NRE costs greatly influence the profitability of your new project. And this article will give you a comprehensive understanding of the NRE.
What is NRE cost?
NRE costs, standing for non-recurring engineering costs, refer to the expense that occurs from a product idea to the stage before mass production. It typically includes sample fees, and sometimes fees for opening molds and testing. It is a one-time investment for new products or the upgraded version of an existing product.
This expense relies on the profits from large-scale production. So a clear NRE cost can help you make a better decision about whether you should develop this new product or not by comparing this fee with the potential revenue. If it is feasible, you can use the NRE cost accurately budget for the new project and avoid unexpected expenses. And then you can better manage the project and ensure that resources are allocated efficiently.
Non-recurring engineering costs examples
Now let’s have a breakdown of NRE costs. Suppose you want to customize LED lights as follows, and the customized parts include the lamp and PCB involved.
Design fees
The design fees lie in PCB design and lamp shape design.
PCB is the core part of the whole LED lights. It involves LED chips, and electric components. The more complex the design, especially when it has multiple layers and high-speed circuits, the higher the design fee.
You can provide the circuit schematic, or directly tell your supplier the purpose of this PCB, and let him help you design it. Like Jingsourcing, we will ensure that we fully understand your idea before starting the sketch. After completion, the design will accurately display how the circuit board operates and the placement of each component, ensuring feasibility in manufacturing.
It requires professional knowledge and rich experience in LED lighting customization. Otherwise, you may find that there are problems with the layout, such as short circuits or mismatched components, which will significantly affect your project and schedule.
Regarding lamp shape design, this is easier than PCB. You can just roughly draw your idea on a piece of paper, like many of our clients. Or you can ask your supplier to help you design it.
Sample cost
After the design is completed, your supplier will make LED lighting samples. And he will charge a sample fee to cover the cost of materials and techniques.
For the PCB circuit board, if you use American chips, which are the best in the LED chip market, the cost is higher than Japanese and German chips. If you have high requirements for LED packaging and want to use better materials like silicone for better heat dissipation performance, then the price is also higher.
If your customized lampshade does not have existing molds, you need to open a mold. This cost is very high, ranging from several thousand dollars to tens of thousands of dollars.
Testing fees
First of all, the branded LED chips you purchased have already passed the test, so you don’t need to test them again. In real business, you can ask your supplier to test the LED lamp samples. For example:
- Aging tests are conducted to detect any adverse effects such as dead lights, dim lights, flickering, color deviation, etc. The general testing time is over 24 hours. If the test is passed, it indicates the lamp can work normally and achieve the expected service time.
- Vibration drop tests verify the anti-fall and anti-shock performance of the lamps during transportation.
These two tests are mandatory and your supplier does not charge for them. If you have any other testing requirements, just tell your supplier. If you need a specialized testing organization to conduct the tests, then you need to pay the testing fees.
How to reduce NRE costs?
For simple appearance adjustments on the existing product, you can sketch by yourself to save design fees.
Then find a supplier to make samples for you, and you just need to pay the sample-making fees. After you order, you can talk with your supplier to refund you the sample fee as a preferential strategy. Most suppliers are willing to waive some small fees for you, for mutual benefit and happy cooperation.
For complex products that need opening molds like plastic toys, you can let the supplier use 3D printing to make a physical prototype first. A complete plastic toy prototype is around $300. Then you decide whether to open molding according to the effect of the prototype, so as to avoid paying very expensive molding fees but getting unsatisfactory products. This is a cost-effective way.
If you are satisfied with the 3D prototype and decide to start molding, which is the largest part of NRE costs, you will need to fully pay the molding fees to your supplier. If your annual order is large, like 1 million dollars, you can negotiate with him to see if they can give you a discount.
As a lead sourcing company in China, Jingsourcing has helped 4000+ clients to customize their products at a reasonable NRE price. We have lots of long-term cooperative suppliers and they are experienced in dealing with orders of customization. We can negotiate with them on your behalf, and refine the sample after making it according to your requirements.
Furthermore, we can help you follow up on the whole production process. We also have a professional inspection team to strictly help you control product quality, and long-term cooperative forwarders to help you ship goods directly to your door.
