Sometimes, shortages of tiny components that can hardly be called 'high-tech' cost companies tens or hundreds of millions of dollars. This happened to Supermicro, which could not get enough quick couplings for liquid cooling systems, which made it postpone shipments of products and delayed $800 million of revenue from one quarter to another, reports Economic Daily News .
"Some key new components shortage delayed about $800 million of revenue shipments to July, which lowered our EPS for June and will be recognized in our September quarter," said Charles Liang, chief executive of Supermicro, at the company's earnings call last week (via SeekingAlpha ).
Liquid cooling is vital for high-performance AI servers. A liquid-cooling system in AI servers typically comprises six components: cooling distribution units (CDUs), cold plates, cabinets, fan walls, coolant distribution manifolds (CDMs), and quick couplings. Quick couplings connect the coolant flow between the cold plate and the cooling distribution unit (CDU) and are essential for liquid-cooled AI machines.
Some quick couplings are prone to leakage, and their quality is crucial. Due to the high demand for AI servers, which require hundreds of these components per cabinet, the market has also seen a surge in demand for quick couplings. As a result, quick couplings have risen sharply, from $40 to $60 per unit, with buyers willing to pay even more to secure them. This price increase reflects increased demand and major challenges in meeting it due to a shortage of suppliers.
The market for quick couplings is controlled by seven companies, including two based in China. However, due to sanctions related to the U.S.-China tech conflict, Chinese companies face restrictions limiting their ability to supply these components, exacerbating the shortage.
Taiwanese firms such as Global Tek, Fositek, and Lotes are taking advantage of this situation by accelerating their production and certification processes. These companies see a significant opportunity to fill the gap left by the constrained Chinese suppliers and meet the growing demand.
Global Tek is actively working with partners in its Wuxi and Taoyuan plants, with samples currently undergoing testing. The company expects to see revenue from these efforts by the fourth quarter of 2024 or early next year.
Fositek, backed by its parent company Asia Vital Components, has also submitted samples for customer certification and focuses on developing quick couplings. Lotes, meanwhile, anticipates making progress by the end of the third quarter, aiming to capitalize on this high-demand market.
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