Recently, the rapid rise in the won-dollar exchange rate has become a negative factor for industries across the board. In contrast, the power equipment sector is showing positive signs for profitability. Since most of the power equipment business is driven by expanding overseas operations, it is expected to benefit from the increase in foreign exchange gains due to the rise in the won-dollar exchange rate.

According to industry sources on January 9, power equipment companies are expected to achieve strong performance in the fourth quarter. This is due to the rapid increase in transformer demand as data centers for artificial intelligence (AI) operations expand in the United States.

With the inauguration of Donald Trump's second administration, there is growing sentiment that the need to replace power infrastructure will increase. President-elect Trump has maintained the position that the U.S. must maintain dominance in the global AI industry, and it is expected that this will lead to additional demand for AI data centers.

Moreover, the high exchange rate is also being cited as a factor contributing to the growth in performance. The won-dollar exchange rate surged to the 1,430 KRW range in early December 2024 due to a state of emergency, and on December 19, the U.S. Federal Reserve's announcement to adjust the number of interest rate cuts in 2025 pushed the rate past 1,450 KRW. Following that, after the impeachment vote of the acting president on December 27, the exchange rate surpassed 1,470 KRW, and it has remained around the 1,450 KRW range since then.

In this situation, the power equipment sector is expected to benefit from positive effects due to increased sales in North America. With the rise in the won-dollar exchange rate and the completion of investments in ultra-high-voltage transformers, there is ample potential for profitability growth, according to analysis.

The securities industry also predicts that the power equipment sector will see an increase in fourth-quarter performance. HD Hyundai Electric is expected to achieve a revenue of 985.5 billion KRW in the fourth quarter, representing a 23.6% increase compared to the previous year. This growth is attributed to expanded production capacity, seasonal leverage effects, and the benefits of the high exchange rate. Additionally, although there was a gap in North American distribution transformers in the third quarter, it is estimated that smooth deliveries are taking place in the fourth quarter.

According to HD Hyundai Electric's public disclosure, the exchange rates applied to the contracts for "380kV high-voltage circuit breakers and transformers" signed with Saudi Arabian companies in October and November 2023 were 1,357.6 KRW and 1,295.7 KRW, respectively. With forecasts suggesting that the exchange rate could break through the 1,500 KRW mark, there are opinions that the profitability of these existing contracts could improve due to the rising exchange rate.

LS Electric's fourth-quarter revenue is expected to reach 1.1 trillion KRW, marking an 11.2% increase compared to the previous year. Operating profit is forecasted to be 88.7 billion KRW, reflecting a 30.3% year-on-year increase. This growth is anticipated due to the benefits from the high exchange rate, particularly from transformer sales to North America in the power infrastructure sector.

Hyosung Heavy Industries is also expected to achieve positive results. The fourth-quarter revenue is estimated to reach 1.4 trillion KRW, a 10.7% increase compared to the previous year. Operating profit is projected to be 125.8 billion KRW, marking a 98.5% year-on-year increase.

However, some point out that there are still uncertainties, such as concerns over domestic economic slowdown due to the high exchange rate, making it difficult to be overly optimistic without considering these risks.

An industry insider stated, "As the export scale is increasing across the power equipment sector, we can expect the benefits of the high exchange rate in terms of performance. However, if the high exchange rate trend continues, it will be necessary to continuously monitor the impact on the overall business, including the rise in raw material prices."

He continued, "With the development of AI technology, the replacement of aging power grids in North America, and the expansion of renewable energy in Europe, among other factors, the boom in the power equipment market is expected to continue throughout this year."

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