Switch prices will fall; leadtimes remain stable
By Gina Roos -- Purchasing, 3/12/2009 2:00:00 AM
The economic slowdown has had a resounding impact on the entire electronics industry
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and the switch market is no exception. For switch buyers, this means stable to slightly lower prices along with short leadtimes in the range of four to six weeks.
In early 2008, switch suppliers projected double-digit growth although economic conditions were starting to deteriorate amid rising fuel and materials prices, and a troubling housing market. Instead, many switch suppliers ended the year with negative to flat growth. It doesn't look much better this year, they say, with many of them hoping to maintain last year's growth.
Revenues were down 4% and units were down 2% in 2008 due to the strength of the first three quarters, says Mike Schwert, founder of market research firm Cumulus Inc. in Antioch, Ill. "The second and third quarters were better than anything in 2007. But what's alarming is what happened to bookings, which peaked in second quarter and dropped significantly over the next two quarters."
However, orders this year aren't being cancelled, although some are being pushed out, say switch suppliers.
Many switch suppliers are trying to identify growth markets including those that are "recession-resistant," with some of them focused on industrial and broadcast equipment markets. The distribution channel is also a big part of their growth strategies, with a high percentage of their sales flowing through this channel.
Buyers can expect some price declines. Some switch manufacturers implemented price increases late in 2008 in the range of 4–10% to absorb increasing costs for transportation, resins, and metals particularly for copper and gold. Schwert says although switch manufacturers raised prices last year they will start cutting prices in 2009 to keep their market share. "There is going to be a lot of competition in 2009 for what business is left so there will be downward price pressure."
Some switch suppliers are feeling the pressure to lower cost. "We're looking at a lot of ways to get cost out from packaging materials. We're also looking at different plastics and at ways to redesign existing products," says David Webber, director of product management at C&K Components in Newton, Mass.
However, the push for halogen-free components may drive up the cost because the new plastics are more expensive, says Webber. "We've entered a new regulatory age and we're spending more time keeping abreast of emerging regulatory legislation." He notes changes to the European Union's Restriction of Hazardous Substances law REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) are in the works and switch manufacturers have to dedicate resources to monitor legislation to ensure compliance.
To be more competitive, many switch manufacturers are trying to reduce leadtimes. For example, C&K Components has reduced its average leadtimes from six to eight weeks last year to three to five weeks in 2009 by becoming more vertically integrated and bringing more tools in-house.
They are also focusing on value-added services and design services. "A lot more time is being spent on design work and looking for cost savings for the customer, specifically for value-added work," says Brent Wonsch, switch product manager at Omron Electronic Components in Raleigh, N.C. "Some customers don't want to do it (value added work) because it costs them time and money, and they're starting to streamline their supplier base."
Kiyoko Toyama, president of NKK Switches in Scottsdale, Ariz., says NKK is also looking at how it can add value to its switches and do some of the design for customers, who may have gone through a workforce reduction and need other companies to do the design for them. In addition, smaller companies don't necessarily have all the engineering capabilities they need, she adds.
Toyama says this activity results in cost savings for the customer and makes it difficult for competitors to "just take the order away."
Buyers can also expect continued new product developments along with customization services. Switch manufacturers may not be as aggressive as in the past in terms of new product introductions, but they are all continuing to invest in R&D.
| Category | Dollars | Units | ASP |
| Source: Cumulus, Inc. | |||
| DIP | 3.50% | 5.40% | -1.70% |
| Keylock | -28.20% | -20.80% | -9.40% |
| Push Button | -19.40% | -26.60% | 9.80% |
| Rocker | 0.70% | 6.10% | -5.10% |
| Slide | -11.90% | 5.60% | -16.50% |
| Snap Action | 0.50% | -11.00% | 12.90% |
| Tact | 4.90% | 2.70% | 2.10% |
| Toggle | -12.00% | -19.50% | 9.40% |
| Total | -3.90% | -2.10% | -1.80% |
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