Designing and manufacturing an electronic product is an exciting process. In this digital age, there are different ways to raise funds to support your product development. Also, an accurate estimation of the production cost is important when designing and developing an electronic device. When there is a new electronics device to manufacture, it is important you take a look at what you are delving into before you get stressed with process.
Before you start manufacturing an electronic device, you need to create some key project development essentials like will the product technically work? What development budget do you need for the electronic device costs? Before you get prepared to get a financial budget for your product, you need to set a goal. The question “how much will it cost to manufacture the electronics?” will go a long way in determining your goal.
Preliminary Production Design
Electronics manufacturing is time-consuming, expensive, and overall risky. Therefore, there are certain steps you should take before you begin the process of manufacturing. The preliminary production design is an important step you need to take before starting out with manufacturing. This step is concerned with the manufacturable version of your electronic product.
A preliminary product design enables you to make an estimate of the cost to manufacture your electronics products before you start the production process fully. So, what does the preliminary design stage handle? A preliminary production design provides answers to some crucial questions like:
- How must does it cost to develop electronics product?
- What is the feasibility of manufacturing your electronics product?
- How difficult is the production process going to be?
- How much does it cost to design a prototype and produce the final product?
- How much does it cost to manufacture each unit of your electronics product?
It is important you know how much it will cost to manufacture electronics devices. The cost of manufacturing determines your profit and the selling price of your product. It is crucial to determine the manufacturing cost at an early stage. However, most electronic producers don’t estimate the cost to manufacture their products on time. They make the mistake of delving into the design process first.
After the design process, they then start to figure out the cost to manufacture their electronics product. However, experienced electronics manufacturers don’t behave in this manner. They answer all the questions above before they start the design process and production process. This is because it is useless and time wasting to design an electronics product that isn’t affordable to manufacture.
A preliminary production design prepares you ahead of your production as it provides all the details needed to make an accurate estimate of the manufacturing cost. Also, it provides details about an electronics product’s feasibility.
Estimating the Manufacturing Unit Cost
In this stage, the manufacturer will need to know the price of everything that will be used in producing the device. This will help in estimating the cost of manufacturing the product. Also, this stage helps to determine the retail price of the product based on the estimated cost of manufacturing.
The manufacturing cost is one important thing that should be determined as early as possible. Determining this cost will help you know if a product is feasible to manufacture and what price it will be sold at the market. Furthermore, it will determine the amount of profit you will make.
For instance, if you plan to make your selling price for a product $90 and you realize the cost of manufacturing will be $75, then you need to make some changes. In this case, you need to look for ways to reduce the cost of manufacturing or increase the retail price. You may as well determine if the product is worth pursuing and forgo it if it won’t make enough profit.
If you would be forgoing the product, then you will need to determine this as soon as possible in order to divert the funds to a new product with a greater profit potential.
Steps involved in Manufacturing Electronics
The electronics manufacturing process involves a number of steps. Each of these steps must be accounted for during manufacturing.
Design
The design stage is crucial in electronics manufacturing. This step requires the creation of a design and a plan for the electronic product. When creating a design for electronic product, the engineer must consider what purpose the device is mean for, the components that will make up the device and the assembling of these components.
Sourcing
After you have created your design and the design prototypes, you need to source out components needed for producing the electronic product. You can source these components from electronics companies.
Assembly
When the components are ready, the assembly stage is the next. This stage involves mounting components and putting parts together. Also, it requires the effort of workers and integration of machines. You can use machines for component placement. There are cases where humans perform these tasks. However, humans are prone to making some errors.
Testing and inspection
These electronics product must undergo stringent testing before final production. Testing and inspection helps to evaluate the performance and functionality of an electronic product. Also, it helps to determine the feasibility of a product. This step is necessary in electronics manufacturing.
Packaging and shipping
This is another step in electronics manufacturing. Electronics products need to be well packaged before shipping. Packaging protects electronic products from damages. Also, it gives a product a nice appearance on the shelf.
Costs to Consider when Manufacturing Electronics Product
When developing and manufacturing an electronic product, it is important you consider some cost you will incur during this process. In this section, we will cover the following:
Production cost
One of the major reasons of creating a preliminary production design is to estimate manufacturing cost. The production cost can also be referred to as manufacturing cost or costs of goods sold. The manufacturing cost will determine the feasibility of manufacturing your product and as well the profit you will likely make from it.
Breakdown of manufacturing costs
So many costs add up to the manufacturing cost. The manufacturing cost isn’t just a figure you generate. It is the sum total of the cost of everything that goes into the production process. So, we will go through what makes up the total manufacturing cost.
