NRE Costs are what you get charged to have your customized electronic product ready for mass manufacturing.
Many people don’t know that the amount of NRE charged to you can be very different from the actual NRE costs to design the product.
Many design firms only tell you about the cost of design and prototyping, conveniently forgetting that getting a working prototype is only 1/4 of the journey.
The total development cost to get an electronic product designed, engineered, prototyped, injection-molded, tested, and CE/FCC certified, ranges from around US$ 50,000 to millions.
There is a whole list of NRE costs you may be charged, we’ll take you through all of them so you know what you can expect, and give you NRE Cost Ranges to assess whether what a factory charges is fair.
NRE Costs depend on:
the complexity of the product
how “new-to-the-world” it is
where and by whom the design is done
where the product will be used (medical, mining & automotive products are a lot more expensive to develop due to testing & certifications)
NRE Charge depends on:
How much YOU actually pay can be very different from what the costs are.
In Taiwan & China, there are many ODM (Original Design Manufacturing) factories which will gladly put your logo on their electronic product, and will only charge you a sample fee and say $500 to set up printing.
The NRE amount also depends on who you are. If you’re Dell or HP, all you need to do is guarantee to buy X number of notebooks, and you pay no NRE at all.
Even if you’re a smaller company, you can try to find a factory boss eager for orders.
If you convince him of the fantastic sales potential of your product, you could get him to get your electronic product into manufacturing for a very modest development budget.
Finding a “right-sized” factory is very important. Of course, eager for business often implies the factory is not very busy, which may be for a reason.
Sometimes a young factory is anxious to win a Western client to get some portfolio.
But if you’re inexperienced at design & manufacturing, picking an inexperienced factory to design and manufacture your new device, is a recipe for disaster.
You are highly unlikely to get a good Time To Market, and this can easily cost you your company.
Kickstarter has seen a lot of very popular campaigns fail to get its product manufactured.
List of NRE Costs to Develop an Electronic Product
To enable you to get a better feel for all the different elements of a complete NRE budget I’ll discuss all the elements, and give you ranges for the industry, and for what we at Titoma tend to budget.
1- Electronic architecture cost (System Design)
For electronic product architecture, we decide which key electronic components will best meet the performance requirements defined in the specification.
This stage is often the shortest, and in many cases, clients expect it to be done for free as part of an offer.
But System Design decides 60% of the cost your product will incur over its lifetime.
For optimization, it is crucial to be aware of the full range of electronic components available in the market, and the market is a lot bigger than what is readily available in, for example, the digeykey.com on-line catalog.
After you pick a particular camera module, the team will often spend a good six months on optimizing the Firmware for that specific module.
In the manufacturing stage, you may then discover that equivalent modules sell for one-third of the cost, such that you have effectively locked-in a structural unit cost disadvantage for this generation of the product.
So, we really recommend spending more time on this stage.
The prices a factory in China can obtain in the Shenzhen eco-system are also often quite different from those advertised on-line.
Don’t just compare specs on paper, do tests with a partial prototype to verify how components perform in your specific application, and then decide which component has the best cost/performance.
When component research is roughly halfway, there will often be a lot of interaction with the client to see if it makes sense to up-or downgrade certain parts of the specification based on components found.
For the electronics architecture costs, we advise you to budget an average of US$5,000. Some less scrupulous factories or design firms will do this for free, but this comes with some risks.
Here are some basic questions an industrial designer will have to find an answer for
What do users prefer?
How will the users hold the device?
What style is best suited for the users?
How resistant does this device need to be?
In what kind of environment will the device work?
After gathering all of that information and more, an industrial designer can start designing the physical aspect of your electronic device, choosing the adequate materials.
But here’s the tricky part, just getting input from the potential users is not enough to create a winning (manufacturable) design.
An early understanding of the manufacturing facilities’ capacity is imperative to design a device that can be manufactured.
A product case will have to go through many iterations (Prototypes) before it is ready to be the final version.
During the prototype stage of the product, it’s okay to use off the shelf parts as a product case to start testing your product in real-life circumstances and gather user’s feedback.
