"The biggest threat to the AI (artificial intelligence) boom is not software. It is hardware that is 140 years old."
Ok Kyung-seok, Senior Vice President in charge of overseas power equipment sales at HD Hyundai Electric, introduced this phrase while delivering a presentation titled "Outlook for AI Data Centers and Transformer Demand" at the "Smart Energy Plus (SEP) 2026" event held on the 30th at COEX in Samsung-dong, Seoul.
The 140-year-old hardware refers to transformers. This means that while AI technology is advancing rapidly, the expansion of power infrastructure to support it has not kept pace, causing transformers to emerge as a key variable in the growth of the AI industry.
As demand for transformers surges due to expanded investment in AI data centers, supply shortages are also deepening. Ok said, "The lead time for large transformers at top-tier companies, including ours, is more than five years," adding, "This means that a transformer ordered in 2026 will not be received until 2031." He further explained, "This is because demand is increasing rapidly, but supply capacity is difficult to expand in the short term."
In the United States, power demand from AI data centers is outpacing supply. According to Morgan Stanley, of the 72GW (gigawatts) of power required for U.S. data centers between 2025 and 2028, only 25GW has been secured or is under construction.
Ok said, "The remaining two-thirds require additional power measures," emphasizing that "data center operators are considering securing their own generation facilities rather than waiting for grid expansion." He noted that the supply crunch for power equipment is intensifying as this coincides with the expansion of renewable energy, the spread of electric vehicles, the electrification of industrial facilities, and demand for replacing aging power grids.
Ok characterized these market changes as a "New Normal." He said, "We are calling the current boom in the power equipment market a New Normal," adding, "While the past was a market where demand would increase and then decline again, we forecast that going forward, demand is likely to be maintained at a higher level or continue to grow further." In fact, U.S. imports of large transformers exceeding 60MVA (megavolt-amperes) more than tripled from $900 million in 2022 to $3.1 billion last year.
HD Hyundai Electric is also expanding its presence in the U.S. market. According to power equipment market research firm Golden Report, HD Hyundai Electric held the top position for two consecutive years with a market share of 17.2% in 2024 and 25.7% last year in the U.S. large transformer market for units exceeding 100MVA.
The gap with Siemens, which ranked second last year (14.1%), is 11.6 percentage points. The company's strategy is to expand its product supply range not only to transmission and distribution equipment such as ultra-high-voltage transformers, gas-insulated switchgear (GIS), and circuit breakers, but also to switchboards, power management systems, and energy storage systems (ESS) required inside data centers.
Most importantly, the transformer supply shortage is spreading beyond the United States to Europe. Ok stated, "In other countries such as Europe, supply is becoming increasingly scarce, and the shortage is intensifying," adding, "Transformer delivery times in the European market were previously one year, but have now increased to two or three years or more."
HD Hyundai Electric has moved to expand production capacity to meet growing demand. Following the completion of its distribution equipment plant in Cheongju last year, the company completed its fifth large transformer plant in Ulsan in September this year. It is also constructing a second large transformer plant in Alabama, United States, targeting completion in 2027. Ok emphasized, "We plan to closely monitor market conditions and actively consider further expansion of production capacity going forward."
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