The global electromechanical switch market should remain stable over the next year, but buyers can expect some marginal price increases for some types of switches because of higher materials and transportation costs. The exception, however is that prices for switches used in the automotive industry will fall due to specific automotive industry market dynamics.

Switch suppliers say pricing in general has remained stable despite increased materials and transportation costs. However, expect average prices to rise less than 1% for all switch products, says market research firm Venture Development Corp. (VDC) in Natick, Mass.

Tactile switches, for instance, are becoming a commodity so at the bare minimum pricing covers factory costs, says Glenn Tarnawa, product manager of switches at Omron Electronic Components in Schaumburg, Ill. There will probably be price increases rather than decreases this year, primarily because of rising materials costs in general coupled with the cost of transportation, he says.

The auto industry is another story. The Big Three automakers usually seek 2–5% cost reductions from suppliers, but switch price erosion could be more this year.

"We're seeing prices being eroded pretty quickly, especially as the Big Three struggle to compete against the Chinese and Japanese," says Robert Seubert, product manager for automotive and snap-action switches at Omron. "General Motors specifically is being very aggressive and is looking for a 10–15% cost down this year as they look to be more competitive against Toyota and Honda."

Even if there is price erosion for switches in the automotive sector, the global switch market will still post modest growth. Switch revenue will grow from $4.1 billion in 2007 to $4.2 billion in 2007, according to VDC. The Asia-Pacific region will show the most growth due to its manufacturing capabilities and many North American and European companies transitioning their production manufacturing to the region, according to VDC.

Venture also reports Asian markets, especially China, will experience greater growth in regional share at the expense of the Americas and Europe.

Some switch makers are predicting double-digit growth for their businesses because of strong unit demand, but single-digit revenue growth is more likely.

Kiyoko Toyama, president of NKK Switches in Scottsdale, Ariz., says, "2008 will be a difficult year. We had good growth in 2007, about 10%, which is substantial for the switch market. We want to grow double-digit numbers this year but when you keep hearing about a recession, companies may not want to make capital investments," says Toyama.

Omron's Seubert initially expected double-digit growth in North America with new automotive programs, but the forecast changed as production continues to move to China and as a number of platforms were dropped by automakers. "We are seeing flat growth in North America because as much as half of the new automotive programs are shifting to China. We always thought the Big Three would keep as much as possible in North America."

Growth for switches used in consumer, medical, telecommunications and appliance applications depends on how well those markets are performing, Tarnawa adds. For instance, appliance products follow housing starts along with the product lifecycle of the appliance. "Depending on what happens in regard to a possible global recession, and fuel prices—as long as no one panics we'll be okay," Tarnawa says. "Realistically, we're expecting single-digit to flat growth."

Global competition from low-cost suppliers is a big issue for switch manufacturers. This has led many of them to focus on higher tech products, particularly in the area of illuminated switching, for North American markets including industrial, security, and audio broadcast applications.

For NKK, this means an increased focus on its programmable and illuminated switches using more advanced technologies, together with targeting high-reliability markets that require these types of product, says Toyama.

Omron's Tarnawa agrees that innovation will drive growth. Omron's combo jog switch, which it introduced over the past year, is making inroads into many handheld products, and the company recently announced a new tri-color illuminated switch. It integrates red and green LEDs and when illuminated under a white translucent cap it gives the illusion of orange.

One of the biggest problems for switch manufacturers is the cloning of their high-tech products. While cloning of commodity products has occurred for decades it's only recently that low-cost manufacturers have been going after higher-tech and higher-priced component designs.

"We see a lot of 'me too' type of products coming from China that can be sold below our cost and as far as users are concerned they look the same," says Toyama. "When we can obtain those products and test them, it's no comparison but convincing the potential user when the price is less than half—that is a problem."