Further Consolidation In Smart Meter Market

Smart meter latching relay company KG Technologies is to be acquired by Chinese relay giant Hongfa Technology Co.
Published: Wed 03 Jun 2015

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Consolidation in the smart metering and smart grid market, which has been led particularly by the larger global companies, continues apace, with the latest announcement being the acquisition of Cotati, California-based KG Technologies (and the assets of its parent company Clodi LLC) by Hongfa Holdings US.

Latching relays for smart meters

KG is a leading supplier of latching relays to the global smart metering market outside of China. The company was awarded the 49th fastest growing company in 2011 by Inc.com and has received numerous awards from its customer base for its customer service and technical support. It is also the owner of 24 patents globally for latching relay technology, with many more pending.

KG has partnered with Hongfa Technology Co. Ltd and its subsidiaries since 1998 for the manufacturing of KG’s products.

“The acquisition of KG by Hongfa further cements the strong relationship that we have developed during the past two decades,” said Philipp Gruner, president and CEO of KG Technologies, Inc

Under the new structure the KG brand, team and product line will remain intact. Gruner will continue in his role, focusing primarily on business development, identifying new market opportunities while further strengthening and solidifying the existing core business and customer base.

Leading relay supplier

Hongfa Holdings US is a grandson subsidiary of Hongfa Technology Co. Ltd, China’s largest relay manufacturer and a leading manufacturer and supplier of relays and related products globally.

“This is the largest overall, and the first international acquisition by Hongfa in its 30 year history,” said Guo Manjin, chairman and CEO of Hongfa in a statement. “The acquisition of KG not only retains the advantages of their existing market, strong brand and technology, but also the integration of Hongfa’s 30 years of relay experience in the field of wealth management will greatly improve the competitiveness of the combined entity. Together we will continue to defend and expand our global leading position in providing the best latching relays to the smart meter market.”

New line of smart meter relays

Gruner told Engerati that KG and Hongfa are already developing a new line of relays for the smart meter market that will be cost advantageous with better performance and addressing market needs that to date are not available for meter manufacturers.

He also commented that the previous limitations and barriers of working under a customer/supplier relationship can now be lifted. Benefits will include greatly reduced new product development cycles and a consolidated go to market strategy with a joint long-term investment plan.

In 2014 Hongfa accounted for almost 10.5% of global relay market share. The company intends to increase its manufacturing capacity by 50% by 2017 and to double its turnover by 2020 to become the leading relay supplier worldwide.

Smart meter potential

In a Q3 2014 report, Navigant Research estimated the smart meter market will continue growing to peak at 116 million units annually in 2023. After a frenzy of deployments over the past 5 years in the US, the focus is now shifting to countries in Europe and Asia Pacific, where major deployments are still in the early stages.

Still the potential thereafter will be significant, with 2023 penetrations estimated at 60% in Europe, 45% in Asia Pacific and lower but still rising in Latin America and the Middle East and Africa.

Mercom Capital Group, which tracks mergers and acquisitions (M&A) in the smart grid sector, recorded 32 M&A transactions in 2014 – twice the number of the previous year. A further seven M&A transactions were recorded in the first quarter of 2015 (compared with only four in Q4 2014).