Hold your Hardwares: the Hidden Costs to Develop, Scale and Manufacture your Electronic Hardware Product

by | Dec 23, 2019

I normally err on the side of skepticism whenever I come across an article that states “Complete/Ultimate Guide” in the title. Most of the time, it contains all of the “yeah, no duh” steps and then just a few sprinkled new resources that I found the most helpful within the 10 minutes that I had to skim to get to them. Again, this article by John Teel may invoke that “yeah, no duh” feeling I mentioned to those of you whom have gone through the process of developing an electronic hardware product; however, for those of you who may not have experienced the whole process or are about to pursue the market, I think this article is worth being acquainted with.

Teel breaks down the process into three stages: Development, Scaling and Manufacturing. The value that Teel provides are the subtle tweaks to plans in-between each stage. One would assume that testing has a lot to do with it, which frankly it still does - but it’s the little things like packaging molding and setup fees that creep into the final bill is what I found to be super helpful.

Let’s start with Development.

The Electronics Part:
When prototyping PCBs, there’s producing it and then soldering it. The methods of how to customize the board though, such as the example that Teel mentioned, like reducing the board size is what doubles the prototype cost. Let alone, he recommends that starting off with just 3 to 5 boards to prototype would be best since you can expect to spend $1-2 thousand per iteration.

The Enclosure/Mechanical Part:
So, what’s more practical: CNC or 3D printing? Like Teel mentioned, 3D printing has been more of an affordable option since its explosion in popularity and accessibility; however, CNC is still a practical choice since it utilizes production injection-molded plastic whereas 3D printing may reflect a different look, feel and strength compared to the final output. When you’re prototyping your product, consider how precise the plastic must be to perform its function and the feasibility of the model to be mass-manufactured.

The Retail Part
Beauty is in the eye of the beholder...well, that’s the attitude you want to avoid with mass consumers! Pretty packaging is key when making sales, and as Teel warns - most entrepreneurs forget this part, and there’s the added costs of how you choose to package your product. Think of how your product would fit into a clamshell or a box: how will your product be protected in each, and what’s the artwork on the outside of it to get capture eyes?

Scaling Time
This section addressed two main ideas: Certification and Manufacturing Setup Costs.

The Certifications Part
Depending upon the electronic hardware’s wireless implementations, you may have to get several certifications before you begin selling the product. Sometimes, you may just be able to get away with selling your product online first and bypassing some regulations until you sell it in a store. Let’s also not forget the added costs of certifications if you consider selling your product outside of the United States or European Union.

The Manufacturing Setup Part
We’re not talking about manufacturing yet, this is just the step to get it setup. Teel recommends to start with a local manufacturer in your country; when your volume approaches 10K pieces, then consider an Asian manufacturer to work out all manufacturing bugs before sending them overseas.

The costs of molding is mostly determined by the hardness of the metal used, the number of cavities, and the use of any side actions. Depending on your product’s needs, tolerance testing will also be a factor in the costs since the harder the material must be, then the higher the cost.

Landed Production
The “landed production cost” is the total cost to produce and transport a single unit to your warehouse. According to Teel, this is your success indicator for how well-maintained your product’s relationship with price and cost is. You’ll need to consider several dimensions:
  • The electronic components: estimating this before can prevent you from spending money on a feature that’s not profitable/necessary.
  • The PCB production and assembly: this will ultimately be less than the cost when you were assembling per unit cost of your prototype.
  • The Injection molded plastic parts: there’s not many factors to modify to reduce cost except perhaps the production speed, part cost, or using multiple cavity molds.
  • The mechanical odds and ends: These being springs, gears, screws, motors, etc.
  • Final product assembly: labor costs are going to vary in each country, so choose wisely.
  • Testing: this should have been addressed before final assembly to avoid sending faulty products to your audience.
  • Scrap Rate: meaning the margin of error that your manufacturing process will create a mistake, so try to aim for 1-3%.
  • Packaging: like mentioned before, you’ll need pretty packaging but see how you can optimize lower costs for your first run of production.
  • Returns: You may have some unhappy customers who want to return their purchase, this along with scrap rate, is something to consider.
  • Freight: plane, train, or boat - each have their benefits and extra costs.
  • Duties: don’t forget taxes!

Teel provided in-depth strategies and details in each section; I was pleasantly surprised to find that I didn’t have to gloss over a section to get to the “good part.” A guide like this is handy to start with, but as always, I would have to recommend finding guidance from an NPI engineer who can walk you through all these steps just as Teel did to give you an accurate forecast of the complete “what to expect” when you begin manufacturing your electronic hardware product.
Continue to original Article >

Ioterra – Where you go for IoT Development

Find the right solutions and services for your needs from the most comprehensive marketplace for IoT projects.