Variable Refrigerant Flow (VRF) System Market Size, Share & COVID-19 Impact Analysis, By Component (Outdoor Units, Indoor Units, and Control Systems & Accessories), By System Type (Heat Pump System and Heat Recovery System), By Application (Residential, Commercial, and Industrial) and Regional Forecast, 2021-2028

The global Variable Refrigerant Flow (VRF) System Market size was USD 15.90 billion in 2020. The global impact of COVID-19 has been unprecedented and staggering, with variable refrigerant flow systems witnessing a negative demand shock across all regions amid the pandemic. Based on our analysis, the global market exhibited a decline of -15.50% in 2020. The market is projected to grow from USD 17.70 billion in 2021 to USD 28.46 billion in 2028 at a CAGR of 7.02% during the 2021-2028 period. The sudden rise in CAGR is attributable to this market’s demand and growth, returning to pre-pandemic levels once the pandemic is over.

Variable refrigerant flow (VRF) systems are used to cool & heat an area by extracting heat from that area that needs cooling and transfer it to another area. They also help to control the minimum amount of refrigerant needed during a single heating or cooling period.

This market is rapidly growing across the globe owing to its several advantages, which include high energy efficiency and energy savings, excellent part-load performance, good zoning control, and minimum ductwork.

The Shutdown of Commercial Spaces amid COVID-19 to Affect Market Growth 

The COVID-19 pandemic has severely impacted the growth of this market. The global health emergency caused by the sudden outbreak of the coronavirus has significantly affected numerous verticals. This pandemic has put a halt on production and trade activities worldwide. Furthermore, as workplaces were forced to shut down, disrupting their daily activities, all companies shifted their employees to continue operations remotely from their houses.

For instance, in April 2020, Emerson, a leading manufacturer of variable refrigerant flow systems, allowed its employees to work remotely and shut down its offices for a certain period of time. Consequently, the period has created awareness among heating, ventilation, and air conditioning (HVAC) companies to regularly perform due diligence for the upkeep of plant conditions and maintain uninterrupted supply to continue a range of tasks. The temporary shutdown of manufacturing industries and commercial spaces across the globe are some of the factors hampering the market growth.

LATEST TRENDS

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Increasing Construction Expenditure in the Asia Pacific Region to Favor Market Growth

In Asia Pacific, several countries such as China, India, Malaysia, and Singapore are heavily investing in infrastructure development on account of rising urbanization and expanding populations. VRF systems are primarily used in the building & construction sector, as these systems are used to capture heat while cooling and reuse it in other areas, which will help to save energy costs. Besides, these systems allow simultaneous heating and cooling of different zones.

Furthermore, in 2018, India also revised its energy-saving standards and initiated an energy labelling program. Thus, many key players are launching new products to comply with the new energy-saving standards to enhance their industry presence that will drive their businesses. For instance, in February 2018, Fujitsu General Limited introduced five new highly energy-efficient models of inverter air conditioners compliant with the new energy-saving standards for the air conditioners market in India. The company also started its air conditioner business with a direct sales structure in India from January 2020. This factor is likely to drive the Variable Refrigerant Flow System Market growth during the forecast period.

DRIVING FACTORS

Increasing Penetration of Variable Refrigerant Flow Systems in Residential and Commercial Applications to Boost the Market

Variable refrigerant flow systems are widely used in residential and commercial applications, owing to their simple installations and minimum maintenance requirements. These systems provide individual controls for each unit, due to which they are highly energy-efficient and have low operating costs.

According to the Japan Refrigeration and Air Conditioning Industry Association, the room air conditioner market in India stood at 4.28 million units in 2018 and is expected to grow at a rate of 10% over the next ten years. VRF systems are being installed by a growing number of homes and public places due to their excellent physical properties, which include a long product life and good air conditioning efficiency. This factor is likely to drive the market during the forecast period.

Rising Demand for Energy Saving Products & Minimum Maintenance to Aid Growth

The rising demand for energy-efficient products is the major factor driving the VRF system market. These systems are energy-efficient, as they consist of a smart variable-speed compressor that runs at a minimum temperature condition. These systems endure less wear and tear and minor failures, resulting in reduced downtime. As a result, they help to save more than 40% energy when compared to the variable air volume technology. The variable refrigerant flow systems system is well-suited for applications in commercial spaces, such as hotels, supermarkets, and office buildings, as it can replace the prevailing equipment in narrow spaces with minimum pipework. Factors such as quieter operation, less operational costs than traditional methods and high energy efficiency are likely to fuel these systems’ adoption over the forecast period.

RESTRAINING FACTORS

High Installation Cost of VRF Systems to Limit Adoption

A variable refrigerant flow system comprises compressors, valves, motors, filters, drain lines, inverters, suction accumulators, liquid receivers, and control systems. The cost of each equipment design and installation is high. This factor is likely to hamper the market growth. Furthermore, The American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) shares guidelines to control the concentration limits of refrigerants. For instance, ASHRAE Standard 34-2010 defines safety classifications and refrigerant concentration limits (RCL) for refrigerants, which states the maximum RCL to 26 lbs/1000 ft3 of room volume for occupied spaces. This factor is also likely to hamper the Variable Refrigerant Flow System Market.

