Global orders are pouring in! This "heart of power" is a hit!

Global Transformer Shortage Crisis

Currently, the world is facing an increasingly severe transformer shortage crisis.

From delays in European power grid expansion to delivery cycles extended to 127 weeks in the US, and the stagnation of Indian renewable energy projects due to equipment shortages, the tight transformer supply is hindering the progress of energy and technology strategies in many countries.

Amid this global shortage, China's transformer industry, with its strong production capacity and technological strength, has become a core force in stabilizing the supply chain.

Data shows that China's transformer production capacity accounts for approximately 60% of the global total, and it has established the world's most complete industrial chain system. In 2025, my country's total transformer exports reached 64.6 billion yuan, a year-on-year increase of nearly 36%, with exports to markets such as Europe showing explosive growth.

The underlying reasons for the transformer shortage are twofold: firstly, the aging of power infrastructure in Europe and the US necessitates large-scale upgrades; secondly, the surge in demand from emerging sectors such as AI computing centers and renewable energy power plants, especially data centers, photovoltaic and wind power projects, which require transformers in greater quantity and performance than traditional power plants.

For example, a photovoltaic power station requires approximately 1.8 times the number of transformers of a thermal power station of the same scale, while large computing centers often require hundreds of highly reliable transformers to support their continuous operation.

Faced with market opportunities, China's transformer industry has not only achieved leading production capacity but has also made continuous breakthroughs in technology.

Back in the 1980s, my country faced a predicament of "no technology, no equipment, and no experience" in the field of ultra-high voltage direct current (UHVDC) transmission, relying heavily on imported core equipment for major projects.

After decades of continuous research and development, China has not only achieved the domestic production of high-end transformers such as 500 kV and 1000 kV transformers but has also taken the lead globally in the large-scale application of UHV technology, becoming a key player in the formulation of relevant international standards.

Especially in the UHV field, through material innovation, my country has successfully reduced the weight of transformers from 7,000 tons in early foreign prototypes to 500 tons and built the world's largest UHV network, with a total length exceeding 40,000 kilometers.

Today, Chinese transformers are exported to numerous countries and regions worldwide, possessing significant competitiveness in terms of quality, delivery time, and cost.

Meanwhile, as the foundation of economic and social operation, electricity supply is directly related to industrial competitiveness and energy security.

Having achieved universal electrification and built the world's largest clean energy system, China's continuous and stable electricity supply has also provided strong support for the development of manufacturing, the digital economy, and artificial intelligence, further highlighting the key position of the transformer industry in national strategy.

Transformer vs. Inverter?

While both are crucial pieces of equipment in the power sector, transformers and photovoltaic inverters differ significantly in function and operating principle.

Transformers are the "heart" of traditional power systems, their function being to change voltage levels in alternating current (AC) circuits.

Simply put, high-voltage electricity from power plants needs to be stepped up by transformers before long-distance transmission. Upon reaching the power consumption area, it is then stepped down by another transformer for residential and industrial use.

Transformers operate through electromagnetic induction, containing coils wound around an iron core. They do not change the frequency of the electrical energy, only adjusting voltage and current, acting as a "voltage regulator" for the power grid.

Transformers are typically large, robust, and highly efficient (reaching over 99%), widely used in power transmission and distribution networks, industrial and mining enterprises, and now in data centers and supercomputing facilities, providing stable and compatible voltages for various infrastructures.

Photovoltaic inverters, on the other hand, are considered the "brain" of photovoltaic systems. Their function is to convert the direct current (DC) generated by solar panels into alternating current (AC), which can then be fed into the power grid or used by other electrical appliances.

The electricity generated by photovoltaic (PV) panels cannot be directly supplied to conventional electrical appliances; it must be converted into standard AC mains power by an inverter.

The inverter performs this DC-AC conversion through high-speed switching of power electronic devices. It contains a complex control system and software that can track the maximum power point (MPPT) of the PV modules in real time to improve power generation efficiency and ensure that the frequency and voltage of the output power meet grid requirements.

Unlike transformers, inverters are essentially electronic devices, relatively small in size, without bulky iron cores, but filled with semiconductor components and microprocessors.

Their applications are primarily in solar power generation systems, including residential rooftop PV and large-scale ground-mounted power plants, as well as energy storage systems. They are typically connected to the internet to monitor their operating status and update software, making them indispensable "smart hubs" in new energy power systems.

In short, transformers manage AC voltage, and inverters are responsible for converting DC to AC power; each performs its specific function while complementing the other, working together to ensure the efficient transmission of electricity from production to utilization.

