Operational Efficiency Reigns Supreme for Power Supplies in 2011

Power ECS45

he power-supply industry’s robustness over the last 12 months should continue well into 2011. Market trends show steady growth for the S&P500 Equipment Manufacturers’ (Standard & Poor’s) categories of healthcare, technology, and industrial.

Looking at the healthcare market more closely, it expanded by approximately 10% last year and a further 5% during the first half of 2010. I deal with 94% of the S&P500 companies in this sector, particularly because XP Power pioneered the concept of power supplies that cater simultaneously to industrial and medical applications.

Customers no longer need to buy expensive specialist power supplies. Most of our standard industrial products, which are manufactured in high volumes, are now medically qualified. As a result, we’ve been able to drive down costs and be much more competitive. We see the medical market continuing to grow in the U.S., Europe, and Asia.

The technology sector includes semiconductor fabrication equipment. After a sharp downturn in 2009, this market is set to double in 2010, albeit from a low base. Indicators show a rise of another 10% growth next year. The communications market is still growing, too, at around 10% per year. We supply 69% of the S&P500 technology companies, and our business in this sector grew 64% in the first half of this year. Needless to say, it’s an important segment for XP Power.

The industrial market, including aerospace and defence, is also recovering. XP’s power supplies are used by about three-quarters of the S&P500 companies, but we expect the defence business to tighten next year. So far, though, our business has not been affected.

Anticipating extended lead times for components has been a major benefit. Component inventory doubled in late 2009 when typical lead times were 10 weeks. Thus, XP Power was able to maintain an eight- to 10-week lead time for most products at a time when some companies quoted 20 weeks or more for delivery.

With respect to technology, the power-supply business tends to be evolutionary, rather than revolutionary. It has been driven for decades by the need to improve power density and cut costs.

Now, efficiency is becoming the dominant concern as customers work to improve their “green” credentials by reducing their products’ energy consumption. For external power supplies, recently introduced European legislation (ErP) limits the power consumed under no-load conditions for all products with annual sales of more than 200,000 units. This applies to a relatively limited number of products today, but we expect the legislation to expand to include lower-volume products and even internal power supplies in equipment.

No-load power consumption is critical in equipment such as vending machines and franking machines, which are mostly in standby mode. XP Power’s goal is to achieve at least 90% efficiency in new products (see the figure). In 2009, only two of the products launched actually reached that target, but in 2010 over half of the company’s 30 new products will be better than 90% efficient.

We’re also seeing a growing trend for major customers to undertake environmental audits of our factories as part of their drive to toward greater environmental responsibility. Once again, XP Power is taking the initiative, rather than wait for legislation or new customer demands.

With an eye toward corporate social responsibility, XP Power signed on to the Electronic Industry Code of Conduct (EICC). This is a code of best practices adopted and implemented by some of the world’s major electronic and telecommunication brands and their suppliers. Its aim is to implement a single social responsibility code of conduct in the electronics supply chain. The code encompasses labour practices, health and safety, environmental responsibility, and management systems, as well as ethics.

Quite rightly, product functionality, size, and price are no longer the only criteria upon which OEMs select their suppliers. Power supplies are a key component of every electronic system, which increases the focus on them with respect to the issues covered by the code. We expect EICC’s impact to be felt much more strongly in 2011.