10 Ways to Lower the Cost of Your Electronic Product
Lowering the cost of your electronic device is especially crucial to offset lower sales and maintain your competitive edge during these difficult times. Here are 10 different strategies which over the years have proven to deliver the best value for money.
1. Eliminate unnecessary complexity
Your product does not have to meet 100% of the wishes of 100% of all people. As Apple demonstrates it’s not necessarily the product with the most features which commands the highest margin. In fact, Steve Jobs famously quipped that “ Innovation is saying “no” to 1,000 things.” For many new products, satisfying 80% of functionality demanded is more than enough. Do not get trapped trying to satisfy each and every wish of that one clamorous prospect, if in fact most of the customers do not really need them and you wind up paying for the cost of all these unnecessary bells and whistles.
2. Leverage existing platforms
Make use of existing technologies instead of starting from scratch and reinventing the wheel. For most products, there are factories already making something which comes pretty close and can be customized to fit your requirements, user interface, and styling. Not only does this ensure you pay less in development fees but it also avoids a lot of debugging, and so speeds up time to market. Bear in mind though that a factory’s priority is to sell their product and the number of units you want to produce will have to be incentive enough for them to customize the device and reconfigure their production line.
3. Simplify mechanical design
In their relentless drive to lower assembly time engineers in the West often come up with very complex parts. But as labor is still very affordable in China you are often better off splitting the part in two, the cost of a really complex mold is a lot higher than that of two simple ones, and far outweighs the savings in assembly cost, especially if you are producing in batches of say 5K.
4. Design electronics in Asia
In many markets the only way to be cost competitive is to design for low cost manufacturing in China right from the start. Once the whole design has already been completed and certified in the West it will be very hard to achieve substantial cost savings China, because it would take a lot of time and effort to re-do the design for Asian components and manufacturing methods. Another issue is that the most cost effective IC’s are those produced by companies such as Allwinner, Holtek and a host of other brands an engineer in the West has never heard off, let alone be able to design a board around it without any support, since that support unfortunately often only comes in Chinese.
5. Embrace standard parts
Use off-the-shelf parts and modules as much as possible. Since almost every product is made in China these days there is a also a complete supply chain supporting for almost everything, and there are very few parts which cannot be sourced ready-made, at prices you can never get close to using a custom design. If you manage to standardize on parts over your various products you will realize further savings on material handling, purchasing, and inventory management, while you can also expect discounts when purchasing in larger volumes.
6. Design for testing
Avoid a lot of rework at the end of the production line by making sure that you have proper testing SOPs and integrate test points in your PCB design to allow for in-line testing. Special firmware developed only for testing may also be necessary with some devices. Matt Rogers, founder of Nest, started his career working at Apple in a department that is only responsible for in-line testing: http://www.youtube.com/watch?v=HegU77X6I2A —advance video to 19:55.
Pick popular components
The less popular a component the higher the price and the longer the lead-times—the factory may only run another batch only after they have slowly collected the orders from a number of clients, and lead-times may go up to 8 weeks or more. It’s vital to stay in touch with the component markets to get a heads-up before a critical component becomes scarce or even goes End of Life (EOL). We recently recommended a client to go for a 7” instead of a 6” size LCD screen because the 7” screens are much more popular in the market, and so despite being larger the price is actually lower, and availability immediate.
WARNING: Don’t go for something too popular though; otherwise you’ll be in the same position with regard to lead time and availability.
Use materials wisely
Determine the appropriate material you need according to surface quality, durability, and what kind of environment the device will be used in. Some kinds of plastics can easily cost considerably more than your garden variety polypropylene (PP).
Involve your mold maker early on
In the West over molding TPE on ABS is often done with a very expensive automated 2K mold installation, but in China we simply take the still warm ABS part from one mold to place it in the next for a shot of TPE rubber. The cost of both the molds and the injection machines needed to run them are only a fraction of the automated process, so unless you’re producing a million toothbrushes the manual process is a lot more economical.
The molding method chosen has of course some implications for the way the part design is optimized, so ideally involve the tool maker already during the design stage; get early feedback from them on potential production challenges, material properties, and tolerance issues.
Bundle your purchases
Try to consolidate purchasing of components from one or two sources instead of splitting it. It will be easier to negotiate price when you have one vendor handling your component needs. While ordering more of a component reduces the price, with specialized components it’s advisable to pay attention to the SPQ (Standard Packing Quantities) so that you don’t wind up with a lot of expensive surplus you won’t be needing for a while—a component’s SPQ may at times determine the number of units you should produce.
Buyer beware: Stringent testing and on-site factory qualification are essential when selecting a new vendor, do not base your purchasing decision on the few carefully selected samples you get from a trader on websites like Alibaba; chances are they will not be able to deliver the quality you need in a consistent way. If a price looks too good to be true, it usually is.
Titoma Design takes on the complete design and manufacturing of your electronic products in Asia. Our end-to-end solutions include product design, engineering, programming, prototyping, mold making, certifications, mass manufacturing and logistics.
Titoma has Western designers, engineers and project managers permanently based in Taiwan and China. We know how to get things done right in this part of the world. With Titoma you’re in good hands.
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