Vertical integration or horizontal integration?

Under its new study, the market research and strategy consulting company proposes a deep analysis of the power electronics technologies and business opportunities. Yole’s analysts review the key market drivers and describe the impact on the supply chain.

“The power electronics supply chain is very diverse and mostly application- and local market-dependent,” said Mattin Grao Txapartegi, Technology & Market Analyst, Yole. “European and American players for example, prioritise horizontal integration, keeping proven expertise in a specific level of the value chain”. Such companies diversify their activities thanks to the acquisition of complementary knowledge and sign partnerships to develop their portfolio. They also outsource part of the manufacturing, especially with Asian partners. Moreover European and North American players propose R&D services. IMEC, APEI, Fraunhofer, PRIMES or GE Global research are some examples.

Under this report, Yole’s team analyses the major mergers and acquisitions of 2014, for instance International Rectifier’s acquisition by Infineon, in order to understand their context and purpose. Under this acquisition, Infineon enlarges its product portfolio. With a deep understanding of customers’ needs, the power electronics leader accelerates its strategic approach.

In parallel, Asian companies select the vertical integration strategy in order to be fully integrated and optimise the costs. These players acquire competencies internally to build an overall system. Under this strategy, the Asian companies would like to enlarge their positioning all along the supply chain as well as reach local markets.

“Some system manufacturers, such as Tesla or BYD, have understood the importance of developing their own power electronics and energy management systems for traction, chargers and batteries in order to offer extended added-value”, commented Dr Pierric Gueguen, Business Unit Manager, Power Electronics & Compound Semiconductor activities, Yole.

Japanese players are already vertically integrated and involved in multiple applications simultaneously to benefit from their technologies across different markets. Chinese players are developing this vertical integration in order to create major market leaders in each application segment such as SunGrow in PV, GoldWind in wind and BYD in EV/HEV.

In this report, Yole reveals a detailed analysis of the Chinese market, which is driven by Chinese Government policies. In this changing environment, western and Japanese players need to bring high added-value solutions to be able to compete with Chinese companies. Yole’s report includes a complete section on main players’ strategies.

Yole performs comprehensive analysis on the power electronics area and this phenomenon of vertical/horizontal integration.

With this report, Yole’s analysts disclose a new step towards a better understanding of the power electronics industry and its evolution. Results including market structure, status of its technical innovations, business opportunities at the substrate and device level, as well as the applications side, will be presented at conferences, CS International (Frankfurt, Germany from 11^th to 19^th March 2015) and APEC (Charlotte, North Carolina, USA from 15^th to 19^th March 2015).