There was no nail: the shortage of quick-release couplings for life-support systems cost Supermicro $800 million in deferred revenue

Any manufacturer is not immune to the disruption of the supply chain for small components, leading to significant losses, sometimes amounting to hundreds of millions of dollars. According to Tom’s Hardware, Supermicro was unable to obtain enough quick connectors for liquid cooling systems (LCS) in time, which delayed the delivery of finished products to customers. As a result, “deferred revenue” was generated in the amount of $800 million, which had to be transferred from one quarter to another.

Life-support systems are extremely important for AI servers and usually consist of several components connected by quick-release connections. These connectors can leak, so their quality is key. Due to the high demand for AI servers, the demand for connections has also increased. Their price has already risen from $40 to $60, and potential buyers are willing to overpay even more just to book supplies.

Image source: Cejn

The quick-release connector market is controlled by seven companies, including two Chinese companies hit by U.S. sanctions, which is only exacerbating global shortages. Taiwanese manufacturers Global Tek, Fositek and Lotes are eagerly taking advantage of the situation by increasing and accelerating the production and certification of relevant products – this will help fill the “void” from the departure of sanctioned Chinese companies. Global Tek is actively working with partners at its factories, samples are already being tested. The company expects that revenue from these projects will begin to flow in the fourth quarter of 2024.

The demand for cooling systems is really high and it is expected that by 2028 they will occupy a third of the market for cooling systems for data centers. At the same time, complaints are already being received – it is possible that deliveries of NVIDIA GB200 super accelerators may be delayed due to leaks of auxiliary “accessories” of liquid cooling systems.