HVAC Equipment Manufacturing
Companies in this industry manufacture residential and commercial heating, ventilation, air-conditioning (HVAC), and air-purification equipment, as well as commercial refrigeration equipment. Major US-based companies include Lennox, Nortek, Trane, and the climate control divisions of Johnson Controls and United Technologies; other leading companies include Bosch Thermotechnik (Germany), Daikin Industries and Yazaki (both of Japan), Danfoss (Denmark), and Gree (China).
Global demand for HVAC equipment is forecast to increase by about 4% per year, reaching a value of $122 billion by 2020, according to Freedonia. Leading countries for HVAC equipment manufacture include China, Germany, Japan, and the US. Global growth is expected to be driven by construction activity in emerging markets, primarily in the Asia/Pacific region.
The US HVAC equipment manufacturing industry includes about 1,500 companies with combined annual revenue of about $43 billion.
The ability to develop smart building applications that tie HVAC equipment with other building systems to increase energy efficiency will be a leading competitive differentiator. Companies must also focus on implementing a global strategy as HVAC demand growth shifts from established markets to emerging ones.
Demand for HVAC equipment depends on replacement rates of existing equipment, residential and commercial real estate construction, and home sales, all of which can be cyclical. The profitability of individual companies depends on efficient operations and effective marketing. The US industry is concentrated: the top 50 companies account for about 65% of revenue.
Smart Homes and Buildings -- Smart homes and nonresidential building automation systems use connectivity to integrate a building's HVAC, lighting, security, and other systems. HVAC companies whose products and designs integrate easily and increase the overall performance of connected building systems can have more control over how the smart building industry evolves and capture greater value.
Advanced Control Systems -- HVAC equipment manufacturers are introducing products with user interfaces that enable remote monitoring via smartphones and tablets. Products can also provide diagnostics and predictive maintenance tools that streamline system maintenance and minimize downtime. Advanced control systems are an integral component of smart building advancement.
Global Strategy -- HVAC equipment industry growth is forecast to be strongest outside traditional North American and European markets in the coming years. Growth in the Asia-Pacific region, particularly China, is expected to far outpace the global average. As the industry becomes more global companies must navigate regulatory variations that affect HVAC products, while offering product mixes that serve regional needs and preferences.
Companies to Watch:
Gree Electric Appliances -- Gree is China's largest manufacturer of air conditioners, and has built one-third of the AC units in service globally. The company is focused on expansion outside China and is a major player in the Brazilian market.
Johnson Controls -- The maker of commercial HVAC systems is well-positioned to take advantage of the smart building market. Its 2016 acquisition of Tyco added fire and security capabilities to its controls, HVAC, and power solutions and energy storage businesses.
United Technologies -- The company's Climate, Controls, & Security division includes HVAC manufacturer Carrier, as well as fire safety, security, and building automation offerings.
Products, Operations & Technology
Major product categories are air-conditioning and warm air heating equipment, and industrial and commercial refrigeration equipment (75% of industry revenue),
Sales & Marketing
Finance & Regulation
Regional & International Issues
Also includes the following chapters:
Quarterly Industry Update
Trends and Opportunities
Call Preparation Questions
Glossary of Acronyms