Cost is a major concern when you need to get a custom electronic device manufactured. First the cost to design the product, and even more so the cost of manufacturing the device. In this post I’ll give the pro’s and con’s of the various ways you can use to obtain the lowest costs when manufacturing your custom electronic device.
In these days of globalization and auction sites, it would seem a smart idea to first ask ten design firms to bid on designing your custom product. Next, take the resulting design, and ask ten factories to bid on manufacturing your custom electronic device.
But alas, in reality, it is not nearly as easy as it sounds.
Be Careful of a Disconnect Between Designers and Factories
Splitting up a project in this way is a recipe for long delays, especially if you are not experienced in managing electronic design projects. The risk of miscommunication and finger pointing is very high.
The designer in California will say the China mold maker totally screwed up his amazing concept.
The Chinese mold maker will say that the 3D files he got were physically impossible to manufacture, so he was just helping the project along by quickly (i.e. without asking) making some “improvements”.
On the electronics side there are many issues as well. Specifying battery cells from Toshiba becomes problematic when you learn that these will get taxed 30% when they need to be imported into China for final assembly.
Don’t Send your Design to Everyone
The preparation of a quotation takes considerable time, and often involves the most senior people in a company. So the more factories you ask to quote, the more factory bosses will feel frustrated at not getting the project after having put in 2 weeks of study.
This being China, there is always the chance that they decide to implement the design anyway, with or without you…so less is more when protection of IP is involved.
Design for Low Production Cost
There are a lot of very clever electronic engineers in Eastern Europe, Russia, and in India. Unfortunately, their designs often turn out to be relatively expensive to make. 80% of the cost of an electronic device is in the BOM (Bill Of Materials, the list of the electronic components).
Chinese manufacturers make the cheapest products in the world, because they use the components with the best value for money, and the majority of those are made in Taiwan and China.
For example, these days there are quite a few Chinese firms, such as Xiaomi, selling cameras at very low prices. They can afford to offer such a low price because they use a very low-cost camera module made in China.
Additional reading on how much manufacturing costs might be > Have a look at “How Much Will It Cost to Have a New Electronic Product Developed in China” which goes into more detail about the cost of developing and manufacturing custom electronic devices in China.
How things can go wrong from the start with Western companies’ products (an example)
Here’s an example of how things can go wrong, leading to costs which are just too high.
Your CTO in Munich selects a great German camera module he has found on a acomponent website such as Digikey. The German module maker is very helpfull in giving him advice on how to overcome all the problems teh engineering team has in making the module work for this particular application.
Once a first working prototype is ready, your firmware engineers will get to work optimizing the performance of the camera. This can easily take them a year (bear in mind that Apple has 1,000 engineers working on their camera firmware, that sets minimum expectations for everyone else).
After the whole electronic design is then finally prototyped, optimized, prototyped again (and again), tested, certified and approved, you go asking factories for production quotes. You then find out that the German camera module costs three times as much as a module of equivalent quality from China.
Now you have a very difficult choice. Either manufacture 5,000 products which are not likely to sell all that well, because they’re much more expensive than the competition. Knowing that many electronic devices retail at 3 times the FOB China cost you may decide to absorb the cost difference, but this iwll really hurt your bottom line. Or spend at least another 6 months on a redesign, knowing that a year from now the specification of your device may be outdated, because better products and components come out all the time.
Communication Roadblocks with the Chinese Factories
So then for your next generation device, you know which factory in China to use for affordable modules, and you give that camera module name to your design team.
They will then likely find the documentation to be very sparse, and it it exists at all it is unlikely to be in English. So for the many, many questions your engineers will have, on how to drive this module, why this or that is not working, they will need to contact the Chinese FEA’s (support engineers).
Unfortunately most engineers in China and Taiwan are not excelling at English. The situation is not likely to change, as custom electronic device manufacturers in China have little interest in hiring expensive English speaking engineers. This is mainly because nearly all their high quantity orders come from factories within China, or from the local purchasing offices of, say, HP or Wal-Mart.
An electronic design firm from San Francisco or Munich, working on behalf of a client which is not yet a household name in China, will be very low on their priority list. This means it can take a very long time to even get an answer to an email.
