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North American Thermal Management Components and Software Markets
Frost & Sullivan, June 2005
Machine Shops with Localized Clientele Challenge Heat Sink Manufacturers
North American manufacturers in the heat sink market - a part of the thermal management components market - are facing a strong challenge due to the sudden proliferation of several small machine shops with localized customer bases. These machine shops are winning over small and mid-sized clients by providing them with customized, yet affordable, solutions. This rising trend has placed manufacturers of heat sinks under considerable pricing pressure and restrained their market penetration, in addition to the tough price competition they are already facing from Asian suppliers in the standardized heat sink market. In particular, many tier-2 and tier-3 participants that had already started moving toward niche or customized markets in search of better margins have been impacted by the growing strength of machine shops in these areas. These manufacturers are expected to develop partnerships with machine shops in an attempt to convert this challenge into an opportunity and gain much-needed presence in small and medium accounts for customized solutions.
This Frost & Sullivan research service takes an in-depth look at the North American thermal management components and software market. This analysis focuses on the markets for standardized and customized heat sinks along with single-stage and multi-stage thermoelectric coolers (TECs). It examines the critical challenges facing these markets as well as their major drivers and restraints. It also includes detailed revenue forecasts by level of customization to give clients better insights into the market.
Increasing Power Density and Packaging Challenges Drive Revenues
Growing functional convergence of products is creating a demand for superior and more efficient thermal solutions. Packaging challenges are increasing, as are the power densities on printed circuit boards (PCBs). Thermal management manufacturers are addressing these challenges by providing more sophisticated - and more expensive - heat sinks and TECs along with higher-performance thermal design software, thereby driving revenues.
Thermal management challenges arising due to miniaturization of end-user applications also form an important driver for this market. In an attempt to differentiate themselves from the competition, original equipment manufacturers (OEMs) and system integrators are looking to pack a greater number of components on their PCBs. Moreover, due to growing miniaturization, there is a trend toward reducing the size of the PCBs in order to minimize the size of the end product. The industry is not likely to see a decrease in the rate of miniaturization and digital convergence, observes the analyst of this research service. Therefore, the impact of this driver is anticipated to be high throughout the forecast period (2006-2012).
Move toward Higher Customization Expected to Provide Respite from Relentless Price Pressure
The extent of customization in a heat sink design determines the price of the product in the North American heat sink market, which is not as commoditized as that in Asia. Product margins are closely linked to the level of customization, causing the market to shift toward increased customization in terms of both consumption and production. North American manufacturers are actively pursuing mass customization as well as long-term partnerships to improve margins, says the analyst. This move is also expected to provide some relief from high levels of price sensitivity in the heat sink market, caused by an increase in the shipments of standardized, low-cost products.
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