Buyers can expect switch tags to fall about 5% this year, as availability remains high even though much of the inventory in the supply chain has finally been worked off.

Switch manufacturers say demand will be better than last year, but is not likely to pick up until the second half. Weak demand coupled with ample capacity means tags will fall especially for large volumes buys of switches.

Since demand will be relatively sluggish, buyers can expect some switch manufacturers to concentrate on more value-added services that involve combining switches with other components in a module.

Buyers can also expect switch makers to focus their business on products and customer segments that are most lucrative. Manufacturers see decent demand for lighted pushbutton switches and miniature toggles and pushbuttons and will, therefore, focus efforts on these lines.

Purchasers should also expect switch manufacturers to concentrate more on medical equipment, industrial control and automotive industries. These segments weren't hit as hard last year by the recession compared to the telecommunications, computer and contract manufacturing industries, which were plagued by high inventory levels.

High inventory levels in the face of very weak demand are resulting in many switch companies having double-digit declines in sales.

"Last year was not a very pleasant year for the switch industry in general," says Kiyoko Toyama, president NKK Switches. "It was down primarily because of telecom. We were most affected by telecom and computer and related areas. We saw tremendous downturn in board level switches," she says.

However, while business was down, there were some bright spots, according to Toyama.

"Our sales of LED pushbutton switches used in medical and broadcasting equipment increased 20-30%. They are in a small package and have brighter illumination," she says.

Toyama expects sales of lighted pushbuttons to remain strong in 2002 and says there should be growth in other product areas as well.

"Growth may not go back to the 2000 level but there should be some in 2002. Most of it should be in areas other than telecom," she says. She expects there to be healthy demand for toggles, pushbuttons, miniature and subminiature switches.

Demand for smaller switches is growing because OEMs continue to downsize their equipment.

A miniature toggle switch measures about .07-in high including the toggle and bushing. A miniature pushbutton measures about .03-in and a subminiature about half that size. Width for a subminiature is about .25-in and for miniature it is .33-in.

NKK isn't the only switch manufacturer seeing healthy demand for small switches.

"We still see significant growth in ultraminiature switches, which are used by industrial controls, medical equipment and wireless and automotive industries," says Darryl Wilk, vice president, director sales and marketing for ITT Canon Switches.

"They could be pushbuttons, toggles. For years our customers have been downsizing their products. There doesn't seem to be any letup in that trend. There were products that we thought were reaching the limits of how small we could make them. That's not happening. Customers seem to be interested in using these products to save board space or to reduce the size of equipment," he says.

Besides growth in miniature switches, Wilk says he expects demand to grow for switches that are integrated with other components to form hybrid products that incorporate functionality of the switch, connector and keypad and maybe some mounting structural support into modules that can be easily assembled into products.

"It can mean lower cost, depending on integration," says Wilk. "It can result in a lower installed cost because the customer installs one module instead of individual components. The module may also increase reliability because there are fewer components," he says.

The automotive, medical and wireless industries are interested in the modules. "It would be more important to our customers because there would be a higher value content," says Wilk.

A switch company that is likely to benefit from this trend is Electroswitch. At least 50% of its business involves some value add, all of its business is build to order, and it makes a large number of custom and semi-custom switches, according to Ken Sinick, sales manager.

Electroswitch makes rotary, miniature, rockers, toggles, pushbuttons switches for industrial control, medical equipment, instrumentation OEMs and military contractors.

"We do wiring or harness work in house, we sell plug-in products. We recently had a request for a rotary switch that could not be actuated inadvertently. We designed it so it had a pull function before it could be turned," says Sinick.

While certain product and customer segments will recover in 2002, switch manufacturers aren't expecting to see a huge increase in sales. Rather, they're expecting growth to be slow and backloaded at the end of the year.

"We forecast that our business will be relatively even quarter by quarter in terms of end market demand," says Wilk. "Business may improve as inventories come down further. "We are not expecting a huge ramp up of OEM demand during the year, but it will be better than last year," he says.