Product Price Question

At our company, we are in the process of finishing to develop a toy prototype.

I need to estimate the "production" price of all the components.

I was able to gather all the price from every manufacturer of every components in quantity of > 5000.

However, the sums of each individual price is really high even in quantity of 10000, and when I add a plastic enclosure, the PCB, and assembly, it is clearly not competitive with similar products.

Does anybody have some experience in this field, and could share his finding on how to optimize the price of a product in a reasonable range ?

For example, I bought and analyzed an Android 7'' Tablet available on AliExpress for 42.00$(shipping included). Then, I tried to find every components in quantity of 10000 (Capacitive 7'' LCD Screen, Large capacity LiPo battery, WiFi, Bluetooth, 4GB Flash, Dual Core >1Ghz processor, Speaker, Vibration motors, etc.). For now, without assembly and plastic case which are hard to estimate for me, sums of every component price is over 500$, which is already more than 1000% higher than their actual "sell" price, testing, shipping and profit included on their side.

I don't need to create a product 1000% less expensive. But since it is a toy, it can't be as high as it is currently.

• Do I need to replace every components by cheap part found only in Asia market?
• Do I need to buy in quantity of 500k / 1M to have a good price?
• Do we create the prototype first locally, and then ask a second partner team in Asia to redo it completly with their products ?

If anybody have some clue to help me on this topic, I would really appreciate it!

Thank you !

Simon

• If you want to know high volume prices, you have to inquire about the price at high volumes, not 5k and 10k units. – Olin Lathrop Apr 21 '14 at 19:19
• Get all your parts through the same distributor and leave it up to your purchasing people to get a deal. – Matt Young Apr 21 '14 at 20:13
• Have you tried the old "value engineering" approach to see which parts add the least value (per dollar/cent). Results can be very surprising and it might get you to focus in a slightly different direction. – Andy aka Apr 21 '14 at 21:40

Prices in Asia tend to be significantly lower, even at 5K-10K, on the sort of stuff you're talking about. Note that high-spec items such as aerospace qualified parts may be more expensive in Asia, so you really have to look it it on an item-by-item basis.

You cannot estimate the BOM of mass-market toy using the methods you've described. The idea of finding a product that has similar or higher spec parts and comparing the sell price to your required sell price is valid for a ball-park feasibility estimate, but not highly accurate.

Note that even if your quantity is not relatively high, you may be able to have the product built fairly cheaply, however your access to top-tier components, assembly houses etc. will be severely constrained, and your quality will suffer greatly.

You should use an iterative process to design a prototype using parts that are available inexpensively in Asia as well as meeting all your requirements. There's no need to sweat over passives and such like, but the choice of a microcontroller, LDOs, connectors, PCB technology and such like should involve some market knowledge at some level.

So, in summary- find a similar product to ballpark, but involve external experts or develop expertise internally before committing to a design.

P.S. Be careful about "shopping" your design-in-progress unless you have iron-clad protection, one fellow I worked with got quotes from several potential Asian manufacturers, and by the time he got around to signing P.O.s and contacting buyers, a very similar product was already on the way to the shelves, as a direct result of his inquiries. I'm sure their "engineering" was made more efficient by having detailed drawings on-hand that they just needed to tweak a bit.

• Thank you very much for taking the time to answer my question. It will really help me to focus in the right direction. – user40671 Apr 21 '14 at 22:57