If You Order Now, Delivery Takes 4-5 Years... "We Get the First Slot at That Factory" as 'Slot Reservations' Spread

As global demand for electricity surges, the lead time required to receive power equipment such as transformers after placing an order has become unprecedentedly long. In response, the industry is seeing a growing trend of “slot reservation” orders. This is seen as a result of the interests of customers, who want to secure a stable supply of future orders amid a supply shortage, aligning with those of manufacturers that want to reduce volatility risk.

DC semiconductor transformer for DC distribution installed at LS Electric Cheonan DC factory in Chungnam. Not directly related to the article. Photo by Jinhyung Kang

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According to the power equipment industry as of April 15, HD Hyundai Electric has already secured most of its production slots through 2030. LS ELECTRIC has also filled its production schedule until 2029. In the past, the power equipment market would begin production immediately upon receiving an order, making the lead time either negligible or extremely short. However, with a recent surge in order volumes, the wait time to receive products has now stretched to three to four years or more. Slot reservation involves manufacturers allocating a specific period of their production schedule to a particular customer. As it has become nearly impossible to secure products on time-even with payment-customers are lining up to secure their place in the production queue several years in advance.

Supported by this “super cycle,” the order backlogs of major Korean companies are also rising steeply. As of the end of last year, HD Hyundai Electric’s order backlog stood at 10.174 trillion won, while LS ELECTRIC’s was 5.0154 trillion won, representing year-on-year increases of 21% and 45%, respectively.

The same situation is observed among global companies. GE Vernova, the largest power equipment company in the United States, indicated at a conference last month that “slot reservations for transformers have already been secured through 2031,” pointing to the growing practice of slot reservations amid supply shortages.

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Industry analysts note that slot reservation also has positive aspects for manufacturers as a means of risk management. Slot reservation is conducted in the form of a letter of intent (LOI), a type of preliminary agreement before a legally binding final contract. This process helps reduce risks such as rising raw material prices, exchange rate fluctuations, and wage increases that could occur if a firm contract for products to be delivered in four to five years is made at today’s prices.

One industry insider explained, “At this stage, due to risks like raw material prices and exchange rates, we are prioritizing discussions on production scheduling without fixing contract prices. The concrete contract amount and detailed terms are finalized through the main contract two to three years before delivery, once these risks are mitigated.”

Market observers predict that this “supplier-driven” trend will become entrenched in the power equipment market, significantly improving industry profitability. Minho Heo, an analyst at Daishin Securities, commented, “The full-scale growth of the North American market and increased orders will have a positive impact on mid- to long-term growth potential. Considering the continued supplier advantage in the global power equipment market, additional drivers for growth, such as further capacity expansion and mergers and acquisitions (M&A), can also be reasonably anticipated.”

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