Global switch production is in for steady growth until 2006, where consumption is expected to reach US$3.75 billion, driven mostly by increased spending in consumer electronics, telecom and IT products, and equipment for industrial and transportation applications. OEMs are predicted to account for at least half of the worldwide sales.
An estimated one-third of the world's requirement for switches is supplied collectively by mainland China, Taiwan and Hong Kong. In 2005, mainland China's and Taiwan's aggregate annual sales are pegged at about US$1.60 billion, up about 15 percent from US$1.39 billion in 2004. Production in mainland China encompasses Taiwan- and Hong Kong-owned companies that have opted to put up manufacturing facilities in the region because of its low overhead costs and proximity to allied industries such as electronics, telecoms and IT.
This report covers 47 mainland China companies, 13 Taiwan companies and six Hong Kong companies. Of these 66 profiled companies, 64 have disclosed worldwide sales totaling roughly US$377 million in 2004.
Other findings of this report include:
Industry Composition
• Switch manufacturing is focused on a supplier base of about 265 companies — 75 percent of which are mainland China makers; 22 percent, Taiwan makers; and 3 percent, Hong Kong makers.
• About 85 percent of the surveyed makers have production facilities in mainland China. Some 15 percent maintain factories in Taiwan.
• Switch production is centered in Guangdong, in mainland China, where about 28 percent of the companies have set up manufacturing bases.
• Zhejiang is also key production hub for some 24 percent of the makers in this report. Some companies have factories in Fujian, Hejiang, Shandong, Shanghai and Tianjin.
Production
• More than 899 million units of switches monthly can be manufactured in-house by the companies interviewed for this report.
• Tactile switches represent the bulk of production at about 329 million units monthly, followed by slide switches at 102 million and micro/ miniature switches, 60 million.
• Fifty-six of the 66 companies forecast a 25 percent growth in the production of switches in 2005. At least two companies will have increased their output by 100 percent by end-2005.
• Only 15 percent of all profiled companies predict that there will be no change in their production volume in 2005.
Industry Overview
The global switch market in 2004 was pegged at US$3.5 billion, up from US$3.3 billion in 2002, according to a projection by market research firm Venture Development Corp (VDC). In 2005, market specialist TTI, Inc., predicts a market growth of 24 percent.
In mainland China, sales turnover from switches reached US$1.02 billion in 2004, according to the China Electronic Components Association (CECA). Sales revenue is forecast to increase by at least 15 percent in 2005.
With a supplier base of 200 makers, mainland China is the world's largest manufacturing base for electrical and mechanical switches. Manufacturers are mostly based in Fujian, Guangdong, Jiangsu and Zhejiang.
In Taiwan, there are about 60 switch makers, according to the Taiwan Electrical and Electronic Manufacturers Association (TEEMA). At least 83 percent of the Taiwan makers have production facilities in mainland China. Less than 10 percent are foreign-owned or foreign-invested.
Production in Taiwan reached more than 5.98 billion units in 2004, up 10 percent year-on-year, figures from the Taiwan Customs show. In 2005, output is forecast to drop by 1 percent to 5.92 billion units. The decline is predicted as more Taiwan makers consider moving their low-end and midrange switch manufacturing to mainland China while retaining high-end production in Taiwan.
Despite the forecast production slowdown in Taiwan, annual sales are expected to rise 16 percent to US$437.9 million in 2005 from US$377.5 million in 2004 on the strength of rising demand for high-end switches. Most Taiwan makers turn out rocker switches, roll ball switches and keylock switches.
In Hong Kong, meanwhile, switch manufacturing is focused on about five makers. Production is centered mostly on high-end switches. Most Hong Kong makers turn out tactile switches.
Switches: A Mature Industry
Switch makers in mainland China mostly cater to the midrange and low-end market. Being a mature industry, most makers are capable of producing several types of switches in thousands of models.
Most mainland China makers have completed facilities upgrade and have well-trained QC personnel and R&D engineers. Most switch companies are capable of offering custom designs according to clients' specific requirements. R&D is primarily focused on new applications in the digital electronics segment.
In Taiwan, R&D is chiefly concentrated in no-noise micro/ miniature switches that are multifunctional, smaller and lighter. Although micro/miniature switches production entails more advance and expensive technologies, more Taiwan makers are entering the line.
Supplier Profile
Chi Fung Electronics Co. Ltd
Chi Fung Electronics Co. Ltd began manufacturing switches in 1993. Its product line covers miniature switches, tactile switches, pushbutton switches and slide switches. Fifty percent of the switches are used in A/V products, 30 percent in consumer electronics and 20 percent, PCs and peripherals. The company expanded its product categories in 2001 to include switches for automotive application.
Five percent of Chi Fung customers are OEM buyers. Sales revenue from switches used in PCs and peripherals accounted for 60 percent of the company's total earnings from 1997 to 2002. The company has set up sales offices in South America, India and Europe.
Chi Fung's biggest customers include Yamaha, Philips, Samsung, Acer, TCL, LG, and Siemens. It signed an agreement to become a supplier of tune equipment switches for Yamaha in 1999; the contract will end in 2005. In 2004, Chi Fung was named by Shenzhen Hangsheng Electronics Co. as one of its eight excellent switch suppliers.
Manufacturing Capability
Chi Fung runs two factories in Huizhou and Dongguan in Guangdong in mainland China. The factories cover a combined land area of 9,500 square meters. Production at the facilities is handled by 1,100 workers.
The company's aggregate monthly output is 45 million units. It currently runs at 80 percent of capacity. Operating at 90 percent of utilization, the Chi Fung's output reached 500 million units in 2004.
The Huizhou facility has two three-story buildings occupying a total of 8,000 square meters. It has a workforce of 950 employees. Each floor covers an area of 1,200 square meters, on average.
The Dongguan factory is a three-story building measuring 1,500 square meters. It is manned by more than 200 employees.
The Global Sources team was allowed to tour the Huizhou factory, which is Chi Fung's main production facility. The team's first stop was the IQC station on the third floor of the first building, where eight employees were checking raw materials. The ERP system is in practice on this floor.
In one workshop, the team saw about 12 assembly lines manned by 200 workers, with each line equipped with a resistance tester and an oscillograph.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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