Electronic Product Development - Manufacturing Cost Estimation

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Estimation of your Product ABOUT THE AUTHOR
March 9, 2016 Christopher Oliva Product Development

My name is Christopher Oliva,
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Welcome on my blog !
I have been living and working
in China (Shenzhen and
Shanghai) since 2008
I am a Msc Engineering, Ms
Business Administration, ISO
9001 Lead Auditor, Six Sgima
Green Belt and Certied Quality
Engineer. I have been involved
in quality assurance industry,
sourcing, procurement,
manufacturing, engineering,
and design since 2008
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I have been working in the product development and asian FOLLOW ME

manufacturing industry for several years now and I frequently get
1 of 21 8/7/2017 12:52 PM
requested from our clients the following: "Can you tell me what
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will be the cost of my product if we develop and manufacture
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it".
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Those people who come to me, generally have nothing else than
just a few scheme drawn on a piece of paper or sometimes luckily
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made a few 3D rendering of what they hope to build.
automatically
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Their request is legitimate because indeed, unless you plan to
target a very special niche market or to position your product at a
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high end level, there is no use to develop and attempt to
manufacture a product if your product is going to be over priced
face to the competition. Subscribe
Well the simple answer would be to sum up all the costs required to GET INFORMATION
manufacture your product.
Let's take the case of an electronic product. Let's look at what it is

made of and to try to understand where the costs are coming OUR SPONSORS OFFERS
from:
A./ ELECTRONIC PARTS COST
B./ MECHANICAL PARTS COST
C./ ACCESSORIES COST (I will not talk about this one because in this
blog post becaue this is very basic and obvious)
D./ PACKAGING COST(I will not talk about this one either in this
blog post)
RECENT POSTS
E./ FINAL ASSEMBLY COST
8 Product Testing and
F./ LOGISTICS COST Certication in China related
Tips you should know
G./ MARGIN PILLING UP TROUGH THE SUPPLY CHAIN AT EVERY
PROCESSINGSTEP (SINCE EVERY PROCESSING INVOLVE A Product Development &
STAKEHOLDER, EACH OF THEM WILL HAVETO EAT A BIT PART OF Manufacturing in China:
THE CAKE) Keeping a Competitive

Advantage In Todays Factory To
Consumer
2 of 21 8/7/2017 12:52 PM
Let's take one by one each categories and enter into details:China
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A./ ELECTRONIC PARTS COSTING
Solve Quality Issue in China
Manufacturing & Production
Usually there are two or three types of elements to consider when
trying to calculate electronic part costing: Why you should involve
engineering team during
a./ PCBA (Printed Circuit Board product design phase
Assembly)
CATEGORIES
This is the backbone of the electronic product. It hosts components
and ensure connection between them. It is made of two types of
Inspection & Quality Control
sub-entities:
Lean Manufacturing

Logistics & Shipping
1./ Electronic components cost Manufacturing
Electronic components are selected based on functions they can Payments
achieve to t with product specications. For each functions to Product Development

achieve you may have hundred or thousands of components who
Prototyping
can probably achieve this function. There are plenty of references,
and there are also plenty of components manufacturers so your Quality & Manufacturing
choice is usually large. You have rst to select the manufacturer of
Sourcing & Procurement
the component (there are plenty for basic function) and then inside
this manufacturer catalog, you have to select the proper Supply Chain
components (because they usually have several components who
Testing & Certication
can achieve the same functions but those components have
technical specications variations..) Tooling, Mold, Die
3 of 21 8/7/2017 12:52 PM

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Electronic components can weight easily 80-90% of the cost of

your electronic product
The game then to optimize product cost is to rene smartly the

selection of components in order to achieve the required
functions while not overpaying for other functions on this same
components which you don't need.
Is it quick to select components properly ? Usually, not really. A full

process of renement can take several day or sometimes weeks to
optimize cost while not sacricing performances to choose which
components will be used. Only looking at a chipset family such as a
microcontroler allows you to see that for a model type you get
sometimes more than 200 referencesof it making the price to go
from simple cost to ten times. Over those 200, somes are priced 1
USD and other are priced 10 USD. Which do you need in your
product ? This is the question...
The process for components selection is normally quite time

consumming and is part of what we call "Electronic Architecture
System Engineering". This is the part of the electronic engineering
where we are going to investigate which components should be
used to achieve a certain functions under requirements.This is
usually handle by a project manager and a hardware engineer.
2./ PCB (Printed Circuit Board)

