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In order to meet the through-life reliability targets for power modules, it is critical to understand the response of typical wear-out mechanisms, for example wire-bond lifting and solder degradation, to in-service environmental and load-induced thermal cycling. Application of accurate wear-out models can identify the dominant failure mechanisms at the design stage and can be employed in reliability assessment and health management under in-service conditions. The work in this paper presents the effect of power cycling frequency, load current and mean temperature on temperature variations within the power module structure and its impact on the life consumption for two common wear-out mechanisms (the bond wire and the substrate-solder). Compact real-time thermal models combined with physics of failure based reliability analysis are used to identify the dominant failure mechanism and predict the life-time of the power module for each thermal cycling condition. It is shown that bond wire degradation is the dominant failure mechanism for all power cycling conditions whereas substrate solder failure dominates for externally applied (ambient or passive) thermal cycling. In addition to informing the design process and enabling real-time health management, the knowledge gained from these studies can be used to design thermal cycling experiments for selected failure mechanisms.