How much does Industrial Design cost?
The cost of Industrial Design can vary enormously. It depends on your ambition, the budget, and the time you have available.
You can organize a contest on a site like 99designs.com, and perhaps 30 young enthusiasts will submit their concept, you only pay the winner $100.
The disadvantage of this approach is that it risks being “creative diarrhea,” just a lot of different shapes, with not necessarily much logic behind it.
On the other side of the spectrum, you have high-end industrial design firms such as frog design, which can charge $1 million.
They offer a complete package that starts with ethnographic research, i.e., observing users interacting with the (prototype of) the device or with a current solution which the device will replace.
Of course, you should never base a decision on a sample size of 3, so observing, logging, and analyzing say 100 users takes a lot of effort.
But this allows us to “inform the designer with user insight,” which helps to come up with better ergonomics or styling where “form follows function.”
Doing Industrial design with a specialized ID firm in the primary target market makes a lot of sense.
It assures a better market fit and facilitates quick iterations. ID is also still far removed from manufacturing, so for ID, DFM is not yet the main driver.
Unfortunately, cutting edge industrial designs that challenge the norms tend to be hard to manufacture, requiring many iterations to come to the highly-aesthetic result sought.
If manufacturing is done in Asia while ID is done in the US, it often requires the industrial designers and their supporting mechanical engineers to fly over to the other side of the world to make the dream become a reality.
In the B2B projects we do at Titoma, Time To Market is often more critical than aesthetics, so our typical industrial design budget is $5,000.
An experienced industrial designer already knows what sort of shapes can quickly and affordably be manufactured.
He will become less adventurous but, instead, go for a direction that is likely to work.
3- Mechanical Engineering Cost
An industrial designer will excel at creating a product that looks and feels great, but this won’t be of much use if it can’t be manufactured, or if it doesn’t perform as expected when being handled by the user or simply when it’s performing its job.
Someone with experience working on mechanical machines and components needs to be brought into the picture to make sure an industrial designer’s work is manufacturable.
She/he will also define and design the necessary tooling for manufacturing, and make sure the device will perform as expected; that is, a Mechanical Engineer.
The job of a mechanical engineer is to make sure that the industrial design is feasible; any mechanical/moving part must be optimized for robustness and aesthetics while minimizing the cost of tooling.
Fixtures
Jigs
Gauges
Molds
Dies
Cutting equipment
Patterns
The more mechanically complex a device is, the more expensive it’ll be to manufacture.
It is in this stage that features if deemed not necessary, will have to be dropped from the original design.
How much does a mechanical engineering design cost?
Here we run into another circumstantial scenario, depending on the complexity of your device, the cost will vary significantly.
The amount of mechanical work that has to go into a simple square box device such as a TV box is not the same as the effort you have to put in a, let’s say, the Juicero .
The Juicero was a complicated piece of IoT in which the door locking mechanism only involved more than two dozen parts, and which drivetrain had to apply equal pressure to 66 square inches of a surface at once.
The Juicero was a state-of-the-art electro-mechanical device, an expensive one to develop too, a total of 120 M was spent on engineering this device correctly.
The Juicero is a perfect example of how expensive a new to the world product can be.
If your device is low in the complexity scale, you could go to a website like Fiver and hire a Mechanical Engineer freelancer or an engineering agency who will charge you different rates for different services, the options are many and quoted at profoundly different prices, for example.
US$ 10,000 to provide you with proposal refocus, 3D CAD+Renders, visual communications, and drawings.
2 parts design for US$ 800, or 10 parts design for US$ 2,500. Including Mold casting, die-cutting, rib designs, plastic thickness analysis, they’ll send you source files.
US$ 10,000 to design complex injection mold, composite molds, and custom tooling machinery
US$150 for a complex CAD 3d/2d model, drawings, and Solidworks designs.
If you decide to go the freelance way, please understand that they will all, after having a conversation with you most likely, work on mechanical designs, and in the end, you’ll get different “ready to manufacture” files.
Some freelancers will say they’ll get the job done in 1-week others in 2 months; it depends on the complexity of the design, the price they’ll charge will also vary.