cost
Printed circuit board is the board that host all the components and
allow to connect them all together so the system can run properly.
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You have to dierentiate PCB which is a bare board without

component, and PCBA which is a PCB board including components,
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the "A" in PCBA stand for "Assembly"
A bare blank PCB without component.
The cost of this elements is varying based on many criteria: size of

the board, number of layer of the board, nishing, accuracy
required, materials used, certication requirement, number of hole
required, etc... To know all those parameters with accuracy you
should normally have already achieved PCB layout for your PCB.
To achieve your PCB layout you need to know which components
you are going to use and how they will be placed on the PCB, so the
component identication should have been done already.
To be able to quote a PCB board, a manufacturer will need to have

the PCB layout in hand. So if you don't have this le in hand, the
quote will be roughly done.
3./ PCB Assembly cost
You have your PCB board one side without components, and you
have your components on the other side without PCB board. Now
you need to assembly them together, so all the components can be
connected.
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A PCBA include components being soldered on the blank PCB
There are dierent process possiblity to achieve this assembly

phase:
SMT process: This process is the most commonly used and it

is handled by a succession of sub-processes (I will explain in a
future post the detail of each sub-processes):
Process 1: PCB solder paste spilling (made by operator)
Process 2: Component pick and place positionning

(made by a pick and place machine)
Process 3: Reow oven processing baking (made by a
reow oven machine)
Process 4: Quality control + testing (made by
operators + machine)
Process 5: Fixing and reparation (quite often made by
operator manually)
Through hole process (also called DIP):This process is

adapted for components who have long legs and the
sub-process are usually the following:
Process 1: Component placement into hole (made
manually by operator)
Process 2: Soldering "ither in automatic way using a tin
bath or made manually)
Process 3: quality control + testing (made manually by
6 of 21 8/7/2017 12:52 PM
operator usually with a jig or xture)

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Process 4: xing and reparationClicking HERE
To quote PCB Assembly cost, you need to have the bill of material
of the electronic already done, with associated packaging and
subsequent number of legs of each components so you can
compute the cost of assembling each components on the PCB.
In your PCBA cost you then need to add components cost, PCB cost
and this PCB assembly processing cost.
Now let's wonder "Is it possible to anticipate cost of PCBA before

starting the design", yes probably but not without investing a
certain amount of time to perform some researches to dene
which components will be used to achieve each functions of the
product, what will be the estimated siwe of the PCB to use, and how
much will be the cost of the assembly processing.
We call this activity Electronic System Engineering and it is usually

part of our Feasibility Study and Cost Analysis Services.
b./ ELECTRONIC PERIPHERALS
Electronic peripheralare usually electronic components or

electronic parts which are used to interact with user. Those
components are not necessarily included on to the PCBA, they can
be on wire or connected to the PCBA via some ex pcb. They can
take the form of sensors, actuators (speakers), display, antenna or
any other elements which allow the user to give some order to the
system or to receive information from it.
Here again, can we expect the costs of those parts to add them up
in the total, yes as long as you have identied those parts early on,
which again takes time because the same way you made it with
electronic components, you will face many dierent kind of
manufacturers for those parts with many references of parts for
each manufacturer you choose.
7 of 21 8/7/2017 12:52 PM

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Peripherals such as speaker or mic are not directly

attached to your PCBA but they count on your cost
The game to achieve a reliable costing for electronics is you are

creating a puzzle which you have to wisely identify each pieces, and
you have to make sure all those pieces can t together properly so
the system can work properly. So, to the question "Can you
estimate the cost of my electronic into my product without having
made some deep research ?" my answer is usually : "Not really".
B./ MECHANICAL PARTS COSTING

