of 2020.

The company explained that its decision was in part driven by an increase of power consumption in the United States and a growing demand for renewable energy - which creates demand for power transformers. Hyosung also saw opportunity in the aging electricity-supply infrastructure, much of it nearing the end of the 50-year replacement cycle, a company spokesman said.

Another big motivation was the U.S. government’s trade protectionism. Over the past few years, the U.S. Department of Commerce has imposed anti-dumping duties on Korean-imported transformers. Hyosung was one of the companies hit by the duties, along with Hyundai Electric. A U.S. factory will allow it to avoid such penalties.

“A local production plant will help us gain competitiveness in the market,” the company said in a statement.

In a similar move, Hyundai Electric is operating a transformer factory in Alabama, which recently underwent expansion.

According to Frost & Sullivan, the U.S. market for power transformers is expected to grow at an annual rate of 4 percent to reach $2.9 billion in 2022.

Hyosung has sold large power transformers to U.S. clients since 2001. The new Tennessee factory will ensure stable supply for existing partners, the company said.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]