Electronic component costs
Electronic components are crucial in electronic devices. The cost of these components is added to other costs to make up the total manufacturing cost. You will get discounts when you purchase these components in higher quantities. Getting a quote from your supplier will help you to determine the discounts you will be given. You will get more discounts if you manufacturing volume is higher.
Also, you will have more bargaining power if you are purchasing high volumes of 100,000 units. At this level, you will be able to bargain pricing with your supplier.
Printed circuit board cost
After estimating the cost of electronic components, the cost of fabricating the bare PCB is the next cost to consider. There are factors that affect the cost of a bare PCB board. These factors include the board size and the number of layers. After fabricating the bare PCB, you need to consider the cost of soldering the electronic components.
This is what we refer to as cost of PCB assembly. The number of components pins you need to solder impacts the PCB assembly cost. Integrating surface mount components will make the cost of PCB assembly cheaper. So, you can avoid using THT components if you want a cheaper PCB assembly.
You will realize that the PCB assembly cost is much higher than the cost of fabricating the bare PCB. The cost of fabricating your bare PCB will only account for about 30% while the remaining 70% will account for the cost of your PCB assembly.
Mechanical costs
This is another cost you need to consider. The mechanical costs will majorly be for enclosures. For example, you may need to design an enclosure which consists of two pieces of plastic. As the manufacturing volume increases, you will need to transform into multi-cavity molds.
Packaging cost
This is another cost you will account for when determining the total cost of manufacturing. Most producers forget to add this cost when determining the total manufacturing cost. The package safeguards your product. It is crucial to use the best packaging for your product.
Packaging becomes more expensive when you don’t have a description of your product. Therefore, there’s a need to be more attentive to the packaging. Ensure you account for the packaging cost in your total manufacturing cost.
Final product assembly cost
You need to include the cost for assembling the final product. This is totally different from the cost of your PCB assembly. The PCB assembly cost only covers the cost of soldering electronic components on your bare board. The final product assembly cost entails the cost it takes to assemble the final electronic product. This usually includes the product and the packaging.
Timing how long it takes to assemble your product is a good way to estimate the final assembly cost. When you simplify your final product assembly process, you will be able to cut more cost on assembly. Therefore, prioritize the optimization of your assembly process.
Quality testing, defects, and returns costs
These costs account for the cost of testing your electronic products, detecting any defect, and accounting for returned units. Testing is an integral aspect of electronics manufacturing. It helps to easily detect any defect in your product. There are different ways to test your products. You can test the assembled product or test pieces of the product separately before assembling them.
If any unit is defective, it will be recycled or scrapped. You can always assume to have a defective scrap rate of about 10%. Another factor you need to consider is the returns of your product. Customer returns will always occur irrespective of the quality of your product. Returns may occur due to product defects.
Types of Costs that Determine Total Cost to Manufacture Electronics
Manufacturing costs are usually influenced by a number of factors. There are different stages involved in manufacturing an electronic product. Therefore, there is no exact manufacturing cost formula to determine the cost of production. When considering how much it will cost to manufacture electronics, there are two types of cost to consider.
These costs are fixed costs and variable costs. Fixed costs come at a standard price. They can’t be changed. On the other hand, choices can have an impact on variable costs. Variable costs are also referred to as flexible costs.
Variable Costs in Electronic Device Manufacturing
The manufacturability of an electronic product is the first variable cost that impacts total cost of manufacturing. There are some variable factors that affect the cost of production. These factors include:
Design for manufacturing (DFM)
DFM stands for design for manufacturing. It is a factor that affects manufacturing cost. The electronic product has to be assembled in a way that is suitable with the technology. One stage of the production process is ensuring the electronic product design meets the assembly and equipment capabilities.
Design for manufacturing ensures the guidelines and standards of manufacturing are meant during a product design. The manufacturing facility will ensure your design is modified to correspond with their production processes if the assembly drawing of the product didn’t consider DFM.
The factory will have to make additional effort to achieve this and this will add to the cost of manufacturing. Also, it may jeopardize the quality of the final product. Therefore, it is advisable to create a ready-to-manufacture design to reduce your manufacturing costs.
Cost of materials
The material used in manufacturing an electronic product is another factor that affects the total cost of production. Bill of materials (BOM) comprises the parts, raw materials, and subcomponents for developing your product.
You can decide what your product should constitute. Therefore, it is important your BOM corresponds with the target selling price of your product while giving room for some profit margin. If the cost of materials is more than your budget, then you can adjust the components and materials in the BOM or compromise some features to remain at the target selling price point.