The issue with this is that, once they’re done, you’ll find yourself with different files that you will then want to send to a manufacturing plant in the hopes they can get your product into manufacturing.
But, surprise, they can’t, because the designs you received are not suitable for the technology of the plant.
This doesn’t mean your project has failed.
It means you’re going to have to go back to whoever made your mechanical designs and ask him/her to redo the designs, taking into account the new inputs from the manufacturing plant, you’ll be acting as a communication bridge.
This back and forth might repeat itself a couple of times before you get it all right; this is what happens when a part of the product development process is done separately from the rest.
Whereas, a design and manufacturing company might do a better job at saving you time.
By including all stakeholders early on in the product development process, they make sure the work of both industrial designers and mechanical engineers can be manufactured.
The fees charged by an industrial design firm will vary depending on location, reputation, size, and complexity of the product.
It could be somewhere between US$500K to US$1 M.
Here at TITOMA, we focus on embedded electronics, and our typical Mechanical Design budget ranges from 10k to 15k.
4- Firmware Cost
For embedded electronic devices, a microcontroller such as STM32 or PIC 32 is required to get the product to function.
You’ll need a firmware engineer to design the code your device needs to work.
Firmware design and development is a delicate process, and up to 70% of the time is spent refining and debugging the code, which makes this step somewhat costly.
The more functionalities your product has, the more programming it’ll need.
How much does Firmware design cost?
This is directly proportional to the complexity of your device, the more complicated it is, the more lines of codes will require, and indeed, more debugging will have to be done.
If you were to make, let’s say a water level indicator to be installed inside a tank, well, that’s a relatively easy and low-risk device.
You’ll need some forty lines of code, and any firmware developer will put it together in a couple of hours.
If you go to a site like Upwork, you’ll find freelancers offering their services for around 60USD/hour, so it’ll just take you a couple of hundreds to get your Firmware ready.
But, if your project instead is something more complicated and riskier like an automotive electronic throttle control system, then you’re in for an expensive piece of Firmware.
While this is a straightforward device, you’ll most likely need a real-time operating system (RTOS), thousands of lines of code, and perfect debugging.
A buggy source code for a device that controls the acceleration speed of a car is not permissible.
A throttle control system is a critical device; having a bug that causes unintended acceleration on a moving car can be deadly.
For such a device, we wouldn’t recommend you look for a freelancer who doesn’t know about the ins and outs of the rest of the project.
You cannot have a delicate firmware of this kind being worked on as a separate step from the rest of the product development process.
It would be best if you had a highly experienced Firmware engineer who can hold their own in Firmware and hardware to lead the integration of both.
Also remember, debugging is critical for any firmware and any embedded device project as a whole.
According to the 2015 UBM Embedded Marketing Study, debugging an embedded system was the most significant challenge facing developers and managers; this can cost you your Time to Market.
The answer to how much you’ll pay for firmware development is circumstantial.
You have to consider the complexity of the device, risk level, newness of the technology, among other variables.
It’s not uncommon for some firmware to reach the hundreds of thousands mark. At TITOMA, our average cost for firmware development for embedded systems around stm32 is USD 15,000.
5- Prototyping Cost
Before you even think of mass manufacturing your product, you have to go through the prototyping stage, in this step you have to create an early working version of your final product.
This is critical in the product development process.
It allows you to test and improve the functionality of your design
You can test the performance of the materials you think are best for your product
It allows you to get real-life feedback from potential users
By having a functioning prototype and positive feedback from users, you’ll make a better case if you’re looking for investment.
Having a prototype will help you to apply for a patent if you decide to go down that road.
Bear in mind that the first round of prototypes doesn’t have to be fancy- there’s more than one prototype to be made; it just needs to show how the product’s core features will work and provide a physical example of what the final electronic device will look like.
In many instances, using off the shelf components will be good enough to put an early prototype together. Proof of Concept
The prototyping stage will culminate in the creation of the pilot units, for which only injection molded parts will provide the right representation of the product needed for testing before manufacturing for sales.
How much does prototyping cost?
