Getting to the point of having a fully functional, manufacturable prototype is a major accomplishment! However, it is still a long way from large volume production. Scaling from prototype to mass manufacturing is often an overlooked step when launching a new hardware product.
Scaling almost always takes longer than you expect. To clarify, scaling is the cost to setup manufacturing plus the cost for any required electrical certifications. It is usually the most expensive step too. Neglecting or underestimating the scaling costs will prevent your product from ever making it to market.
Manufacturing Setup Costs
Many entrepreneurs are surprised to learn that the plastic enclosure, not the electronics, is the biggest expense when setting up manufacturing. The electronics may have been the most expensive and time consuming part of your product to develop, but the enclosure will dominate your manufacturing setup costs. The is due primarily to the use of injection molding to manufacture the enclosure.
Although 3D printing was likely used to make your enclosure prototypes, injection molding will be necessary for larger scale production. Injection molding technology is great at affordably producing the exact same part many times. However, there are also two major downsides: the high cost of the molds, and the complex design rules that must be followed.
Molds are expensive because hot molten plastic is constantly being injected at very high pressure. This necessitates an extremely durable mold. The more pieces the mold will be used to produce, the more durable it must be.
To withstand such extreme conditions, high volume injection molds are made from very hard grades of steel. The cost of a mold is determined by the hardness of the metal, the number of cavities, and the number of side actions required. It is usually wise to begin with a 1-cavity mold made of a softer metal.
A single-cavity, low volume mold may cost a couple thousand dollars and be good for ten to twenty thousand units. On the other extreme, a mold with multiple cavities (I have seen molds with as many as 32) made with a hard grade of steel can potentially pump out millions of units. However, the latter will cost you tens of thousands of dollars.
Even the simplest product will need at least two molds. One mold for the front side of the enclosure and one mold for the back side. However, most products require around 4-8 molds. When developing your enclosure, try to minimize the number of molds required and you will drastically reduce your scaling costs.
Okay, now back to the electronics portion of your product. You did not think you would get by without some significant expenses to scale the electronics did you? The primary scaling expense for electronics is their required certifications.
Certification fees may vary from a couple thousand dollars up to as much as $50k. Each product is different. Does your product have wireless functionality? If so, are pre-certified wireless modules used? Does your product plug directly into an AC electrical outlet? Will you sell the product online or in retail stores? Perhaps most importantly, which countries do you plan on selling it in? These are all questions that impact your certification expenses.
I will be specifically discussing the certifications required in the United States and the European Union, but other countries will have similar certifications. Just make sure to double check that you are following all of your county’s certifications if you live outside the U.S. or Europe.
Federal Communications Commission (FCC)
FCC certification is necessary for any electrical products marketed in the United States. All electrical devices emit electromagnetic energy. Governments want to ensure that new electrical products do not interfere with radio communication.
The FCC specifies two levels of certification. Products with wireless functions are specified as intentional radiators since they intentionally emit electromagnetic energy (radio waves). Products not intentionally emitting electromagnetic energy are classified as non-intentional radiators. If a wireless product uses a pre-certified module for the wireless function then it will be classified as a non-intentional radiator.
A module is an electronic circuit that has already been developed, tested, and certified by another company. Modules for wireless functions like Bluetooth and WiFi are very common.
Any product classified as an intentional radiator will typically cost about ten times as much to obtain FCC certification compared to a product classified as a non-intentional radiator. This is why most hardware companies developing wireless products begin by using a module that has already been certified.
Once your product is a huge market success and higher production volumes are warranted, you may want to consider transitioning to a fully custom wireless design. This is usually done to increase profit margins. However, many products continue to use modules indefinitely.
Underwriters Laboratories (UL)
Any product marketed in the U.S. that can be plugged directly into an AC outlet must be UL certified.
If your product only runs on batteries then UL certification is not a requirement. This is true even with rechargeable batteries as long as a pre-certified charger is used. So, for example, products using USB chargers do not require UL certification because they plug into a pre-certified charger and not directly into an AC outlet.
However, most large retailers require UL certification for all of their electrical products regardless of whether or not it plugs directly into an AC outlet. Begin by selling your product directly from your own website to avoid the expense of UL certification (at least initially).
RoHS certifies that your product is lead-free. It is a requirement for all electrical products sold in the European Union or California. However, since California is such a large chunk of the U.S. market, it is usually best to go ahead and get RoHS certification if you plan to sell anywhere in the United States. Fortunately, RoHS tends to be the lowest cost certification required.
Conformité Européene (CE)
If your product will be sold in the European Union, then CE certification will be required. CE is similar to a combination of FCC and UL certifications.
When bringing your product to market, scaling costs will likely be one of your biggest obstacles. Failing to plan for these costs will make it impossible for your product to succeed. For most products, the cost to transition from making a few prototypes to manufacturing thousands or millions of units is the most expensive obstacle.
On the bright side, you will eventually get past both the development costs and scaling costs. Unfortunately, you will never escape the cost I will be discussing in my next article: production cost. It is the most important cost, and will determine both your sales price and, most importantly, your profit!