The past four years created significant sourcing obstacles across all electronic components, including thermal management. With heat issues accounting for 55 per cent of electronic system failures, sourcing adequate thermal management solutions is vital to many designs.
Most thermal products are manufactured in Asia and Europe and shipped to the US via ocean freight due to their size and weight. Global container prices surged throughout 2021 and by mid-2022 full container quotes for shipments—from Hong Kong to California ports—had increased by over 400 per cent, ranging from $18,000 to $20,000. Since late 2022, prices have moderated, with container prices returning to pre-pandemic price points and even lower in some cases as spot buys for excess available containers is becoming more prevalent.
During the second half of 2020, port congestion globally peaked, causing delays in sailings and contributing to extended transportation lead times. Pre-pandemic, sea freight shipping time from Hong Kong to the US through Long Beach, CA was typically three to six-weeks. Although three to four times more expensive, air-shipment became a more frequent request throughout the pandemic period and extended into 2022. Currently ocean transit times are holding around six to eight-weeks from Hong Kong to US and three to four-weeks from Europe to US east coast.
For thermal products, thermal interface materials (TIMs) and system level active thermal assemblies experienced some of the longest lead-times.
Historically, lead-times for fans and blowers ranged between 12 to 16-weeks—with OEMs and distributors operating on a just-in-time (JIT) model—and managing inventory based on customer forecasts. By the second half of 2021 lead-times were 26 to 40-weeks, peaking at 50 to 80-weeks in 2022 with some suppliers reaching over 100-weeks for specific series. Distribution inventory levels helped minimize the impact early in the pandemic but incremental large jumps in lead-time challenged the entire supply chain to keep pace.
Initially, air-mover suppliers’ manufacturing lead-times were impacted by raw material and component shortages. However, as the pandemic continued, production capacity and labor availability became a bigger issue. The channel reacted by moving from JIT to ‘just in case’ ordering, laying in multiple orders to support future needs, putting further strain on supplier capacity.
In Q1 2023, fan manufacturers’ lead-times began to stabilize and improve slightly, now averaging 26 to 40-weeks for new orders. Continued improvements in lead-times are expected in late 2023 as suppliers, channel partners and customers continue to adjust the extensive backlog. Additionally, multiple air-mover suppliers have increased manufacturing capacity by investing in new manufacturing sites in various geographic regions which should have a positive impact on lead-time in 2024.
Pre-pandemic lead-times for TIMs ranged between four to six-weeks; during the pandemic, lead-times averaged 12 to 16-weeks and in some cases 20 to 26-weeks. Raw materials used in the production of certain silicone-based products drove some suppliers to declare force majeure for those particular products. Post pandemic lead times are almost back to pre-pandemic levels, a welcome sign, as the $3.4B thermal interface market is expected to grow to $5.6B over the next five years in conjunction with growth in key markets such as EV, 5G, data center, ADAS and consumer electronics.
Active thermal products, with their internal make-up of multiple electronic components and raw materials, saw lead-times increase substantially during the pandemic: sourcing of fans was a common issue. These products began to normalize towards the end of 2022 and will remain stable throughout 2023.
While several pandemic-related issues have improved, manufacturing lead-times for thermal products are still catching up as suppliers work through their backlog. For those procuring lead-time impacted thermal products, maintaining an extended buying horizon is still prudent.
A strategy to navigate fluctuations in the thermal market is to partner with an authorized distributor like Sager Electronics. With a world-class line card, expansive thermal inventory and continued product investment, Sager’s technical sales team can assist in sourcing in stock and short lead-time thermal products, plus establish the appropriate dynamic inventory strategy to meet production requirements.