On average, an electronic prototype can cost between US$ 100 to US$ 100,000.
It is a big range; the exact cost will vary not just depending on the complexity of the device, but also, on which kind of prototype you’re looking at developing.
Throughout the different product development stages, there are various prototypes made that vary in functionality, materials, and components used, they also vary in cost.
Here’s what the costs look like for embedded electronics
For proof of concepts made out of off the shelf parts and using 3D printed custom parts, the cost will be around US$1,000
For partial electronic prototypes that include custom PCBs, electronic components, and CNC parts cut out of the exact target plastic, the cost will be around US$5,000
For pilot run units or pre-production samples where devices are assembled from injection-molded parts, and an automated SMT line produces the PCBs, the cost will be around US$8,000 to US$18,000
6- Tooling Cost
Now, we have to consider the cost of setting up a production line.
This includes necessary molds for each part of your device and any machine or piece of machinery needed for manufacturing.
The more parts a device, the more complicated it is to put together, the more expensive this step will be.
There will also be higher chances of making a mistake during assembly.
This is why it is imperative for electronic engineers, industrial designers, and mechanical engineers to work together and make sure that the final product design is as easy to manufacture and assemble as possible.
Sometimes, setting up all the molds and machinery necessary to do the production run takes more time than the actual production time of your devices.
Which is why many factories don’t care much for small batches of products, it doesn’t make economic sense.
How much does tooling cost?
Injection mold tooling can easily be the most expensive part of any electronic product development process.
Two main factors can make the costs go up or down, the size and intricacy of the parts and the number of parts.
Each cavity in a mold has to be ground and polished to meet specific tight tolerances; only professionals in the industry can pull this off.
Once the molds are made, it is pretty much impossible to change them.
Devices that require large and intricate parts need equally intricate machined and polished cavities; this translates into high costs.
On the contrary, devices that only require two parts that open and shut against each other are less expensive.
The material you choose for your device will also influence the cost of your molds.
Injection molds are put under thousands of pounds of pressure on every production cycle; because of this, the materials used to make the molds must be able to withstand the test of time without deforming.
If you’re going for tens of thousands of parts made out of fiberglass, then the mold will need a high grade of steel so it won’t wear out and cause defective parts.
The higher the grade of steel, the more expensive the molds will be.
7- Cost of Certifications
Before your product hits the market, you’ll need certifications, which you can only get after plenty of testing, time effort, and of course, money.
Depending on the environment where your device will work, different tests will need to be run to get certifications.
Depending on your device and its requirements, some tests could be but not limited to
Accelerated aging
Temperature shocks in a heat chamber
Drop tests with and without packaging
Getting a certification is usually very time-consuming. If your product wasn’t designed properly, you run the risk of having to go back to the designing table and having to start over.
What is the cost of certifications for electronic devices?
How many certifications you’ll need depends entirely on the specifics of your device and the countries where it will be used.
Here’s a breakdown of different certifications and how much they cost.
From experience, we can tell you that you need to budget at least US$20,000 for certifications.
NRE (Non-Recurring Engineering) Costs Conclusions
For any company, whether it is an established one, or a start-up, manufacturing a new product is a complex operation that relies heavily on money.
The product development process of an electronic device is one that presents many iterations and contingencies.
If way too many were to happen, your electronic device might never see the light of day, especially if you were not prepared for all that spending.
Before manufacturing a new product, make sure you are aware of all the costs associated with your product and do the numbers.
It’s also advisable that you connect with experts in electronics manufacturing that follow DFM and DFR guidelines, and that can better help you to make sure your electronic device meets its Time to Market.
NRE Frequently Asked Questions
What is the meaning of NRE in Manufacturing?
NRE in manufacturing stands for Non-Recurring Engineering Costs, meaning the design or set-up fee charged by a manufacturing and design house to get your electronic product ready for manufacturing..
What are Nonrecurring Engineering Costs?
A non-recurring engineering cost (NRE) is a one-time cost a company has to pay to get its custom electronic product ready for mass manufacturing .
List of NRE (Nonrecurring engineering) costs for electronics
