Relay prices expected to be more stable in 2009
By Gina Roos -- Purchasing, 1/15/2009 2:00:00 AM
The relay market in 2008 was marked with price increases of up to 10% as a result of rising materials costs. Now, relay prices are changing due to the worldwide economic slowdown.
Electromechanical relay prices have recently stabilized and there is talk about lower prices in 2009. A potential downside is longer leadtimes as relay manufacturers cut back on production capacity. Prices went up 10% last year, says to Mark Boston, relay product manager at Omron Electronic Components in Schaumburg, Ill. "One of the strong driving factors was material costs, which increased in late 2007 and eventually caught up to relay suppliers, raising prices from late winter to summer 2008."
Tyco Electronics implemented some select relay price increases in 2008. However, prices have stabilized industry-wide, says Paul Craven, director of product management for the Americas at Tyco Electronics in Harrisburg, Pa.
While asking for price reductions may not be a problem in 2009, one challenge buyers could face is longer leadtimes if relay suppliers significantly lower production capacity.
Larry Behm, corporate inventory manager/operations administrator for Cascade Controls Northwest in Portland, Ore., says relay leadtimes "are getting longer because nobody wants to stock. [Suppliers] have cut back on inventories."
Orders are coming in more on an "as needed" basis, says Behm. "You're getting a lot of orders but they are for much less. For example, instead of $1,000 orders, it's $100. Everybody is a lot more cautious."
Boston says there could be some relay leadtime issues later this year. "If the economy continues this downward trend for another six months I would anticipate that there will be some cuts in manufacturing, and then it will affect leadtimes," he says.
Omron currently quotes leadtimes in the six to 13 week range, depending on product type, for electromechanical relays. Specialty types have the longest deliveries.
Tyco Electronics' Craven says the key for suppliers is balance. "We certainly balance our capacity with demand so we will make a judgment as necessary based on demand." Leadtimes for general-purpose relays typically range between four to five weeks, he says.
"Certainly with the economy the way it is, short-term growth will be challenging for all of us. The overall industries that consume relays are down," says Craven. However, electromechanical relay suppliers believe the alternative energy markets—solar, wind and geothermal—and energy-savings applications will be key growth drivers in 2009, though growth will start off slow.
Boston believes alternative energy will turn out to be a growing market picking up momentum as the year progresses. "I think the country is ready for this kind of movement." Power latching relays in the 30-250-amp range, which are already making some headway in the utility market for panel meter applications, could also be used for inverters in the alternative energy market.
"Companies that make inverters realize that these latching relays allow for power savings especially when the inverters are going to be on for a long time. Inverters are used in solar and wind power, and many other alternative energy types that need to invert energy from DC to AC," says Boston.
Tyco Electronics also plans to focus on the alternative energy market next year. "We certainly see a lot of activity from a design-in standpoint," says Craven. He also sees continued activity in lighting applications and energy management.
Other relay market drivers for 2009 include building automation, particularly for power printed circuit board (PCB) relays, and latching relays, Boston says.
Relay suppliers are following several strategies to remain competitive, including moving more production to China. Boston expects more relays to be manufactured in China due to the cost of making the product. "In the world of supply you have to look at what works best and you're trying to maintain healthy margins so that is part of the game."
In the area of product strategy, Omron is looking to add special features, first to solid-state relays (SSRs) and in the future to electromechanical types to achieve healthier margins. But there is always a fine line to walk between cost and benefit. "You have to offer product at a reasonable cost with specialty features that make them advantageous," says Boston.
One example of an existing product with "value-added" features is Omron's G2RV super-slim relay for industrial automation. Unlike other super-slim relays, the G2RV relay offers maintenance-friendly features—a transparent housing, metal-tab terminals and a mechanical indicator on top of the relay to easily check operation.
For Tyco Electronics, no changes are ahead in terms of its R&D and new product development strategies. "We're still focusing on new product growth for long-term growth of our business," says Craven.
Market drivers will include smaller board-mount relays with a similar level of performance, lower profile relays, and relays with stronger board-mount pins so they can be used in both board-mount and socketed applications, says Craven. There will also be a trend to cost reduce existing designs.
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