Table of Contents
Introduction
In the post The Real Cost of Developing an Electronic Product, I shared with you how much capital you should reserve for developing a new electronic product. To summarise in one sentence, it can cost you anywhere between USD 20k to USD 300k.
The reason for this extensive range is that too many factors can affect the cost of product development.
In this post, we’ll look at the factors that affect the development cost so you can estimate more accurately before jumping into product development.
Major Factors
Product Complexity
Simple products like an asset tracker or a basic smart home device may only require a few components and a straightforward design.
In contrast, more complex products like smartphones or laptops require more intricate designs, advanced features, and a more comprehensive range of components.
The design’s complexity will influence the development team’s size, the development cycle, the number of prototypes required, and the cost of testing and validation.
Technology Maturity
When a technology is new or immature, it may be more challenging to design, develop, and manufacture products that incorporate that technology. This can result in higher costs as more time and resources are required to overcome the challenges and ensure the product works as intended.
In contrast, it is typically easier to develop products when the technology is mature, as the knowledge and expertise required are more widely available.
Development Team
An experienced team can manage the development process more effectively, avoid costly mistakes, and streamline production.
The composition of the team can impact the cost of product development too. For instance, having a team with a good balance of designers, engineers, and project managers can result in a more efficient development process.
The location of the development team is another factor. If you’re comfortable managing an offshore development team, hiring an engineering team in China can be a good option, as the country has a large engineering pool that is pretty affordable. On top of that, you can also get your product manufactured there once the development finishes.
Other Factors
Power Consumption
Developing a product that runs on a non-sustainable power supply (such as a battery) is a lot more expensive because:
- Battery-powered products are often expected to be more convenient and portable than their wired counterparts. This can require additional design work to ensure that the product is lightweight, compact, and easy to use.
- Battery-powered products require careful power management to maximise battery life and ensure that the product functions correctly. This can require additional design work and testing, increasing development costs.
- Selecting the right battery for a particular product requires careful consideration of factors such as voltage, capacity, size, weight, and cost.
- Developing a battery-powered product requires careful attention to safety considerations, such as overcharging protection, thermal management, and safe disposal of the battery.
- Many countries have regulations and standards for batteries and battery-powered products, particularly regarding safety, recycling, and disposal. Meeting these requirements can require additional testing, documentation, and certification, adding to the development cost.
Design Changes
Changes to the design can add to the cost of electronic product design. The more changes are made, the more time and resources will be required to implement them. This is particularly true for electronic product development. Compared with software, an electronic product is much harder and more expensive to change.
Because of that, hiring senior, experienced engineers are generally more cost-effective than entry-level ones because of their experience.
Product development specifications (PDS) can also help prevent scope creep and avoid cost overrun. It contains all the requirements, constraints and specifications to which product development must adhere.
Testing and Validation
Testing and validation are critical phases in developing an electronic product. The number of prototypes required, the cost of developing prototypes, and testing equipment, on top of the amount of time required to validate the product, will all play a role in determining product development costs.
For example, knowing that tens or hundreds of prototypes are normally required for product testing and validation, you should expect to spend a lot more if your product has pricey components.
Intellectual Property
Protecting intellectual property can be expensive, especially for electronic products that are highly innovative or have unique features.
In the United States, for example, the fees associated with obtaining a patent can range from a few thousand dollars to over ten thousand, depending on the size and type of the entity seeking the patent.
In addition to the patent application fee, there are costs associated with preparing and prosecuting the patent application. These costs can vary depending on the complexity of the invention, the amount of time it takes to prepare and prosecute the application, and the hourly rates of the attorneys or agents handling the application.
Regulatory Requirements
Compliance with regulatory requirements can add to the cost of product development because you will need at least one or more certifications to legally sell your product in your target market. These requirements may include safety standards, environmental regulations, and electromagnetic compatibility (EMC) regulations.
If you want to reduce the development cost, consider acquiring only the mandatory electrical certifications such as FCC, CE, RCM or CCC.
Conclusion
The most important factors that can influence the cost of product development are product complexity, technology maturity and development team. From my experience, if the product you’re developing is reasonably simple and uses only mature technology, you should be able to develop it for under USD 100k. Make sure you only work with an experienced team, as design changes for electronic product design can easily break the bank. You can further lower the cost if you offshore the development to an overseas engineering team with a good reputation.