This is one of the many reasons that even the flagship product from Nest, designed by a star-studded team of engineers worth billions, had to be completely redesigned in Taiwan. Just like 91% of the world’s notebooks are designed by Taiwan’s ODM’s.
Good Chinese Engineers do not work for Chinese Hourly Rates
All right, so to get affordable custom electronic devices you need engineers who speak Chinese, and preferably work in the China time zone. So better idea: find an independent design firm in China to make you a “build to print” design package, and then shop that around in China. If only you could find such an electronic design firm in China…
The problem is that the whole world comes to China to manufacture their electronics.
All big customers such as Apple, Cisco, Siemens and Sony require lots of engineers to support their production orders. So while China does have a lot of people, there is a real scarcity of good engineers. Basically, all those who have a decent amount of experience, speak some English, and (rarest of all) show some creativity, work for the foreign rbands or for the large ODM factories such as Foxconn who manufacture for these brands.
These factories pay increasingly higher salaries, and more importantly, also pay large end-of-year bonuses tied to company sales, so the engineers benefit from the success of the products they design.
This means that there are very few good engineers interested in working in electronic design firms in China, where they only receive a salary and do not get a profit share. There still are independent electronic design firms in China, but they will insist on also manufacturing the PCB assembly. To make sure they get to make their profit on manufacturing the units they will not give you manufacturing files, nor an open BOM and especially not access to the firmware, which is their main key to keep you locked in.
Focus on Dedicated Design For China Manufacturing
You can, of course, add a Chinese speaking engineer to your own or outsourced design team in, say, California.
To help you with this our CEO Case Engelen has condensed his 20 years of designing electronic devices in China & Taiwan into 9 DFM China rules.
Bringing in such an engineer can work well, it’s how Apple does it, but it will involve a lot of flying back and forth.
The biggest issues are actually often to be found in the mechanical parts where, to avoid delays, it is always best to have people on the ground in China.
The design of the housing needs to be tweaked and optimized, for as long as it takes until ALL of the following are happy:
- the industrial designer
- the assembly factory
- the ruggedization testing team
- the various certifying agencies (FCC, CE, UL etc.)
- the cost accountant
Paying US design consultants by the hour to stay in China for months on end quickly becomes very expensive as you can imagine.
Factories Never Prioritize Product Design
Here are three examples of how Chinese factories don’t prioritize product design:
1. Factories are 100% focused on keeping their production lines humming with the limited engineers they have.
So the biggest issue tends to be that for a factory design is never a priority. They always seem to have more important manufacturing issues to be resolved.
Therefore the design projects they do take on tend to last a very long time.
2. A factory will never agree to do just the design without a guaranteed production order.
Unless you negotiate very carefully you will be locked in and also will not have any ownership of the resulting design. To avoid these and other potential issues have a look at 7 pitfalls to avoid working with China ODM Factories for Design.
3. If you ask a Chinese factory to design and make you a low-cost product they WILL come up with a very cheap design. Unfortunately, they tend to get overzealous when pushing for the lowest cost possible. In China you can, for example, buy iPhone rip-offs that cost only $50. The problem is that the glass shatters the first time you drop it, and the battery only lasts for 18 minutes.
Be vigilant, because even if the first sample sent for your approval doesn’t have this “cheap disease,” you can just wait for it to start sneaking into the first or second production order.
Conclusion: The Cheapest Way to get your Custom Electronic Device Manufactured
To be competitive in electronics you need to manufacture in China, using parts from China.
To design your product in a reasonable amount of time, it really helps to do product development in Asia as well. Make sure throughout there is tight quality management, so expectations continue to be met.
Well, you’ve guessed it, this is where Titoma comes in. As the Time To Market company, we are a complete team, experienced in all the product development skills needed to get a custom device manufactured in China. Our Western engineers and project managers work on-site in Taiwan and China, in close cooperation with the various factories and vendors involved. We make it our job to know exactly what you need and the quality you expect, and deliver just that, faster and more economically than just about anyone else.
We can help you! Just hit the button below to arrange a call with us to speak about your project, needs, and concerns and we’ll listen to you and gladly provide you with a quotation for our service if you feel we’re a good fit for you.