This the skin of your product and you need it anyway to protect the
electronic from outside elements. Those mechanical parts can be in
plastic, metal, rubber, ceramic, carton, glass or whatever you like.
Enclosure weight also on the cost of your product
Usually there are two or three types of elements to consider when

trying to calculate mechanical part costing:
8 of 21 8/7/2017 12:52 PM

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a./ Raw materials
Very frequently price of a mechanical part will vary based on

material used and grade of those materials. In China, you can nd a
very diversied range of raw materials grade form the lowest
range of entry market to the highest for high end product. Most of
materials used in electronic product are metal and plastic.
Price of plastic can very highly. Take a chinese plastic and an

american one and you will see a huge dierence in price. when
choosing a plastic you really need to take in consideration what
constraints you have so the plastic brand and grade can be
adapted to the specifciations. For example, you shoudl choose a
dierent plastic if your product is supposed to be submitted to
harsh environment in an industrial or automotive application,
versus a cosummer product.
Although looking the same visually pricing of plastic material

vary highly based on brand and greade
For metal materials, you really need to pay attention to the grade
used because for example a stainless steel 304 is not same than
stainless steel 316. Some may rust and get alterated by corrosion
faster than the other.
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Metal materials can also have dierent grade, hence diernt price
for the same material type
To compute the cost of part related to materials, you need to know

how much material you are going to consumme, this is usually
calculated using the volume of the part. If you have not established
yet the 3D CAD of your parts, then you don't know the volume of it,
hence you can not know the quantity of raw material you need to
make this part.
So, to the question: "Can you estimate the cost of the part of my
product without having a CAD le ?" my answer is usually : "NO"
b./ Materials processing
Shape, and geometry complexity to transform raw materials into

desired parts is an important point of care of when calculating
price.
As it require labor cost and machine cost, it is not free. Machines

mayconsume electricity highly, labor salary is not that cheap
anymore, and if you want a proper quality control to be done on
your part, you should make sure that corners are not cut on
this...which means that extra labor cost should be made.
I will not talk about all the dierent kind of material you can nd
because it is too much exhaustive, I will only talk about the two
most common one:
10 of 21 8/7/2017 12:52 PM

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1./Plastic
There are dierent way to shape plastic, but the most common one
is to inject it because it allows to make some complex shape at low
cost. Plastic injection is very commonly used in China. Normally in
this processing cost, you have to consider the time it takes to
produce the part, the times it takes to setup the machine for your
production, the time it takes to inspect the parts, the waste
produced for each batch (as there are always some defectives
which get rejected), and all the other cost (such as the electricity
consummed by the machine).
Plastic injection cost is directly dependant on your tooling conguration ,

part size, quantity
The cost of your parts may also be inuenced by the number of

cavities included in your tooling because it indirectly inuence the
time necessary to produce a part per unit. Example: If your tooling
host 10 cavities and your injection time is 10 seconds, then it means
that every 10 seconds you are producing 10 parts, so the time
necessary to produce one part is 1 second. However, if your tooling
is hosting 1 cavity, then every 10 second you are creating one
part.... So the time per part to produce is higher, hence the unit
cost of your part is also higher.
2./ Metal
For metal parts, there are several manufacturing technics that can
be applied, but most of them are usually in 3 categories:
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Stamping: this is the action to punch a sheet of metal with a

press and a tool so the sheet of metal is cut and folded based
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on the shape we want to achieve. one of the most used
technic is called progressive die stamping where a stip of
metal sheet is moving forward one step by one step in a
tooling where each step is performing one specic action.
Most of the metal part you nd in our daily life are made this
way (connector legs, etc...)
Progressive metal die stamping process
Casting: this is a process a bit similar to the plastic injection

process where some hot liquid metal is injected into a tooling
(but vertically). Once the metal cool down, the part is
unmolded from the tooling giving a metal part with the
desired shape. In another article I will discuss the advantages
and draw back of using casting.
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Metal casting is a process of molding metal in a

tooling similar to plastic injection (roughly)
CNC Machining: This is a process where a block of metal is

cut with a special tool, so the block can become the part with
desired shape (the case of macbook are done this way). This
is usually the most expensive process of the three processing
presented here because all the parts are made one by one
very slowly.
CNC machining is usually costly but give some very nice

nished parts
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In any case for all those process there is a certain cost which is
associated with machine cost usage and labor cost.
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Of course the price of a parts is subsequently adjusted based on

the labor cost needed to transform the material into parts via
machining or hand making.
Normally, to get an accurate costing of a mechanical part, you need

the userof the machine which is going to process raw materials to
analyze the part specifciation accurately so that it can determinate
the volume of material needed to be processed, the labor time
necessary to transform the material into parts via machining,
analyze defective rate over a production, and take in consideration
wasted material . To do so, they need a 3D CAD le which they will
use as data inputto perform this analysis.
So, can we estimate the cost of a part accurately without having the
mechanical design being done? I usually would say "not really", the
best that can be done is a rule thumb or by random guessing. It is
extremely dicult to evaluate the cost of a part without having a
drawing or somthing with date.
C./ FINAL ASSEMBLY LABOR COST

