Hyosung Heavy Industries is emerging as one of South Korea’s clearest industrial beneficiaries of the global AI infrastructure boom, as surging electricity demand turns transformers and grid equipment into critical components of the data center supply chain.

The shift is significant for Hyosung Group.

For decades, Hyosung was more readily associated with businesses such as spandex and tire cord. Today, however, ultra-high-voltage transformers and power equipment are becoming an increasingly important part of the group’s growth story.

The numbers illustrate the change.

Hyosung Heavy Industries secured roughly KRW 7.5 trillion in new heavy industries orders during the first half of 2026. Its order backlog reached a record KRW 17.5 trillion at the end of the second quarter, with North America accounting for 57% of the total.

The company has since raised its full-year new order guidance from KRW 8.4 trillion to KRW 12 trillion.

Behind those figures is a strategic decision made years before the current AI investment cycle began.

A 2020 acquisition looks different in the AI era

In 2020, Hyosung Heavy Industries acquired Mitsubishi Electric’s ultra-high-voltage transformer plant in Memphis, Tennessee.

At the time, the global transformer industry had yet to experience the severe supply constraints seen today. AI data centers were also far from becoming the massive source of electricity demand they are now.

Six years later, the strategic value of the Memphis operation has changed dramatically.

U.S. utilities are facing multiple investment pressures at the same time: aging transmission infrastructure needs to be replaced, renewable generation needs to be connected to the grid, and hyperscale AI data centers require increasingly large and reliable power supplies.

Transformers sit at the intersection of all three trends.

For Hyosung, owning manufacturing capacity inside the United States has therefore become more than a localization strategy. It provides direct exposure to one of the world’s most important grid investment cycles.

The company’s U.S. position is particularly relevant in the ultra-high-voltage segment.

Hyosung Heavy Industries has secured major orders for 765kV transformers, equipment designed to transmit very large amounts of electricity over long distances.

A KRW 787 billion U.S. order for 765kV ultra-high-voltage transformers helped drive first-quarter orders to a record level. The company’s backlog stood at KRW 15.1 trillion at the end of the first quarter before rising further to KRW 17.5 trillion in the second quarter.

The progression suggests that the U.S. power equipment boom is no longer simply an expectation in Hyosung’s investment story. It is increasingly visible in actual orders and earnings.

AI’s infrastructure bottleneck is moving toward electricity

The broader story goes beyond Hyosung.

The first phase of the generative AI investment boom centered largely on advanced semiconductors and computing capacity. But as hyperscalers deploy larger clusters of AI accelerators, another constraint is becoming increasingly apparent: electricity.

Building an AI data center is one challenge. Securing enough power to operate it is another.

Large AI facilities require substations, transformers, switchgear, transmission connections and power management systems before computing equipment can operate at scale.

That is changing the position of traditional electrical equipment manufacturers within the AI value chain.

They do not develop large language models or manufacture GPUs, but they supply physical infrastructure without which those technologies cannot operate.

Hyosung Heavy Industries sits directly in that part of the value chain.

Its second-quarter heavy industries sales benefited from growing U.S. demand, while the share of U.S. sales in the segment rose to 38%, up 15 percentage points from a year earlier.

The company’s second-quarter consolidated revenue reached KRW 1.69 trillion, up 10.6% year on year, while operating profit jumped 60.9% to KRW 264.3 billion.

From exporting equipment to building locally

The Memphis investment also illustrates a broader change in the way Korean manufacturers approach overseas markets.

Exporting from Korea once provided an efficient route into global infrastructure markets. But power equipment is increasingly a business in which local manufacturing capacity, delivery times and relationships with utilities can matter almost as much as manufacturing technology itself.

Hyosung has continued to reinforce that strategy.

In July, Hyosung Heavy Industries and U.S. power infrastructure company Quanta Services established a joint venture to manufacture ultra-high-voltage gas circuit breakers in the United States, with production scheduled to begin at a Pennsylvania facility in October.

That expands Hyosung’s U.S. localization beyond transformers and gives the company another foothold in critical grid equipment.

The strategic direction is increasingly clear: Hyosung is moving from exporting individual Korean-made power products toward establishing a broader local power equipment platform in North America.

The opportunity is also moving beyond the U.S.

North America remains the main engine of Hyosung Heavy Industries’ current expansion, but it is unlikely to be the only one.

Europe faces its own grid investment cycle as renewable energy expands and aging transmission infrastructure requires modernization.

Wind and solar projects often generate electricity far from major consumption centers, creating additional demand for transmission capacity, substations and transformers.

That gives Hyosung an opportunity to apply the capabilities built in the U.S. to other markets undergoing structural changes in electricity infrastructure.

The company is also expanding its focus from individual pieces of equipment toward broader power solutions for data centers and other large electricity users.

That distinction could become increasingly important.

The value of a transformer manufacturer in the AI era may ultimately depend not only on how many transformers it can produce, but on how much of the infrastructure between the grid and the data center it can supply.

Cho Hyun-joon’s early bet faces its next test

The transformation also provides context for Hyosung Chairman Cho Hyun-joon’s emphasis on technology and overseas localization.

The Memphis acquisition was made before transformer shortages and AI-related electricity demand became dominant industry themes. In hindsight, it gave Hyosung production capacity in the right market before demand accelerated.

But the next stage may prove more difficult.

Global competitors are expanding transformer production, while manufacturers are investing aggressively to capture North American grid spending. Today’s unusually tight supply-demand balance will not necessarily last indefinitely.

For Hyosung, the challenge is therefore shifting.

The question is no longer whether the company can benefit from the transformer shortage. It is whether it can convert the current boom into a durable position in the global power infrastructure market.

Its record KRW 17.5 trillion backlog provides considerable visibility. Local manufacturing in Memphis and the new U.S. circuit breaker venture add another layer of competitive positioning.

But maintaining that advantage will require technology, production capacity and continued expansion into higher-value power solutions.

That is what makes Hyosung’s current trajectory more than a transformer boom story.

The AI investment cycle is revealing a fundamental reality of the digital economy: computing infrastructure ultimately depends on physical infrastructure.

Chips may determine how fast an AI model can calculate, but electricity determines whether the data center can run at all.

Hyosung made its U.S. power infrastructure bet before that constraint became obvious.

The KRW 17.5 trillion order backlog now shows how valuable that timing has become — and why the next phase of the company’s strategy will be about turning a favorable cycle into a lasting global advantage.

Jung Jun-ho More by this reporter