Rumors of Tariffs on Inverters

Similar to its high global market share in transformers, China's leading position in the global photovoltaic (PV) inverter market has prompted Europe and the US to re-evaluate supply chain security.

According to Wood Mackenzie data, in 2023, nine of the top ten global inverter manufacturers by shipment volume were Chinese, accounting for approximately 81% of the market share, leaving only one European/American company, Germany's SMA.

Huawei and Sungrow Power, among other leading Chinese companies, have consistently ranked first and second globally for ten consecutive years, together accounting for 55% of the global market. The European market is particularly reliant on Chinese inverters; statistics show that in 2023, approximately 70% of newly installed PV systems in the EU used inverters from Chinese suppliers.

A report by the European Solar Manufacturers Association (ESMC) further indicates that nearly 80% of the inverters used in new PV systems in Europe come from China, with two Chinese manufacturers almost dominating the European market. Hundreds of gigawatts of clean electricity in Europe are being converted and transmitted through Chinese inverters.

This situation has unsettled some politicians and industry groups in Europe and the United States, with recent rumors suggesting the EU may consider imposing tariffs or restrictions on Chinese inverters.

From a motivational standpoint, Europe's consideration of restricting Chinese inverters may not be unfounded.

On the one hand, due to concerns about industrial and cybersecurity, Europe is worried about the over-reliance on Chinese products for its power grid. Inverters require network monitoring and regular software upgrades, and ESMC warns that this poses a risk of remote control. If a high-risk supplier controls a large number of devices simultaneously, it could trigger large-scale shutdowns or even power outages through malicious commands.

In fact, Lithuania has already banned remote access to the back-end systems of Chinese manufacturers of its renewable energy equipment, and cybersecurity agencies in the Czech Republic and Germany have also warned of supply chain attack vulnerabilities in Chinese-made inverters.

On the other hand, the pressure of trade protectionism and the revitalization of domestic industries is also at play. European domestic inverter companies have suffered setbacks in recent years, with only one remaining among the global top ten. More than 30 members of the European Parliament have jointly written to the European Commission, urging immediate restrictions on Chinese inverters entering the European power grid, stating bluntly that if no action is taken within two more years, all existing European inverter manufacturers may be wiped out. To support its domestic industries, the EU has introduced the Net Zero Industrial Act, requiring member states to consider supply chain resilience in public renewable energy project tenders. In August, Italy took the lead, explicitly stipulating in its renewable energy tenders that project equipment must be "not made in China," excluding Chinese-made components, cells, and inverters from subsidy incentives, becoming a pilot for EU policy.

These signs indicate that, driven by the strategic need to ensure its own supply chain independence, Europe may be considering stronger trade intervention measures, including imposing tariffs or restrictions on Chinese inverters. If these tariffs are implemented, the aim would undoubtedly be to weaken the price advantage of Chinese products, force supply diversification, and curb potential security risks.

Despite these calls, significant uncertainty remains regarding the EU's policy of imposing tariffs on Chinese inverters.

Firstly, Europe's urgent goal of clean energy transition makes it hesitant to initiate a trade war. The European Commission's decision in 2018 to end five years of anti-dumping and countervailing duties on Chinese photovoltaic products was a conclusion reached after weighing the interests of manufacturers and users: not extending the tariffs was more in the EU's overall interest and conducive to achieving the EU's new renewable energy targets.

The EU has now formulated an ambitious green plan, requiring large-scale solar power installations annually. Chinese inverters, being of high quality and low price, have driven record-breaking photovoltaic installations in Europe over the past few years. Imposing heavy tariffs prematurely would directly increase inverter prices, raising the cost of photovoltaic projects and slowing down the deployment of photovoltaics in Europe, contradicting its carbon neutrality goals.

Secondly, Europe currently lacks sufficient alternative production capacity to quickly fill the gap left by Chinese supply. Although the European industry claims that domestic manufacturers have the potential to meet demand, the reality is that Chinese manufacturers occupy the majority of global production capacity and hold a leading technological position. Rebuilding a complete inverter supply chain in the short term would be both time-consuming and expensive.

Moreover, the costs of high tariffs will ultimately be passed on to European consumers and renewable energy developers, potentially triggering opposition.

Furthermore, trade barriers will inevitably provoke retaliation and diplomatic negotiations from China. China is a crucial link in the global new energy industry chain, and excessive pressure could affect broader economic and trade cooperation.

In summary, the EU needs to carefully balance energy security and energy transition, and will not easily resort to extreme tariff measures.

Many analysts believe that rather than unilaterally imposing tariffs, strengthening product certification and safety reviews, and guiding supply chain diversification through technical standards and subsidy policies, may be a more feasible path for the EU.