SIC 3625
RELAYS AND INDUSTRIAL CONTROLS



This category covers establishments primarily engaged in manufacturing electronic relays and industrial controls used for starting, regulating, stopping, and protecting circuits and electric motors. Mechanical switches and relays are classified elsewhere.

NAICS Code(s)

335314 (Relay and Industrial Control Manufacturing)

Industry Snapshot

The industry encompasses two major categories: electronic relays and industrial controls. Electronic relays are used in circuitry for computers, communications equipment, and a multitude of other electronic devices. A relay is basically a switch that is used to open or close a circuit. It controls the flow of electricity to create a desired result. Most industrial controls are essentially switches, but of a more complex nature. They are usually associated with the control of electric motors and systems. Industrial controls include devices such as motor starters, contactors, control centers, and programmable logic controllers.

A conventional electronic relay contains a solenoid, which is a coil of wire with an enclosed, fixed iron core. When electricity passes through the wire a magnetic field is created that energizes the core. An armature connected to the core allows it to move and activate, or trip, the relay. Smaller relays used in transistorized equipment work similarly, but are much smaller and require a fraction of the power consumed by electromechanical relays. The tiny reed relay, for example, is made with two flat magnetic strips. The separated strips are sealed in a capsule filled with an inert gas (to prevent corrosion), which sits inside a coil. When electricity is applied to the coil the two magnetic strips are drawn to each other, thus completing a circuit. Finally, miniaturized solid-state relays are not magnetically activated, but are instead triggered by electrical pulses.

Total industry shipments in 2000 were valued at $11.76 billion, down from $12.01 billion in 1998. The cost of materials in the late 1990s and 2000 remained steady at roughly $5.5 billion per year. Employment declined each year between 1997 and 2000, falling from 67,885 to 61,735.

Organization and Structure

Two standards for industrial controls are administered by the International Electrotechnical Commission (IEC) and the National Electrical Manufacturers Association (NEMA). IEC-approved controls conform to standards which have brought them a reputation for compactness and affordability. Controls rated by NEMA, while considered less streamlined, are generally perceived by users to be more reliable and serviceable for heavy industrial uses. Parts, accessories, and miscellaneous related items make up the remaining share of industry products.

The largest consumer of relays and industrial controls in the 1990s was the computer equipment industry, which purchased 14 percent of production. Most of the remaining output was consumed by various manufacturing industries, particularly those producing electrical and electronic equipment. Machine tool producers, for example, made up about three percent of the market, and manufacturers of heating and air-conditioning equipment represented two percent of industry revenues. Other consumers of industrial controls included producers of mining machinery, automobiles, railroad equipment, aircraft, and construction equipment.

Background and Development

One of the first practical applications of electrical relay technology was the telegraph, which was patented by Samuel F.B. Morse in 1844. Relays that were used to operate electronic devices were not developed on a significant scale until late in the nineteenth century, following Thomas Edison's work with the electronic vacuum tube. As the demand for lighting, phonograph, and other electrical devices flourished during the early 1900s, the need for relays surged. Importantly, U.S. investments in electronics research during World War II spawned significant advancements in all types of electronic components.

When integrated circuits were introduced in 1958, many manufacturers of relays and other electromechanical devices feared that the new solid-state components would make some conventional products obsolete. But the development of miniaturized relays served to expand the breadth of the industry and culminated in demand growth for both traditional and new devices during the 1960s and 1970s. Demand for relays boomed as a result of expanding consumer electronics, business machine, computer, and communications markets. Likewise, industrial controls evolved from relatively simple relay and switch devices used to start and control motors into complex, high-tech mechanisms used to regulate speed, pressure, timing, and other mechanical characteristics.

Overall demand for electronic components grew during the 1980s, bolstered by the proliferation of personal computers and peripherals, telecommunications equipment, and the integration of electronics into industrial and consumer products. Worldwide sales of integrated circuits, for example, jumped 464 percent during the decade. Shipments of many conventional relay products stagnated or declined, largely as a result of foreign competition. But the demand for new high-tech industrial controls, as well as some types of relays, thrived. By 1987, the peak of the 1980s economic expansion, industry sales reached $6.1 billion and employment topped 66,000.

While the United States slumped into a recession during the late 1980s and early 1990s, sales of relays and industrial controls continued to climb at a healthy pace until 1991, when sales dipped by about 6 percent. Entering the mid-1990s, sales in 1995 climbed to more than $9.5 billion. In addition to strong demand, manufacturers benefited from industry consolidation and increased efficiency which had characterized electrical component manufacturers during the 1980s. Indeed, as shipments grew producers continued to reduce employment through automation and restructuring.

The relays and industrial controls industry began to feel the pinch of recession in the early 1990s. Conventional relay shipments, which had already dropped 2.7 percent in 1991, were hit hardest. Nevertheless, overall sales climbed about three percent in both 1992 and 1993, and growth in some segments remained strong.

