Long read: The century-old device choking the world’s AI push

Among the myriad ways AI is disrupting the world is an age-old electrical technology – transformers. Transformers are ubiquitous in their use for transport and use of electricity – they ‘step up’ or increase the voltage at power generation plants to allow efficient transmission over long distances through the electrical grid and ‘step down’ or reduce voltage at the last mile for safe use by industries and households for their appliances. The technology is still rooted in an early 19^th century discovery of the principle of electromagnetic induction by Michael Faraday. Progress in material science has allowed higher voltages to be handled by transformers but other than that, the technology hasn’t seen much change. AI is now demanding it to change. The FT has produced this lovely visual piece that explains the technology using visualisations and pictures.

As is now well understood, the data centre infrastructure housing GPU chips required for training and running large language models guzzle a lot of electricity. And hence, the AI war is morphing into an energy war. Whilst the US leads the AI race, if electricity becomes a bottleneck, China could catch up given its advantage in renewable power and battery technology. Hence, America is rapidly investing in power generation capacity and alongside transmission capacity triggering a huge demand for transformers. “Average lead times for transformer orders, once measured in months, now stretch into years. Prices for certain large devices have almost doubled post-pandemic. Analysts expect the supply crunch to last until at least 2030.

Almost 40 per cent of US data-centre projects due to come online this year are at risk of falling behind schedule, according to data shared with the FT by SynMax, a satellite and AI analytics group. More than a dozen industry executives said power and related equipment were among the primary reasons for hold-ups, alongside labour shortages and permitting hurdles.”

Why aren’t the world’s leading transformer companies like GE Vernova, Siemens Energy and Hitachi Energy not able to cope up with demand: “Although transformers have become larger, more efficient and more specialised over the past 150 years, the devices still rely on complex, labour-intensive manufacturing processes that are difficult to automate and scale.

…Difficulties in scaling up power transformer manufacturing have been compounded by shortages of several key materials.

Specialist electrical steel — essential for transformer cores — is produced by only a handful of global suppliers, many of whom are struggling to keep up with the surge in demand.

…Market growth, price volatility and limited mining capacity have also strained supplies of copper, crucial to the conductivity of windings around a device’s core.

But one of the most acute bottlenecks is the shortage of skilled workers needed to carry out complex, labour-intensive manufacturing tasks.

…The most powerful transformers used in electricity grids and to connect large data centres are enormous — weighing hundreds of tonnes and reaching up to 15m tall. The biggest can handle enough power to charge 25mn iPhones at once, and their robust design means they can last for decades with little maintenance.

With up to 80,000 different designs, most transformers still have to be built largely to order, taking three to six months to make.

The most demanding stage is the windings, when copper wire is applied around a transformer’s core — a “beautiful” process, according to Bruno Melles, an engineer now leading Hitachi’s global transformer business. Each winding is unique and is “still a human manual activity that we’re very proud of”, he says.

A transformer’s electrical circuit is created out of loops of copper wrapped around a device’s metal core. The number and pattern of these windings dictate voltage — fewer turns lead to lower voltage while higher voltage devices can have multiple windings stretching hundreds of kilometres.” 

With necessity being the mother of invention, a century old technology is finally seeing disruption: “…Heron Power, is developing modular solid-state transformers using modern power electronics that can respond dynamically to changing power needs. These devices can simplify the power architecture on data-centre campuses by replacing a transformer and four other key pieces of kit.

…These devices also enable real-time monitoring and control — something legacy transformers cannot do because “it’s been all steel and copper”, Baglino says. 

The startup has so far secured more than 40GW of orders, including from data-centre developer Crusoe. The company has raised $140mn to build a US factory that will begin producing up to 40GW of medium-voltage devices annually from next year.”