Introduction

In 2005 the North American relay market showed steady improvement followed by a slow down in 2006. The first half of 2007 comes in with sales down some from 2006 and bookings are down dramatically on a big drop in Q2 of this year.

The North American switch market realized a better than expected first quarter, although lower than Q1 of 2006, where four of eight switch types shipped and booked more dollars and units than any previous quarter as measured by Switch Tracks. The second quarter looks like it may be comparable to Q1. Recent surveys show a slow down may occur in the second half of the year.

Overall Relay Sales and Booking Trends

Sales for the total North American relay market show a steady growth in sales dollars and units through 2005 and reaching a peak in the fourth quarter. Sales dollars fell off quickly after the start of 2006 to levels below any quarter of 2005. In the first two quarters of 2006 sales units moved lower, but not as quickly as dollars, to settle at a point just below 100. This year sales dollars rebound in the first quarter and then fell back to their lowest point in two years.

Bookings dollars moved in the opposite direction of sales through the third quarter of 2005 while booked units tracked with sales units for the entire year. Booked dollars jumped dramatically in Q4 of 2005 then declined the first three periods of last year. The final quarter of last year and the first of this year had booking dollar increases then they fell in Q2 to the lowest level in two years. Booked units moved contrary to dollars to set a quarterly high in Q1 of last year then declined to reach a charted period low in Q2 of this year.

Overall Relay Market Price Trends

For the past two years the total relay market average selling price (ASP) has varied between an index of 90 and 95 with a downward trend. The average booking price (ABP) has been more volatile ranging from 80 to just over 110. Except for spikes in Q4 of 2005 and Q1 of this year, the ABP trended lower through the second quarter of last year then reversed course to head north. For the last two periods the ABP has been higher than the ASP.

Performance by Relay Type

The two basic relay types that this market information represents are electromechanical (EMR) and solid state (SSR) rated up to 30A. Reported sales dollars and units for the first half of this year decreased for EMRs and SSRs compared to the same period last year. Average selling prices went up about 1% for EMRs and nearly 40% for SSR as overall units fell faster than dollars with a mix shift toward lower priced relay types. Like sales, reported booking dollars and units fell, but with more magnitude, for both relay types when compared to first half of last year. As in the case of SSR sales, both types realized faster unit declines than dollars and a mix shift toward lower priced relay types causing ABPs to rise.

July Shows Weakening for Switches

Each month Cumulus surveys people in the switch industry (manufacturers, distributors, and independent sales representatives) concerning current sales and bookings levels, as well as, current and expected business conditions. An index that can range from –2.0 to 2.0 is calculated for each measure. A positive measure indicates improvement and negative suggest a decline. The results for July show measures continue to soften.

The July survey reveals all six measures at or below zero, four in decline and two neutral. Compared to June, there is softening in four of six metrics. Both new order measures saw the largest negative move and are thought to be declining. Shipments versus the previous month had the best reading as it improved to neutral mark.

The negative read on the switch market coincides with negative feelings from consumers that make up two thirds of the economy. The latest Conference Board Consumer Confidence Index fell from 111.9 in July, the high for the year so far, to 105.0 in August. Other than the spike in July and a smaller one in May the index has trended down since February. Sure contributors to this decrease in confidence are lower home values, falling stock prices, and the current credit crisis that has driven up the cost of borrowing and tightened lending requirements so refinancing, new loans, or credit line extensions can be very difficult to obtain.

Good news came from the U.S. Census Bureau on durable goods orders. In July durable goods orders rose 5.9% to their highest level since 1992, when the current measuring system was initiated. Ex-transportation, orders were up 3.7% and ex-defense up 4.9%. Orders for capital goods, a subset of durable goods, for non-defense items rose 5.8% and defense items up 35.7%. Other measures of durable goods had shipments 3.8% higher, unfilled orders up 2.4%, and inventories nearly unchanged at 0.1% more than June. This strong durable goods activity should be good for switches and relays in the coming months.