Three factors contributed to the success of relay and industrial control makers in the mid-1990s: the recovery of industries that purchased their products; increased global competitiveness, which was the result of productivity gains and a devalued U.S. dollar; and technological advances that broadened the market for industrial controls.

Long term industry gains will partially depend on U.S. export growth. While exports accounted for only about 6 percent of sales in the early 1990s, they made up the fastest growing market segment and offered lucrative long term potential for sales of high-tech industrial controls. Canada and Mexico were the largest foreign consumers of U.S. exports and represented about 30 percent of cross-border revenues. European nations also consumed 30 percent of U.S. exports. But East Asian markets, which purchased 14 percent of exports in the early 1990s, showed the fastest growth. The United States imported a total of $650 billion worth of relays and controls annually in the early 1990s, more than 40 percent of which came from Japan.

Current Conditions

According to a study conducted by the Venture Development Corporation of Natick, Massachusetts, growth in the North American relay market is expected to increase from the 3 percent annual growth charted during the mid-1990s to 4.5 percent by 2003. Experts say that strong market economies will lead to increased profit levels for end user and OEMs, which will, in turn, lead to increased demand for components and parts.

Continuous improvement in technology and product quality, a greater variety of product offerings, and improved customer relations are other factors that will contribute to the growth of the relay market. Another is the growing trend toward consolidation of smaller companies into large conglomerates, which may be better equipped to offer expanded product lines and to make maximum use of improved technology.

Similar growth is expected in the industrial controls market, according to the Freedonia Group, a leading industrial study provider. A six percent annual gain is expected to be fueled by a healthy maintenance/repair/operations MRO) aftermarket as repair and maintenance needs increase. Technological advances such as computer-based factory automation will also contribute to the growth of the industrial controls industry.

As a whole, despite predictions for growth, the industry saw shipments decline from a high of $12.01 billion in 1998 to $11.65 billion in 1999. Shipments totaled $11.76 billion in 2000. Employment also declined, falling from 67,034 in 1998 to 63,721 in 1999 and to 61,735 in 2000. However, costs associated with payroll increased from $2.41 billion in 1997 to $2.49 billion in 2000. Production workers in 2000 numbered 34,915.

Industry Leaders

Despite steady consolidation in electronics components industries during the 1980s and 1990s, the relay and industrial controls industry remained relatively fragmented in the late-1990s with about 1,200 competitors. Most companies built industrial controls and specialized in a specific industry niche.

Based on sales, the top three companies in the relays and industrial controls industry in 1999 were Rockwell Automation, of Milwaukee, WI, Allen-Bradley Company, also of Milwaukee, and Crouse-Hinds, a division of Cooper Industries. If broken down by category, the industry leaders in the relay market included Siemans, Aromat, Omron, CII, Hella, and CP Clare. These six companies combined accounted for 52 percent of the relay market in the late 1990s. Significant forces in the industrial controls industry included, among others, Robert Bosch, Dana, General Electric, Honeywell, and Rockwell International.

Workforce

Despite a generally positive outlook for most companies in this industry, long term job prospects are less pleasant. The industry employed 61,735 workers in 2000, down from 63,400 in 1995. Productivity gains and imports of some commodity-like relays and controls will continue to diminish opportunities, particularly for laborers. Jobs for assemblers and fabricators, which account for about 25 percent of the U.S. electrical apparatus work force, were predicted to decline by 30 to 50 percent between 1990 and 2005, according to the Bureau of Labor Statistics. Positions for white collar managers and top executives are expected to be cut by about ten percent. Jobs for sales professionals and engineers are expected to increase, though slightly.

Research and Technology

One of the most significant industry trends in the mid-1990s was the integration of fuzzy-logic into control systems. Fuzzy-logic employs the chaos theory, which holds that there are identifiable tendencies of movement amid apparently random patterns. Fuzzy-logic industrial controls are particularly well-suited for complex systems that are heavily dependent on human supervision. In addition to U.S. initiatives, Siemens and several Japanese firms were investing heavily in this new technology.

To keep pace with the demand from increasingly sophisticated consumers, new product products are being developed and introduced in this industry continuously. For example, in 1999, Aromat Corporation, of New Providence, N.J. Introduced a new high-sensitivity Relay designed to provide low-level switching capacity for measuring Instruments and other applications. Also, in 1999, Eaton Corporation, of Pittsburgh, introduced a new protection relay, designed to maximize motor operation while protecting against excessive heating and overload conditions.

In this ever-changing industry, experts predict that those companies that can continue to explore advanced technologies and to expand their product lines will be the survivors of the future.

Further Reading

Darnay, Arsen J., ed. Manufacturing USA. 5th ed. Detroit: Gale Research, 1996.

United States Census Bureau. 1995 Annual Survey of Manufactures. Washington: GPO, 1997.

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .



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