Unbelievable! The world is competing for China's "little iron box," while Europe and America are choking on transformers.

It’s truly a once-in-a-lifetime sight—by 2025, the competitive logic in the tech industry has been completely turned upside down. Once, everyone was fighting over NVIDIA graphics cards, meticulously competing for each inch of chip production. Now, an seemingly insignificant industrial device has quietly become the world’s most scarce resource—transformers.

While European and American companies are still anxious about shortages of high-end chips and lithography machines, the construction of data centers has been paralyzed by a “big iron box” priced at around 200,000 RMB. Orders are already delayed until 2029, and some customers are willing to pay a 20% premium just to get their equipment earlier. The once-assertive 104% tariff hammer has quietly been withdrawn, replaced by various “tariff exemptions” under different names. How sudden is this reversal?

The Hard Currency Shifts from Graphics Cards to Transformers, and Elon Musk’s Words Reveal the Truth of the AI Era

As early as March 2024, Elon Musk hinted during a conference in Germany that the world would face power shortages and transformer shortages next year. At that time, Wall Street was still reveling in the NVIDIA graphics card frenzy, dismissing his warning as alarmist. But reality delivered a loud slap with a series of events.

Over the past year, the status of the most hard currency in the tech industry has finally changed hands. Musk’s own xAI supercomputing center, a 70-megawatt energy-consuming beast, took a year to get connected to power due to inadequate electrical infrastructure. Then came a series of shocks: in January, a transformer in Cleveland suddenly exploded; the same month, a substation in San Francisco caught fire—these incidents exposed the aging of the US power grid.

Running a single ChatGPT query consumes roughly ten times the electricity of a Google search. Once these massive data centers are operational, they can easily consume the annual electricity of a city with 200,000 residents. For each electric vehicle sold, at least 5 to 6 transformers are needed to support the charging network. This explosive growth in energy demand has pushed transformers from behind-the-scenes components to the front lines of global competition.

Why Did Western Manufacturing Reach Today’s Dilemma? Starting from “Moving Away from Real Industry to Virtual”

The current predicament in Europe and America is especially awkward: they have ample funds and mature designs but cannot produce enough transformers. About 80% of transformers in the US rely on imports, and domestic capacity is insufficient. Want to order a large transformer in the US? Delivery times have stretched to 2-4 years.

The root cause isn’t technology but industrial structure. Over 70% of transformers in the US are past their service life, many operating for 38 years or more. These outdated devices can no longer handle current high loads and are prone to failure at any time. Europe faces similar difficulties.

The EU once ambitiously launched a €584 billion grid upgrade plan but was forced to halt due to an inability to procure enough transformers. Although Germany and France have built numerous wind and solar farms, the lack of connection equipment prevents these renewable sources from integrating into the grid. In 2025 alone, the G7 countries suffered direct economic losses of up to €7.2 billion due to “wind and solar abandonment.”

Behind all this is a decades-long choice: Europe and America have gradually abandoned manufacturing, shifting their industrial focus to finance, services, and design. They believed that as long as they mastered cutting-edge technology and branding, basic manufacturing would become less important. Now, they are forced to reckon with that reality.

Why Does China’s Transformers Have Unmatched Demand? The Completeness of the Industrial Chain

As Europe and America stumble, global attention has shifted eastward. China currently controls about 60% of the world’s transformer capacity, and more importantly, the entire industry chain—from raw materials to finished products—is in its hands.

A key raw material behind these transformers is oriented silicon steel. This material must be rolled to just 0.18 millimeters thick while maintaining stable magnetic properties. Industry experts call it “the crown jewel of steel,” and only a few countries worldwide master this technology. Last year, China’s output of oriented silicon steel was eight times that of the US. Baosteel’s ultra-thin silicon steel production line is the only one of its kind globally, directly controlling the high-end transformer industry chain’s critical point.

The efficiency and cost advantages are even more apparent. Manufacturing the same transformer in China takes only 6 to 12 months, and urgent orders can be compressed to 3 months. In contrast, similar products produced locally in Europe cost between $30,000 and $50,000, while China can keep costs around $10,000—an advantage of three to five times.

The 104% Tariff Reversal to Tariff Exemptions—Europe and America Have Truly Bowed This Time

The most ironic scene is this: to curb Chinese manufacturing, the US once imposed a 104% tariff on Chinese transformers, pushing the unit price from over $3,000 to nearly $6,800. But just a year or two later, faced with frequent power outages and widespread delays in data center construction, they had to reluctantly introduce various “tariff exemption” policies.

On the surface, they still pretend to hold firm, but their actions tell the truth. In 2025, China’s transformer exports skyrocketed to 64.6 billion RMB, with an average export price of 205,000 RMB per unit. Exports to Europe surged by 138%. Even wealthy buyers like Saudi Arabia signed large orders worth 16.4 billion RMB.

Orders are already scheduled into 2029, and many companies’ order volumes have doubled or tripled. Some European clients, eager to jump the queue, even requested a 20% premium. This isn’t just doing business; it’s a demonstration of a fundamental industrial logic: controlling basic manufacturing means controlling the discourse.

The Surprising Contrast: Why Can’t Europe Match China’s Prices?

Why can’t Europe and America quickly make up their capacity shortfalls? Essentially, their “moving away from real industry” policies over the years have hollowed out their manufacturing base. They are too accustomed to outsourcing basic industries, focusing only on finance, design, and branding. When it comes to mobilizing actual production capacity, they find that their domestic industrial workers, supply chains, and manufacturing facilities have long been depleted.

In contrast, China’s entire chain—from raw material procurement, intermediate processing, to final assembly—remains domestically rooted. A single command can mobilize capacity swiftly. This is not only a cost advantage but also a fundamental edge in time and efficiency.

As the world scrambles for Chinese transformers, this seemingly insignificant industrial device tells a profound story: the importance of a complete industrial chain, the strength of foundational manufacturing, and the strategic position of seemingly “low-end” industries in global competition. Truly a once-in-a-lifetime sight—this year’s most hard currency is an iron box.