Total production quantity
This is another factor that impacts the cost to manufacture electronics products. The number of units manufactured will impact the total manufacturing cost. When you manufacture electronic products at large quantities, the production cost will reduce. This results to a cheaper price per unit.
It is important to review the quantity requirements before commencing final production. If it will be more beneficial to do a larger production run, then go for it. The volume of your production is a risk you need to take.
Production timeline
This is another variable factor that could impact total production costs. A product that is usually manufactured at a particular time of the year would likely not get preferential treatment. However, if a factory manufactures a product on a steady basis, there is most likely going to be a price break.
Packaging
You might be wondering how packaging really affects the cost of manufacturing electronic products. In the production process, packaging is usually the last step. There are two ways to package a product, these are retail packaging and bulk packaging. Bulk packaging is cheaper than retail packaging. However, retail packaging is a better option.
Retail packaging gives your product an outstanding look on the shelf. The choice of packaging which include package shape, ink choices, materials for packaging and more will be included in the cost of production.
Your product’s manufacturability, time line, BOM, and final packaging are factors that contribute to the cost of manufacturing a product. Also, these items are usually considered as variable costs. This is because they are determined by your decisions and you can adjust them to fit the price point.
Fixed Costs in Electronic Device Manufacturing
There are other items that impact the cost of manufacturing an electronic product. These are considered fixed costs as you have no control over them. The third party delivering the service sets these costs and as such they are very difficult to negotiate them.
Manufacturing overhead cost
The factory’s margin is the first variable item that contributes to the cost of manufacturing. An additional amount that adds to the base production cost of the factory is usually included in the manufacturing costs. This usually covers the overhead costs. Overhead costs can comprise various categories like quality control, labor cost, supplies, and factory equipment.
This additional margin will be accounted for as part of the markup on the manufacturing cost. Also, a factory will have to prepare working space, equipment, and as well train their workers to manufacture your electronics product on a larger volume. The effort and time needed to get these items ready is referred to as production setup.
Compliance fees
Compliance testing fee is another item that contributes to the cost to manufacture electronics. Electronics products need to adhere to some compliances. These products need to meet certain standards in the industry. Every country has its own standards, but most countries require electronic products pass some compliance testing before being permitted to be sold in the market.
Therefore, there’s a need to know about the standards and regulations your products need to meet. Also, you should know the costs related to getting certification.
How Much Does it Cost to Manufacture Electronics?
Different factors which contribute to the manufacturing of electronics exists. To calculate the total cost of manufacturing, one must take the variable cost and fixed costs into account. Therefore, total cost of manufacturing is the summation of fixed costs and variable costs.
You may need to speak with your manufacturer before you determine the total manufacturing cost. Therefore, you need to involve your manufacture at the early stage. Your manufacture can advise you on what to do in certain areas.
Product development strategy and product design decisions usually determine variable costs. With prior proper planning, your estimated manufacturing costs can correspond with the target unit cost. When asking a question like “how much does it cost to manufacture electronics “ you need to know that there are various factors that determine this cost.
Therefore, cost to manufacture electronics= Variable costs + Fixed costs. There is no particular amount needed for manufacturing electronics. A lot determines the total manufacturing costs of electronic products.
Challenges in Determining Electronics Manufacturing Cost
There are major challenges being faced by electronics manufacturers when determining the cost of manufacturing electronics. As it was earlier said, the cost to manufacture electronics varies. This is because there are certain factors that play a key role in determining the cost to manufacture electronics. The two major cost that may be challenging to determine when calculating total cost of electronic manufacturing are labor cost and raw material cost.
Raw material cost
The cost of raw materials used in producing electronic devices fluctuates. Materials include components and parts that make up electronic products. The cost of these materials varies. Most times, they are not usually fixed and as such can pose a problem when determining the total cost of manufacturing.
Labor cost
The cost of labor varies based on location, qualification, and skills. Labor costs can fluctuate in some particular cases. There are reasons why this cost fluctuates. While hiring cheap labor may be affordable, it is crucial to consider the quality of your electronic products. Therefore, the skills and experience of a worker will determine their cost. It isn’t easy to calculate labor cost as it varies.
Conclusion
Different factors which contribute to the manufacturing of electronics exists. To calculate the total cost of manufacturing, one must take the variable cost and fixed costs into account. It is important you know how much it will cost to manufacture electronics devices. The cost of manufacturing determines your profit and the selling price of your product. It is crucial to determine the manufacturing cost at an early stage.
