The cheapest way

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Titoma Product Development Law 4 - Do final assembly close to your vendors

The cheapest way

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 device, and then take that design and ask ten factories to bid on manufacturing the electronics, and ten mold makers to bid on the molds for the housing.

But alas, in reality this is not nearly as easy as it sounds.

Be careful with “splittist” thinking

Splitting up a project like this can be a recipe for disaster, especially if you are not experienced in managing transnational design projects. The risk of finger pointing is very high: the French designer will say the mold maker screwed up his wonderful concept, the Chinese mold maker will say that the 3D files he got were impossible to manufacture, so he had no option but to help the project along by quickly (i.e. without asking) implementing some “improvements,” the list goes on…

Don’t frustrate too many people

The preparation of a quotation takes considerable time, often involving the most senior people in a company. So the more firms you ask to quote, the more firms are going to feel frustrated not getting the project after having put in 2 weeks of study, and in particularly China there is always the chance that they decide to implement the design anyway, with or without you…

Design for low production cost

There are a lot of very clever engineers in the West, in Russia and in India, but unfortunately their electronic designs tend to be relatively expensive to make. 80% of the cost of an electronic device is in the BOM (Bill Of Materials, i.e. all the electronic components). Chinese factories make the cheapest products in the world because they use the cheapest components, and those are the components made in Taiwan and China. (Learn more from “How Much Will It Cost to Have a New Electronic Product Developed in Asia” about the cost of developing and manufacturing electronics in China.)

For example these days there are quite a few Chinese firms selling tablet PC’s for as little as $80. They can get their price so low because they use a dirt cheap ICs made in China. To integrate a Rockchip IC in your electronic design you need a lot of interaction with their support engineers. Unfortunately they often only speak Chinese. So effectively you can only compete in this market if you have your hardware manufactured and designed in Asia. Like Apple does.

FYI: 91% of the world’s notebooks are designed in Taiwan.

The situation is unlikely to change as Asian IC vendors have little interest in hiring expensive English speaking engineers, because nearly all their high quantity orders come from local factories within China, or from the Asian purchasing offices of HP and Wall-Mart. A design firm from Bucharest, Bangalore or Paris will be very low on their priority list, meaning it can take very long for an email to get answered, if at all.

Good Chinese engineers do not work for Chinese hourly rates

All right, so to get affordable products you need circuit designers which speak Chinese. So get an independent design firm in China to make you a design, and then shop that around in China. If only you could find a one.

The problem is that the whole world is coming to China to get their electronics manufactured. All big clients such as HP and Cisco require a lot of engineers to support their production orders. So while China does have a lot of people, there is a real scarcity of good engineers, and basically all those who have a decent amount of experience, speak some English, and–rarest of all–show some creativity, are working for the big factories. These factories paying higher and higher salaries, and more importantly also pay big end-of year bonuses tied to sales, so the engineers benefit from the success of the products they design. This means that in China there are very few good engineers interested in starting an independent electronic design firm, where they just get paid by the hour and do not share in the manufacturing profits.

Left alone, Chinese factories out-cheap themselves

Meanwhile the factories are 100% focused on keeping their production lines humming with the limited engineers they have to help their clients with new products. So a factory will never agree to do just the design, without a guaranteed production order.

On the other hand, if you ask a Chinese factory to design and make you a low cost product they WILL come up with a very cheap design, but unfortunately they tend to get overzealous. In China you can for example buy Iphone rip-offs that cost only $50. Problem is that the glass shatters the first time your drop it and the battery lasts only 18 minutes. And if your first sample doesn’t have this “cheap disease,” you can just wait for this to happen in the first or second production order.

So in short, to be competitive in electronics you need to manufacture in Asia, and it’s imperative that product development is done in Asia as well, and that there is a tight management to make sure expectations are consistently met.

Titoma allows you to entrust your complete project to professional Western management, on-site in Taiwan and China. We make it our job to know what you want and the quality you expect, and deliver just that, faster and more economically than just about anyone else.

Please contact a Titoma representative for more information, a quote, or other inquiries

Case Engelen

I'm the CEO of Titoma and I've been working in electronic product development in Taiwan & China since 1994. What I've discovered is that to get to market FAST you need to take time to prevent delays. And the most important way to do that is with early supplier involvement. With us doing both Design AND Manufacturing, we save our clients time, aggravation and a quite a bit of money. If you're an established B2B company needing a Reliable Custom Device, on Time and on Target, we should talk!

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