2012 October

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.

7. 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.

8. 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).

9. 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.

10. 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.

WARNING:

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.

Send us an email if you’d like to discuss your project with us.

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