SEGMENTATION

By Component Analysis  

Outdoor Unit Segment to Grow at a Considerable Pace

Based on the component, the VRF systems market is segmented into outdoor units, indoor units, and control systems and accessories. Among these, the outdoor unit segment accounted for the highest share of the market in 2020. An outdoor unit segment consists of compressors, inverters, suction accumulators, and liquid receivers. This unit is responsible for the release of heat to the outside of the system.

An indoor unit segment comprises valves, motors, filters, and drain lines. The indoor unit is responsible for the absorption of heat from the atmosphere. A control system & accessories help to regulate the behaviour of systems using control loops.

By System Type Analysis

Heat Pump System Segment is Likely to Dominate

Based on system type, the market is segmented into heat pump systems and heat recovery systems. The heat pump system segment accounted for the major share of the market in 2020.  A heat pump is widely used in HVAC systems as it helps to maintain precise temperature control and reduce energy consumption. The heat pump is a fully reversible system, due to which it can provide heating in winter and cooling in summer.

The heat recovery system is also known as a ventilation heat recovery system. It provides fresh air to the indoor room and helps to retain waste heat. These systems can recover up to 90% of waste heat.

By Application Analysis

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Increasing Construction of Homes to Augment Industry Growth

Based on application, the global market is classified into residential, commercial, and industrial. The commercial sector includes office buildings, shopping centers, restaurants, and others. In commercial buildings, these VRF systems ensure the most productive and comfortable work environment, as this system comprises outdoor & indoor units. This is anticipated to contribute to the segmental growth in the forthcoming years.

In the residential sector, VRF systems are used for reducing energy consumption and cost. These systems have a long product life under harsh conditions, high air-conditioning performance, and excellent service, due to which they are also widely accepted in the industrial sector.

REGIONAL INSIGHTS

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The market has been analyzed across five key regions comprising North America, Asia Pacific, the Middle East & Africa, Europe, and Latin America. Asia Pacific was estimated to hold the largest market share worth USD 10.12 billion in 2020. This is attributable to the presence of a large number of key manufacturers, such as Panasonic Corporation, Daikin, Toshiba Corporation, and Mitsubishi Electric, and the rising adoption of HVAC systems in commercial buildings across the region.

In North America, VRF systems have gained tremendous popularity owing to their high energy efficiency and easy installation process. Furthermore, several companies have launched these systems incorporated with low global warming refrigerants. For example, in November 2018, LG Electronics launched the V5 multi-variable refrigerant flow systems in Canada. This newly launched offering is available from 6- to 42-tons, with a three-phase 208/230V, 460V, or 575V electrical power as heat pump outdoor units.

The market in Europe is expected to experience exponential growth during the forecast period, owing to the rapidly changing climate.

In Latin America, Brazil and Argentina are expected to dominate the regional market on account of the growing investment in infrastructure development.

The Middle East & Africa is a prominent region as Gulf countries, such as Iraq, Iran, Saudi Arabia, the UAE, and Kuwait, are heavily investing in the building & construction sector.

KEY INDUSTRY PLAYERS

Panasonic Corporation to Expand Its Product Line and Utilize Its Channels to Market New Offerings

Panasonic Corporation is engaged in the development and manufacturing of electronic technologies and solutions. The company has a total of 582 subsidiaries and 87 associated companies across the globe.  

• On May 19, 2020, Panasonic Corporation signed an agreement with Quantum Cooling for the distribution of VRF systems and mini-split equipment across Florida. Quantum Cooling LLC is engaged in the manufacturing of HVAC equipment and building automation systems.


• In October 2019, Panasonic Corporation signed a technology agreement with Welcome Air-Tech (WAT) for the development of energy-efficient and sustainable air conditioning and ventilation solutions for the commercial sector across Southeast Asia.

Overall, the market is highly fragmented, with a large number of players providing variable refrigerant flow systems solutions to various industries. Major players, such as Panasonic Corporation, Fujitsu General Limited, Daikin Industries, Ltd., Toshiba Corporation, Mitsubishi Electric, and LG Electronics, constitute around one-fourth of the market, and the remaining market is dominated by a large number of regional and local players.

LIST OF KEY COMPANIES PROFILED:

• Panasonic (Japan)


• Fujitsu General Limited (Japan)


• Daikin Europe (Belgium)


• Toshiba (Japan)


• Mitsubishi Electric (Japan)


• LG Electronics (South Korea)


• Lennox International (United States)


• Samsung Electronics (South Korea)


• Johnson Controls (Ireland)


• Emerson (United States)


• Midea Group (Fortune Global 500 Company) (China)


• Carrier HVAC (United States)

KEY INDUSTRY DEVELOPMENTS:

• November 2018 – Daikin Industries, Ltd. acquired AHT Group for USD 747.98 million. AHT Group is located in Rottenmann, Austria, and is engaged in manufacturing, developing refrigerating, and freezing showcases.


• October 2018 – Fujitsu General Limited acquired 51% shares in F.G. Europe Italia S.p.A. for a value of approximately USD 8.48 million. F.G. Europe is situated in Greece and it is primarily engaged in sales and aftersales service of air conditioners in Italy, Turkey, Greece, and the Balkans.

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The Variable Refrigerant Flow System Market report presents a comprehensive assessment of the industry by offering valuable insights, facts, industry-related information, and historical data. Several methodologies and approaches have been adopted to make meaningful assumptions and views to formulate the report. Furthermore, the report covers a detailed analysis and information as per market segments, including components, system type, applications, and regions, helping our readers to get a comprehensive overview of the global industry.

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