Once all the parts are manufactured (of course some labor cost
have also been included in the production of your parts to
transform raw materials into parts.), you still need to assembly all
those parts together to make your product to become real, you
have to perform quality control, and you have to package them. All
of this require labor cost again.
a./ Assembly cost
Frequently, labor cost included in a product is directly dependant

on the time it takes to make the product.
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Assembly time directly incluence cost of your product
For example, let's say you have not optimized your design: your
product count 10 mechanical parts to assembly and it takes 10
seconds for each steps, total 100 seconds to assembly your
product.
Now let's say, I take back your design and I optimize your
mechanical design by performing DFM (Design For Manufacturing)
and DFA (Design For Assembly) process, so it allow me to reduce as
much as possible the number of parts to assembly: Now you may
have only 5 parts to assembly instead of 10 and it still takes 10
seconds. Total assembly time: 50 seconds instead of 100 seconds. I
have directly reduce your labor cost by 50% just by optimizing your
design.
The assembly cost can also incldue packing activities. If your

packing is complicated, have a lot of elements to include in, then
your cost will rise.
b./ Inspection cost
If you work with a serious manufacturer, thenthe inspection and

quality control process should come at dierent steps of the
manufacturing:
1./ At the beginning via an IQC (Incoming Quality Control) of the

parts which are entering warehouse to make sure non defective
15 of 21 8/7/2017 12:52 PM
parts are assembled later on.

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2./ During the production via an IPQC (In-Process Quality Control)
to verify that product is assembled properly on the production line
and to catch mistake early.
3./ At the end of the production via an FQC (Final Quality Control) to
verify the product is indeed assembled properly. This quality
control can also include some testing (functionnal testing, aging
testing, etc...).
If they are really serious and organized, they will also:
4./ Inspect parts of the product before they get shipped from the
sub-supplier (mechanical parts manufacturer, PCB, components,
and PCBA manufacturer) to their warehouse. This can be done via
Pre-Shipment Inspection or a During Production Inspection
5./ Inspect again via a Pre-Shipment Inspection on themselves on

product they have manufactured for you before shipping the
goods.
All those activites are time consumming in labor cost and require
skills, (not just some basic workers), so it remains a cost.
Sometimes, some manufacturers will cut corner on those

procedures to reduce their cost while keeping margin acceptable,
allowing them to oer an unbeatable price to their customer who
get attracted by it. Unwise buyer will be quite often seduced by a
low price but will not really understand how this low price can be
achieved.
Can we compute accurately this Final Assembly cost without having

design being done ? I would answer, that even with only design
being done it will be dicult to estimate assembly cost, because
design is only virtual and not physical.
What we usually need to establish pricing on this activity is a

reference sample in hand with all the parts which will be
assembled, having a clear list of all the test and quality control that
will be done.
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The reference sample is of course the fruit of the engineering, since

without engineering and design done, you can not establish a
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prototype.
D./ SUPPLY CHAIN MARGIN COST

Finally, if you analyze properly your product cost you will notice
there are still some extra cost on the top of parts, components and
labor.
Those costs are prot margin taken in the supply chain by the
dierents stake holders who are involved in this chain (yes,
everybody need to eat a part of the cake because nobody work for
free).
There is no general law to predict how much each stake holder will
take at dierent steps of the process, but what is sure is you have
to pill them up to complete your product cost estimation at the
factory gate.
E./ LOGISTICSCOST
You have taken note that in the product fabrication chain (supply
chain) of your product involves several stake holders. Guess
what,hey are not working in the same room. Some of them are
located potentially several thousand kilometers from each other.
Materials, parts have to be sent from one supplier to the other to
be processed or assembled, in China this is usually made by truck.
Those trucking are not free and have to be taken in consideration
in the price cost of your product.
How to know those costs ? Well you need to know the stake holder
rst and where they are located, once done, you have to compute
all the link between each other and compute the cost for trucking,
loading, unloading and you also have to take in consideration that
goods or parts may be damaged during transportation (because it
17 of 21 8/7/2017 12:52 PM
quite often happen in China !!).

