The AC/DC switching power supply market appears stable following a year of excess inventories and plummeting prices. Manufacturers say design activity is high and orders have picked up over the last two months.

The good news for buyers is that while price declines may be over, there will be little if any upward price pressure for the rest of the year.

Manufacturers are hoping that 2002 will be a year of recovery. Sales declined from $8.8 billion in 2000 to $7.6 billion in 2001, according to market researcher Venture Development Corp. (VDC). VDC forecasts just 1% growth for the year. If there is a recovery, it will likely start in the second half at the earliest.

Manufacturers did not see an increase in sales in the first quarter, but suppliers are cautiously optimistic they will see a pick up in orders in fourth quarter as design activity increases.

"We see a lot of pick up in design activity, and quotations are up. Order activity is slowly picking up and we're also coming into summer months which are typically slower," says Mike Wagner, vice president of marketing at Cherokee International LLC.

"Like other companies, we're focusing on design wins now that will add to the revenue stream in quarters three and four," Wagner says. "We are tied to our end OEMs' time tables and that could be eight to ten months."

Design activity is very strong, agrees Ken Blake, vice president of worldwide marketing and business development for Artesyn Technologies. "The real focus is on new product design wins. Whether it's in fourth quarter or first quarter, we have to make sure that we have print position on new products."

Analysts and suppliers say that while prices for AC/DC and DC/DC power supplies dropped significantly in 2001 as competition became more fierce, tags have begun to stabilize in 2002. Contributing to the price decline were some significant sell-offs in 2001 when distribution channels and OEMs cleared their shelves, according to Nate Andrews, director of power conversion and control practice for VDC.

The fragmented DC/DC power supply segment with hundreds of suppliers saw a lot of price erosion last year. For example, a DC/DC converter in a quarter-brick package now sells for $64 or less in quantities of 1,000 as compared to about $70-$80 last year.

Although the cost per watt has been dropping for AC/DC power supplies, it's difficult to put a figure on it because specific product features are considered cost adders. Prices can vary from 15¢ or-20¢ per watt up to 40¢ per watt.

Leadtimes have also dropped over the past year. Leadtimes for DC/DC converters have shrunk from about 8-10 weeks to 4-6 weeks. In the AC/DC product area, typically modified or custom products, leadtimes are about five to ten weeks.

The backlash from the over inventory situation during the past year has led power supply makers and their customers to create vendor managed inventory (VMI) programs or other similar agreements that commit the customer to cover certain levels of investment based on their forecast.

Cherokee has been very aggressive in implementing VMI agreements with both its suppliers and customers. "What we're able to do is manage the inventory, get the costs down and put more pressure on suppliers to help us increase profitability from a cost point of view," Wagner says.

"VMI agreements give us better share in terms of visibility into new programs. The agreements provide guidelines that allow us to be more flexible in terms of supporting both contract manufacturers and OEMs but at the same time providing protection so at least we can manage some inventories and put better planning in place," he addes.

"Our customers are required to give us some visibility into their forecasting so we can make decisions on materials and get the materials pipeline built up," he continues.

"If our customers are willing to sign up for percentage liabilities that means someone in that company is looking more closely at those forecasts because they have real liabilities associated with them," says Mike Buskmiller, senior product manager for Energy Systems Division at Tyco Electronics Power Systems. "Most of our sophisticated customers are putting systems in place to help them deal with these cycles."

There is a lot more focus on managing inventories this year, Blake agrees. He says a lot of effort on both the supplier and customer sides are being made to avoid the problems of inventory build up. There is also more work being done to communicate more effectively with distributors and contract manufacturers, he says.

Despite tough economic conditions, most power supply makers have moved ahead with their research and development programs, focusing on higher power densities, improved efficiencies, smaller footprints and lower costs per watt.

A number of companies were smart during the down economy to turn research and development money inward and push new product developments, Andrews says.

In the AD/DC segment, Artesyn Technologies is targeting densities in the 5-7 watts per cubic inch which is being driven by 1U (1.75 in.) applications. The key trend is increased densities and associated efficiencies, Blake says. "We also trying to put more power in small packages without increasing the cost."

Similarly, Lambda Electronics Inc., an Invensys Co., is targeting higher power density. The company's new Vega Series of 450 and 650-watt configurable AC/DC power supplies offers a power density of 5.8 watts per cubic inch.

For AC/DC switching power supplies, Cherokee is focused on increasing power density and shrinking the footprint with its newly introduced COM1, a 4-channel, 240-watt AC/DC power supply for low voltage 1U (1.75 in) datacommunications and telecommunications applications. It offers 5.6 watts per cubic inch power density.

Remote monitoring and emergency dial-up is a growing trend that allows for fewer people monitoring power plants in central offices. To address this requirement, Tyco Electronics Power Systems has developed the Galaxy Gateway V3 add-on cards that allows for remote monitoring and control of power plants.

Tyco has also introduced its Yukon 650 Power System, a new modular system platform for outdoor power, and expanded its NP Series, a 48-volt power system, with a new 800-watt front-end rectifier.

Known as a custom power supply maker with about 90% of its sales derived from custom products, Cherokee International is making some major moves into the standard product market. The company's goal is to have a product sales mix of about 70% custom to 30% standard product.

Targeting smaller footprints and higher efficiency, Cherokee has recently introduced a new DC/DC converter line that offers 91% efficiency at 3.3 volts in quarter and half brick sizes. The topology is being used across many different product families, which provides commonality in terms of components, Wagner says.

Although efficiency levels are moving into the 90 percentile from low to mid-80 percent range, what makes a good product is not just efficiency but also good thermal management, says Wagner.

Another trend impacting the DC/DC market is next generation ICs and microprocessors that have lower voltages and higher currents. Five to ten years ago the common output voltages were 5 and 12-volts, today it's 3.3, 2.5, 1.8-volts and dropping, Wagner says.

Artesyn is offering two new half and quarter brick converters, dubbed the EXQ and EXB, respectively. They offer good performance levels in terms of "usable power" which is a function of the efficiency of the product and its ability to dissipate heat because that's what limits the performance of the parts, Blake says.

Distributed power, popular in 48-volt telecommunications systems, is now moving into point of load applications. ATE test and semiconductor fabrication equipment, which has traditionally used centralized power, is now using distributed power. Over the past 12-18 months there has been a shift to distributed power architecture in ATE test and semiconductor fabrication equipment, Wagner says. It's an exciting opportunity that will fuel the growth of DC/DC converters, he says.

In the past, customers weren't willing to pay for distributed power because of the high cost, but that is changing today as the prices for DC/DC converters drop due to the number of players in the market, Wagner says.

A lot of companies outside of the telecom sector are contemplating distributed power, Blake says. "We see product with about 12-14 different voltages on a card that necessitates secondary power conversion."

At the point of load, the variability of voltages required has increased over the past several years, says Mark Johnson, director of research and development for Tyco Electronics Power Systems.

"In the past you might see 5 or 12 volts as the ubiquitous standard. Now you see many chips at 3.3 volts, 1.8 volts or a variety of voltages ranges. To isolate some of the variability, customers are moving toward the 48-volt bus and then point of load converters to manage whatever voltage is required by the load," Johnson says.