Nuclear Reactor Suppliers Industry Analysis (graphics not available)Industry OverviewDuring the first ten years after its commercial introduction in 1956, the growth of nuclear power generation it was exponential, as one would expect for a new energy source. It then slowed progressively to 10.9% per annum in 1990, and continued to decline to 1.8% per annum in 2005. However, it is expected to increase again in the years to come, mainly due to the increase in electricity demand worldwide (particularly in rapidly developing countries), awareness of the importance of energy security and the need to limit carbon emissions due to concerns about global warming. Degree of Rivalry Despite a growing market, competition is fierce among the few sellers of nuclear reactors, and the industry is seeing an acceleration of international mergers and acquisitions as it increasingly crosses national borders in a race to reach critical mass in a high-tech industry market with high fixed costs and exit barriers. Three high-level nuclear business alliances were created in 2006, uniting the six companies that dominate the global market (Figure 1). Therefore, the (CR)4 recently increased to 0.6. Furthermore, orders for nuclear power plants are long-term contracts and customers are unlikely to switch from one supplier to another. The combination of these factors creates a moderate level of rivalry although the next few years will be crucial for the major players who will have to demonstrate their ability to meet their customers' expectations in terms of cost competitiveness and safety requirements. Bargaining Power of Suppliers Nuclear reactor manufacturers use two main categories of suppliers: steam generator tubing manufacturers and steel companies for heavy components made from forged steel parts. In the nuclear industry, quality standards are extremely high and only a few companies are qualified to meet the industry's requirements. Companies that meet these quality requirements therefore have significant leverage over reactor manufacturers, who are less likely to change suppliers without warning, as this involves a lengthy quality verification and certification process. Only a handful of steam generator tube manufacturers barely meet the requirements of nuclear vendors. There are also very few steel manufacturers capable of producing large forgings. Therefore nuclear reactor manufacturers are forced to reserve long-term capacity. In response, they tend to backward integrate these stages of the production process: for example, Areva acquired Sfarsteel to produce its own forgings, and GE created a joint venture with Hitachi, a manufacturer of equipment for the nuclear industry.