Slow growth and weak prices for switches
By James Carbone -- Purchasing, 3/26/1998
The switch market will grow at about a 4% annual rate despite downward price pressure and the continuing trend of software and sensors to displace electromechanical switches in some equipment.Manufacturers are abandoning certain types of switches such as rotary and slide in favor of lighted pushbuttons, trigger and snap-action switches. Some manufacturers are concentrating more on the custom switch business, where margins are higher. But while the switch market is mature, the North American switch market will grow from $927 million in 1997 to about $1.1 billion in 2002, even though other technologies are replacing switches. Reason: Switches remain a good value.
"Technologies such as surface-pad technology and optical switches are more reliable and durable, but they also are more expensive, says John Gordon, an analyst with Venture Development. "One of the biggest things going for electromechanical switches is that they are cheap. They are simple, cheap, and are used everywhere. Manufacturers also are improving their quality and reliability. Other technologies such as surface pads, membranes, or optical switches or software are too expensive for many types of equipment."
All this is good news for buyers. Competing technologies will help keep prices low while quality and reliability rise. However, it will also mean fewer suppliers because some switch companies will drop certain products.
Michael Schwert, marketing manager for Cherry Electrical, says there will be healthy growth for pushbuttons and trigger switches. But, he notes that toggles and rockers are flattening out--as are slides and rotaries. And thumbwheels are declining and being replaced by software, switchpads, and touchscreens.
"A color TV used to have a lot of front-panel rotary switches for brightness, contrast, and other things," says Schwert. "Now all that is controlled with screen software. You hit the menu button on the remote and up pops the contrast adjuster or whatever else you need to adjust."
He says software is eroding the thumbwheel switch business in computers. "We enjoyed a sizable market in scuzzy addressing for hard drives and printers and other types of peripherals. The need for those types of switches is going away because of software."
Equipment makers are getting rid of switches to lower the cost of the product. "Once the software is written, it's free," he says.
He says switch use is declining in computers and peripherals while demand remains strong from appliances and industrial control.
There also will be growth in communication, audio, and video equipment, and medical equipment, says Kiyoko Toyoma, executive vice president of NKK Switches. She says although some switches are becoming obsolete, there will be a need for switches.
"There will always be some kind of human interface to turn on the equipment. Certain types of switches may be replaced, but the existence of switches in some shape or form will be there even if it is not a real growth market." NKK says it will grow by building its market share.
Toyoma says there will be growth for lighted pushbutton and tactile switches.
While many manufacturers have abandoned rotary switches, Electroswitch remains a rotary switch specialist. " It is our core business," says Ken Sinick, sales manager.
"There are fewer rotary-switch people and therefore 1997 was our best year since the inception of our division 12 years ago," says Sinick. Sales increased by about 4.5%.
He says there is almost a rebirth of rotary switches occurring. "If you look at high-end audio, manufacturers have tried other things, other applications, but are returning to the knob with a rotary switch behind that knob. We see a lot of applications: audio, automotive, instrumentation."
While its traditional business is electromechanical rotary switches, Electroswitch also makes custom switches.
Mike Francis, new-product development manager, works with customers on proprietary switches and is not limited to rotary switches. In some cases, Electroswitch develops a new switch design for the customer. In other cases, it modifies an existing switch to lower cost.
"Some solutions would be totally unrecognized as switches, almost like sensors. The majority of things we work on are very proprietary," says Francis.
Electroswitch also competes by offering "benchmark leadtimes," says Sinick. "We ship standard products in two days. With products that are modified in some way the leadtime is two weeks," says Sinick. Switch leadtimes are generally six weeks and up.
Glen Tarnawa, product and business planner for switches at Omron, says to compete, switch manufacturers have to offer a lot of value add. "A lot of basic snap-action switches, 50%-60%, are going to be custom," he says. "They may have special levers, special actuators, or have harnessing capability. We get requests for special configurations such as mounting two of the devices together or a special plate with an actuator.
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