Relay prices will fall in 2008, but not as much as in 2007 when prices eroded by about 10%.

Suppliers say prices will not fall as much because of rising costs for copper, silver, and plastics. Buyers can expect tags to fall by about 4–5% in 2008.

Rising material costs and the need to compete on price is a critical issue for suppliers, according to Mark Boston, product marketing manager for power relays at Omron Electronic Components in Schaumburg, Ill. "There is a lot of price squeezing occurring in HVAC, appliance and security markets, mostly because of competition from Chinese suppliers," he says.

Boston says there have been increased materials costs over the past couple of years. Suppliers have been able to absorb some of the material costs and still reduce prices, but in 2008 suppliers won't be able to reduce prices as drastically as previous years. To offset the rising materials costs, many relay manufacturers are moving production into lower-cost regions.

"While the cost of building these parts has gone up, we've shifted a lot of our manufacturing to different locations, primarily in China to offset the materials costs," says Terry Harmon, product marketing manager for low-signal telecom relays at Omron Electronic Components. "We're maintaining production cost levels, and in some cases, costs have come down," he says.

Harmon adds that a shortage in skilled technical labor in China is starting, which is increasing labor costs. This has resulted in some suppliers looking at India as the next potential manufacturing region.

Low-signal telecom and power relay suppliers say the market is growing 2–5% annually with pockets of strong demand in the telecommunications sector and HVAC markets. They also see demand for energy efficient and "Green" products with lower power consumption.

The fastest growing markets include military/aerospace, consumer electronics, automatic test equipment, HVAC and energy, and computers and peripherals, according to market research company Venture Development Corp. in Natick, Mass. The worldwide relay market, including electromechanical and solid state, is expected to grow from $4.4 billion in 2006 to nearly $6.0 billion in 2011, with a compound annual growth rate of 6.2%, says Venture.

Driving relay growth is broadband, Internet phones and asynchronous data subscriber line (ADSL) modems, says John Clayton, business development manager for the Americas, at Tyco Electronics in Harrisburg, Pa.

Clayton says the physical size of such equipment as central office switches and remote switches cannot get any larger, but the market is demanding more phone lines and more connection points. The only way to handle the extra demand is to add more relays on the telecom card, while keeping the card the same size.

However, this also leaves less room on the board for additional filtering and surge protection so the relays need to have a higher dielectric strength and lower power consumption, says Clayton.

These trends are driving what the industry calls its fourth-generation products. These electromechanical relays are offered between 60- and 84-sq-mm board space. Tyco Electronics says it offers the smallest at 60-sq-mm with the highest switching capacity of 2 amps, compared to competitive devices that switch up to 1 amp.

Though solid-state relays are replacing electromechanical relays in some applications such as security and controls, they aren't expected to replace fourth-generation products any time soon because of their heat generation, limited switching capability and high cost. "There are multiple factors in the selection of relay including load-switching capability, small size and cost," says Clayton.

Clayton says it's very expensive to manufacture a solid-state relay with a normally closed (NC) contact and double-pole/double-throw configuration. In addition, the more current it switches, the larger the relay needs to be. The larger the relay, the more heat is generated and the greater the cost.

Clayton also says fourth-generation product is being used in homes in programmable thermostats because of its ability to switch to higher capacity and its smaller size. Newer thermostat designs are now using up to eight relays.

Demand is also growing for high-frequency or RF relays. Tyco recently introduced a new high-frequency, surface-mount RF relay that can switch up to 2 amps or 50 watts of RF power, targeted at broadband and telecommunications applications.

Omron Electronic Components has also been putting a lot of effort into the development of Microelectromechanical systems (MEMS) or semiconductor MOSFET relays to fill the void in its product line for smaller components. MEMS allows for an extremely small device with better switching frequency characteristics as well as lower power consumption in the order of 1 microwatt, vs. 100 milliwatts, says Harmon. The tradeoff is switching capacity which is in the milliamp or microamp range.

There is slower relay demand from some sectors, including automatic test equipment and automotive. As a result, suppliers say there will be no availability issues in 2008. They say they can handle any reasonable increase in demand without pushing leadtimes way out.

Suppliers add they get some help with leadtimes from distributors which do a good job of maintaining inventory. Average leadtimes for low-signal relays range from six to 12 weeks and RF relays from eight to 12 weeks. Deliveries for power relays are about six to seven weeks.

Whether buyers purchase direct or from distributors, suppliers advise them to always sample devices.

"Purchasers need to be careful of what you see on paper is what you really get," says Boston. "Don't design-in based on specmanship," adds Harmon.