Energy Hot Take | China’s transformers are in short supply!

The current “transformer shortage” has evolved into one of the most vexing constraints in the global energy transition and the AI revolution.

Elon Musk’s prediction has once again come true!

At the Bosch Connected World conference held two years ago, Musk warned that if clean energy generation capacity and transformer production cannot be scaled up promptly, the pace of AI development will be severely constrained by physical hardware and energy supply.

No one could have imagined that, today, transformers have truly become highly sought-after commodities.

Not only have prices risen sharply, but transformer delivery lead times have surged from the previous 6–8 months to the current 2.3 to 4 years.

According to monitoring by Wood Mackenzie and other institutions, by 2025 the global supply gap for large power transformers will reach 30%, while the gap for distribution transformers will be around 10%. The regions facing the most severe shortages are North America, the Middle East, and Africa. In particular, the United States will rely on imports for as much as 80% of its large transformers in 2025, with the supply-demand gap continuing to widen.

In the public’s everyday perception, traditional electrical equipment like transformers has long since receded into the background, having evolved alongside nearly two centuries of progress in the power industry. It’s far from a sunset industry, but it certainly lacks the kind of explosive growth opportunities that once characterized its heyday.

However, looking back from the vantage point of 2026, this industrial crisis—dubbed the “transformer shortage”—has evolved into one of the most vexing constraints on the global energy transition and the AI revolution.

As the core component for grid voltage transformation and power distribution, the reliable supply of transformers directly determines the stability of the power grid. Currently, due to the dual pressures of surging demand and capacity mismatches, large power transformers (LPTs) are facing an unprecedented period of supply-chain vulnerability.

According to a special report published by the IEA in 2025, the manufacturing cycle for a 400-ton high-voltage transformer has already expanded from the traditional 18 months to more than four years by 2025—double the level recorded in 2021.

The primary cause of this predicament is the “debt‑repayment phase” triggered by decades of underinvestment in infrastructure in developed economies such as Europe and the United States. Currently, more than 70% of large transformers in the U.S. power grid have been in service for over 25 years, while in Europe roughly 40% of distribution networks have been operating for more than 40 years. Under mounting pressure from increasingly severe extreme weather events and the integration of renewable energy sources, this level of aging leaves the systems dangerously vulnerable.

Meanwhile, the explosive growth of AI computing centers has sharply increased electricity consumption and demand for transformers. To support massive data exchanges and model training, the power capacity per server rack in data centers has surged from the previous 5–10 kW to 50–100 kW, driving an exponential rise in demand for specialized transformers to handle such high‑density power loads.

The deeper bottleneck lies in the extreme scarcity of raw materials. The core material for manufacturing high‑end transformers—grain‑oriented electrical steel (GOES)—is often hailed as a “steelwork of art.” The magnetic permeability of this specialized steel directly determines the energy loss during long‑distance transmission, yet only a handful of facilities worldwide are capable of producing it.

Shortages in the supply of critical raw materials have left even Western manufacturers with assembly capabilities struggling to produce despite their resources.

Against this backdrop, China’s transformer industry, leveraging its advantages across the entire value chain, has firmly secured a foothold in the global market and has even, to some extent, become the “sole firefighter.”

China currently accounts for approximately 60% of global transformer production capacity. In particular, in high-end segments such as ultra-high-voltage (1,000 kV and above) transformers and converter transformers, only a handful of Chinese companies—including China XD Electric, TBEA, Tianwei Baobian, and Shandong Electric Power—along with international giants like Hitachi Energy and Siemens Energy, possess the capability for mass‑production. Domestically, these four leading Chinese firms, leveraging localized services and superior technical specifications, have captured more than 90% of the ultra‑high‑voltage tender market share.

Meanwhile, this technological edge is translating into robust trade figures. According to Chinese customs data, from January to October 2025, China’s large transformer export market posted explosive growth, with total exports reaching US$7.287 billion—up 37.8% year on year.

Take the electrical‑equipment industry clusters in Haian, Nantong, and other areas of Jiangsu Province as an example: Chinese firms’ production‑organization capabilities have drawn widespread attention from their international counterparts. While U.S.-based suppliers can face delivery lead times of up to 100 weeks, Chinese companies, leveraging well‑established teams of skilled technicians and a fully integrated industrial‑chain ecosystem, can reduce the lead time for customized products to roughly 12 weeks—while offering prices that are only one‑quarter of those for comparable products in the U.S. domestic market.

This combination of “China’s speed” and “China’s cost-effectiveness” has compelled even those countries that once imposed steep tariff barriers on China to reassess their policies.

As of 2026, the impact of transformer shortages has extended far beyond the commercial sphere: wind and solar projects in countries such as Germany and India have been forced to remain idle due to the inability to secure grid‑connection transformers. Since 2020, global average transformer prices have risen by more than 60%, directly driving up electricity costs for society and increasing operational pressures on AI‑related enterprises.

Standing at the present moment and observing this battle for dominance in the transformer market, it is clear that Chinese transformers have transcended their status as mere industrial products; they have become a crucial pillar underpinning the global transition to low-carbon energy and the AI-driven transformation of productivity.

As transformer order‑booking schedules in regions like the Yangtze River Delta and the Pearl River Delta now extend several years into the future, Chinese manufacturing, bolstered by its robust capacity in power‑equipment production, is assuming a pivotal role as a central hub in reshaping the global energy‑infrastructure landscape. This phenomenon of surging demand—where supply simply cannot keep up—is, at its core, the result of decades of deep, foundational investment in hard‑core industrial capabilities, which has now unleashed tremendous momentum amid the misalignment of global infrastructure cycles.