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Conclusion
Estimating the cost of a product not existing yet without having no
engineering done is not very easy, rarely accurate and quite time
consuming.
I summarize this part with the following scheme for you to

understand fully:
electronic
cost
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The whole ow of who need what to quote a new product
When I perform some Feasibility Study and Cost Analysis I usually

success to fall within -/+10% of the real cost of the product to design
and manufacture. To do this, you need to have an extensive and
broad knowledge of all the supply chain, understand very well
electronic parts, manufacturing process, and logistics.
Feasibility Study may take around 2-4 weeks depending on the

complexity of the product and it usually consume time of a project
manager, an electronic hardware engineer, a mechanical engineer,
a procurement manager.
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ELECTRONIC PRODUCT DEVELOPMENT
PRODUCT DEVELOPMENT COST
About Christopher Oliva 53 Articles
Christopher Oliva is an Engineer based in Shenzhen since 2008

involved in Product Development, Supply Chain, Sourcing, Quality
Management and Manufacturing activities. With a Msc Electrical
Engineering and a Business Administration background, an ISO
9001 Lead Auditor Certication, a Six Sigma Certication and a
Quality Engineering Certication, he works as a consultant on
mission and contract oriented to Product Development,
Manufacturing Management, Quality Assurance & Quality
Management System setup. He works in the product development
and engineering eld, and as well as an advisor and quality
consultant for several quality control and quality assurance
companies.
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QUALITY, MANUFACTURING & PRODUCT

HOME ABOUT SOURCING & PROCUREMENT QUALITY CONTROL

PRODUCT DEVELOPMENT CONTACT ENGLISH

Estimation of your Product ABOUT THE AUTHOR

March 9, 2016 Christopher Oliva Product Development

I have been working in the product development and asian FOLLOW ME

Let's take the case of an electronic product. Let's look at what it is

A./ ELECTRONIC PARTS COST

B./ MECHANICAL PARTS COST

THE CAKE) Keeping a Competitive

1./ Electronic components cost Manufacturing

Electronic components are selected based on functions they can Payments

achieve to t with product specications. For each functions to Product Development

NEED QUALITY INSPECTION SERVICES ? I got discount for you !

Electronic components can weight easily 80-90% of the cost of

The game then to optimize product cost is to rene smartly the

Is it quick to select components properly ? Usually, not really. A full

The process for components selection is normally quite time

2./ PCB (Printed Circuit Board)

You have to dierentiate PCB which is a bare board without

A bare blank PCB without component.

The cost of this elements is varying based on many criteria: size of

To be able to quote a PCB board, a manufacturer will need to have

3./ PCB Assembly cost

NEED QUALITY INSPECTION SERVICES ? I got discount for you !

A PCBA include components being soldered on the blank PCB

There are dierent process possiblity to achieve this assembly

SMT process: This process is the most commonly used and it

Process 2: Component pick and place positionning

Through hole process (also called DIP):This process is

operator usually with a jig or xture)

Now let's wonder "Is it possible to anticipate cost of PCBA before

We call this activity Electronic System Engineering and it is usually

b./ ELECTRONIC PERIPHERALS

Electronic peripheralare usually electronic components or

NEED QUALITY INSPECTION SERVICES ? I got discount for you !

Peripherals such as speaker or mic are not directly

The game to achieve a reliable costing for electronics is you are

B./ MECHANICAL PARTS COSTING

Enclosure weight also on the cost of your product

Usually there are two or three types of elements to consider when

Very frequently price of a mechanical part will vary based on

Price of plastic can very highly. Take a chinese plastic and an

Although looking the same visually pricing of plastic material

NEED QUALITY INSPECTION SERVICES ? I got discount for you !

To compute the cost of part related to materials, you need to know

b./ Materials processing

Shape, and geometry complexity to transform raw materials into

As it require labor cost and machine cost, it is not free. Machines

Plastic injection cost is directly dependant on your tooling conguration ,

The cost of your parts may also be inuenced by the number of

Stamping: this is the action to punch a sheet of metal with a

Progressive metal die stamping process

Casting: this is a process a bit similar to the plastic injection

NEED QUALITY INSPECTION SERVICES ? I got discount for you !

Metal casting is a process of molding metal in a

CNC Machining: This is a process where a block of metal is

CNC machining is usually costly but give some very nice

Of course the price of a parts is subsequently adjusted based on

Normally, to get an accurate costing of a mechanical part, you need

C./ FINAL ASSEMBLY LABOR COST

a./ Assembly cost