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I built a prototype using an NFC board I bought from Alibaba for 1$ (https://www.alibaba.com/showroom/rfid-rc522.html).

It claims to use the NXP MFRC522 IC, and if I look on the board the chip has that part number and even the little NXP logo. It works like a charm on the prototype so now I'd like to build the NFC antenna into the product and use the same chip (I'll go through the antenna tuning/matching process).

The problem is this: If I want to buy this IC on Digikey, it costs $5.36 for QTY 1 and $3.61 for QTY 1,500 (https://www.digikey.com/products/en/rf-if-and-rfid/rfid-rf-access-monitoring-ics/880?k=rc522). The whole board from Alibaba which comes assembled with other passives and a crystal oscillator, along with 2 NFC tags and some headers, is about 1$.

How can this be possible? Is this just a result of economies of scale (are they really making this many generic NFC boards?) or are the ICs definitely clones? I'd love to be able to use the IC only and make my own PCB antenna, but jumping from 1$ to even $3.61 has a very significant effect on the overall cost of the product.

Does anyone know what justifies this huge price difference and how to deal with it as an electronics designer trying to keep costs low? Any advice is appreciated.

[Edit] Clarification: Although I'm using these particular boards as an example, the question I'm really asking is broader and (in my opinion) useful to others: Is it possible for designers to keep prices low when upgrading from cheap Alibaba-like proto boards to legitimate ICs from suppliers? And if so, what tricks/techniques can we use?

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    \$\begingroup\$ I bought some fake Phillips MOSFET's once. Or the company I worked for bought them. (Phillips became NXP). We didn't KNOW they were fake. Many of them worked, but we had a high failure rate. We asked Phillips if they were willing to do a post-mortem to figure out why they failed. But when they found out we bought them on the grey-market they said they were not interested. So we sent one to a lab and they said the wire bonds had never been attached. In other words, the silicon was not connected to the leads on the plastic package. Who knows where it came from? So it can happen. \$\endgroup\$ – mkeith Apr 22 at 8:40
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    \$\begingroup\$ Fake or not, if your ethics board if happy with using the cheaper parts you could just lift them off the proto boards and place them on your on PCB. Obviously if they are fake the specifications may not always be met but you can test them before de-soldering but are the savings enough to justify all the added time/cost/risk. \$\endgroup\$ – KalleMP Apr 22 at 11:07
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    \$\begingroup\$ A view from inside of a semiconductor manufacturer [in San Jose]. We have a 55 gallon drum full of reject ICs sitting next to an ATE facility. From that drum, the ICs go to a shredder. These types of ICs sell for $20 to $40 at a distributor. At the same time, some enterprising folks come to trawl through our dumpsters regularly. I chatted with one of them [I was a communicative mood, and the guy wasn't in a fowl spirit], and he said that he's hoping to find [specifically] ICs to sell on eBay. He [sincerely] had no clue that anything may be wrong with ICs. \$\endgroup\$ – Nick Alexeev Apr 23 at 0:07
  • \$\begingroup\$ Your edit only adds additional ways that this is off-topic: it is still a prohibited sourcing question, but it is now additionally too broad, asking for a list of assorted hints rather than being something specifically answerable within the requirement of the rules here. \$\endgroup\$ – Chris Stratton Apr 23 at 17:43
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Digikey sources their parts from the manufacturers and adds a retail mark up.

The alibaba seller takes remnants from someone's production run (or possibly salvaged parts, or if you're unlucky counterfeit or reject parts) they don't pay full price.

Usually it's remnants, someone makes 10000 products and has 500 parts on the last 3500 part roll left over and sells that cheap, the module manufacturer gets these cheap, makes a bunch of modules and sells them.

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    \$\begingroup\$ Also, nobody buys production volumes from Digikey if they have any sense. For production volumes (By which I mean thousand++) you should probably be talking to whoever NXPs distribution is in your area, Digikey/Mouser are for prototypes, pre prod runs and spare parts. Rule of thumb, I would expect production parts to be about 25-50% of the Digikey price, particularly if you can do scheduled call off a year in advance. \$\endgroup\$ – Dan Mills Apr 22 at 10:31
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    \$\begingroup\$ Also Digikey's prices include the idiotic tariff. \$\endgroup\$ – Jeanne Pindar Apr 22 at 17:48
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    \$\begingroup\$ @DanMils for some MFG digikey is an official distributor and has competitive volume prices, for others, if digikey itself is buying from a distributor, it is not worth it. \$\endgroup\$ – crasic Apr 22 at 18:34
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I would say that they are probably counterfeit,this is a well known problem when buying from china, you cant be sure that they are original unless you are buying from a trusted chinese supplier. Most of the time they work alright if you are not pushing them to the spec limits,here are some links that can help you through this problem of chinese counterfeit IC and how to identify if what you are buying is fake

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    \$\begingroup\$ You use "probably" without any evidence in your answer. \$\endgroup\$ – qwr Apr 22 at 15:26
  • \$\begingroup\$ many times that i bought cheap ic from china they often showed symptoms of being fake according to the method of detection of counterfeit parts listed in the second link \$\endgroup\$ – Lucas Alexandre Apr 23 at 4:07
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Another thing to consider is that digikey has to pay the full shipping costs.

For someone selling from China, they get government subsidized shipping courtesy the US taxpayer.

According to the U.S. Postal Service, it costs around $20 to mail a small parcel weighing 4.4 pounds from one U.S. state to another, yet mailing the same package from China only costs about $5. Millions of Americans who have purchased consumer goods online from Chinese sellers for a few bucks, shipping included, have likely noticed this disparity first-hand.

This shipping differential is the product of the U.S. government subsidizing Chinese shipments. The government estimates USPS delivers Chinese goods at a 40% to 70% discount, losing money on each package it delivers.

Link

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  • \$\begingroup\$ Wouldn't the Digi-Key shipping costs be added to the component cost rather than included in it? \$\endgroup\$ – Transistor Apr 22 at 21:08
  • \$\begingroup\$ It used to be that if you ordered by post and paid by cheque/money order US/CA shipping was free. to digikey customers \$\endgroup\$ – Jasen Apr 22 at 21:12
  • \$\begingroup\$ "Free shipping" simply means the shipping costs are embedded in the price of whatever you are buying. \$\endgroup\$ – Super1337 Apr 23 at 13:11

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