Introduction

The North American switch market improved 8% in sales dollars while the relay market fell 9% in 2006 compared to 2005.  Prices for each market also moved contrary to one another.  Relay average selling price (ASP) and average booking prices were down 4% and 12% respectively while switch ASP rose 3% and ABP 7%.  The following recaps each market for 2006 and is based on data collected from manufacturers participating in Switch Tracks and the Relay Report market information services.

Overall Switch Sales and Booking Trends

Sales for the total North American switch market ended a seasonal pattern, established in 2003 and 2004, of the best performance being registered in the first quarter then moving lower through Q3 and then improving in Q4.  In 2005 there was no improvement in Q4.  Then, last year strong capital spending in the first half of 2006 increased switch sales by almost 20% over the fourth quarter of 2005.  The graph below shows the sales and booking indexes for the total switch market for Q4 2004 through 2006.

In the third and fourth quarters sales descended, and more so for bookings.  Rising energy costs along with declining automotive and housing market sales surely weighed on the switch market.  The sharp drop in Q4 bookings, particularly in units, is not a good sign for the start of 2007.

Overall Switch Market Price Trends

For the chartered period below, the average selling price (ASP) and average booking price (ABP) were fairly stable from the end of 2005 through Q3 of 2006.  During this period the overall ASP gained slightly and ABP was above the ASP but declining.  Then Q4 saw a significant jump in prices that was caused by two factors.  First, manufacturers appear to raising their prices.  But this is secondary to a mix shift where unit sales of lower priced switches fell at a slower rate than more costly switches.  This shift in mix is most likely a quarterly event and will probably soon correct itself.

Performance by Switch Type

In 2006 sales dollars improved for all but DIP switches.  Better than average sales growth occurred for three product types covered by Switch Tracks compared to 2005.  Keylock, rocker, and tact switches all outperformed the 8.2% overall sales dollar growth rate.  Unit growth was similar with keylock, rocker, slide and tact switch product types exceeded the 6.3% total unit growth rate.  With DIP, push buttons, and snap action shipping fewer switches in 2006 than 2005.  With units underperforming dollars in all but DIP, rocker, and slide, average selling prices rose in five of eight products and in total.  The dramatic drop in slide switch ASP is a result of the strong unit gains.  The table below shows year over year growth rates for sales and booking dollars, units, and average prices by switch type.

Sales and Booking Growth By Switch Type

Five switch types out performed the 3.9% total increase in booked dollars — keylock, rocker, slide, tact, and toggle switches.  Unlike sales, total booked units fell 2.4% despite unit growth in five of eight types.  Here the losses in the snap action and tact, two of the largest categories in terms of units, pushed the total lower.  Like sales, ABP improved in all but DIP, rocker, and slide type switches.

Overall Relay Sales and Booking Trends

Two different years yielded two different trends for North American relay sales.  In 2005 each quarter saw a step up for sales dollars and units.  With the start of a new year that trend sharply reversed as sales dropped in Q1 and Q2.  Q3 inched up before another drop in Q4 of 2006 finishing at the lowest level for the two-year period.  The graph below shows the sales and booking indexes for the total relay market for Q1 2005 through 2006.

Relay bookings had a similar and dissimilar trend in relation to sales.  During 2005 booking units generally rose as dollars fell in Q2 anQ3.  In Q4 booked dollars jumped to a high for the two-year period.  Booked units continued to run significantly higher than sales in the first half of 2006.  Bookings bottomed in Q3 and recovered in Q4, perhaps a good sign for 2007.

Overall Relay Market Price Trends

As relay sales dollars grew in 2005 units increased at a higher rate as the ASP fell 5% for the year.  At the start of 2006 another quick 5% drop ended the downward trend and prices moved up for the balance of 2006.  The ABP for relays was far more erratic than sales.  It ranged from few percent up to more than 20% down compared to a level set in Q1 of 2005.  The trend lines for the selling and booking prices have a similar form to each other with bookings being beneath sales.  Both trends appear to have bottomed in 2006 and now head north.

Performance By Relay Type

The Relay Report separates relays into two types: electromechanical and solid state.  The table below shows year-over-year growth rates for sales and booking dollars, units, and average prices by relay type.

Sales and Booking Growth By Switch Type

Contrasted to 2005, 2006 sales of electromechanical relays were down nearly 10% in dollars and 6% in units. Since the large majority of relays are electromechanical it drives the total result.  However, this is changing as solid state relays grow at a faster pace.  In 2006 solid state relays increased sales in dollars and units by one third over 2005.  Their growth in bookings was very good but not quite as strong.  Bookings for electromechanical declined 9% in dollars while units increased 3% forcing its ABP down 12%.