How can they make and sell products so cheaply? - Page 1
Forum section: electronics / beginners

author: Ram80
author_rank: Contributor
timestamp: June 15, 2024, 10:48:22 am
content: I'm currently designing a PCB. The base price is $2 for 5 but I've yet to add components such as MCU, LCD, buzzer and IC driver for LCD. So who knows what the final cost will be, maybe $5 per unit.Yet I see product such as digital calipers selling for $7 on Amazon.https://www.amazon.co.uk/Electronic-Micrometer-Conversion-Precision-Woodworking/dp/B0947SKCYS/And they have packaging and certification costs to take into account also. So how do they do it, they can't be making much profit per unit?Also how did anyone survive in the days before ultra cheap manufacturing such as with jlcpcb.

author: tooki
author_rank: Super Contributor
timestamp: June 15, 2024, 11:01:12 am
content: Extremely low labor costs (which means materials are cheaper too), low quality, huge volumes, government subsidies, nonexistent customer support, no R&D (just copy someone else’s design).

author: mariush
author_rank: Super Contributor
timestamp: June 15, 2024, 11:02:13 am
content: Also lower pollution standards, less health and safety, less environmental concerns...But things can be cheaper in volume.They buy the chips as bare silicon dies and they connect them to the circuit boards with bonding wires themselves (with a machine or by a human) then pour that black epoxy over.This way the chips can cost pennies especiallly when bought in thousands of pieces at a time.They panelize the pcbs and they order a ton of them (ex 1000 pcbs with 10-50 caliper pcbs per board) - they can add vscoring or other methods of separating the boards from panels easily.Have a look at how leds are manufactured from bare dies in the video below and see how they take round wafers and put that stretchy material over the surface and stretch it to separate the individual dies, then how the individual dies are picked and placed on leadframe and how the super tiny wires are connecting the die to the leadframe - now picture a pcb instead of the lead frameit's about 3 minutes in but the whole video is interesting to see

author: tooki
author_rank: Super Contributor
timestamp: June 15, 2024, 11:09:05 am
content: Quote from: mariush on June 15, 2024, 11:02:13 amYes! I actually thought of those and then forgot to type them out when I was writing!

author: nfmax
author_rank: Super Contributor
timestamp: June 15, 2024, 11:43:00 am
content: And never forget, lower rents

author: radiolistener
author_rank: Super Contributor
timestamp: June 15, 2024, 12:08:58 pm
content: Quote from: Ram80 on June 15, 2024, 10:48:22 amTheir real price is much smaller, these 7 usd includes marketing margin, shipping and a shop fee.You have the base price 2-5 usd because it also includes marketing margin, shipping and a shop fee.And they manufacture it in a large quantities, which allows to make it even more cheap.

author: Zero999
author_rank: Super Contributor
timestamp: June 15, 2024, 12:24:57 pm
content: Quote from: Ram80 on June 15, 2024, 10:48:22 amWell they're not great quality and made of cheap plastic, rather than metal, is why they're cheap.I have a similar pair of calipers. They're okay. Accuracy isn't great at about 0.1" or 0.2mm and they're pretty flimsy. I got them because they're plastic, which means they can be used to measure battery terminals. The low cost also means they're disposable and I wont' get too upset if they're get broken or lost.Don't get me wrong, they're fine for what they are and I would buy them again, but if you want good accuracy and something more hard wearing, then go with decent stainless steel calipars.

author: tooki
author_rank: Super Contributor
timestamp: June 15, 2024, 12:28:26 pm
content: Quote from: Zero999 on June 15, 2024, 12:24:57 pmYou mean 0.01”.(0.1” is 2.54mm.)The stated resolution on the product page is 0.01”/0.1mm.

author: Zero999
author_rank: Super Contributor
timestamp: June 15, 2024, 01:11:50 pm
content: Quote from: tooki on June 15, 2024, 12:28:26 pmYes. I got the decimal point in the wrong place. The resolution may be 0.1mm, but you'll be lucky to get an accuracy of 0.2mm.

author: coppercone2
author_rank: Super Contributor
timestamp: June 15, 2024, 01:43:13 pm
content: i wonder if they use that trick like with scales to round to the best looking number on verificationput it through a set of gauge blocks

author: sanleontexas
author_rank: Contributor
timestamp: June 15, 2024, 01:44:59 pm
content: And what makes you think that their certification standards are the sameas the certification standards you think they are following?

author: Ram80
author_rank: Contributor
timestamp: June 15, 2024, 01:58:01 pm
content: Quote from: sanleontexas on June 15, 2024, 01:44:59 pmDo they not need CE markings and EMF to sell in Europe?

author: themadhippy
author_rank: Super Contributor
timestamp: June 15, 2024, 02:16:38 pm
content: QuoteMost come with a ChineseExportmark, as for EMF ,they tend to be unbelievable

author: schmitt trigger
author_rank: Super Contributor
timestamp: June 15, 2024, 02:53:32 pm
content: Minimal testing.Power it up, is the magic smoke coming out? If not, just ship it!My statement above is OBVIOUSLY a sarcastic one, but the testing is minimal and the testing conditions very lenient.

author: ataradov
author_rank: Super Contributor
timestamp: June 15, 2024, 03:05:51 pm
content: While a lot of negative things mentioned here are true, significant part of the savings comes from being able to market and sell millions of units. The cost savings from that are unbelievable. Manufacturing at that volume was always relatively cheap, at least compared to what you can get at smaller volumes.And one other thing that Western designers tend to ignore - use of really low end MCUs with barely usable tools. And also dealing with other components with questionable specs. Of course your price will skyrocket if you can only deal with Arduino and RTOS and can't imagine coding some obscure proprietary MCU in assembly.You should be able to deal with component substitutions quickly, possibly weekly. If it takes months for you to verify and approve the substitution, you won't survive for long in such a "dynamic" environment. So, you will have to source more expensive parts with a reliable supply.And another thing that helps is access to excess capacity. Chinese vendors will readily design a product if they somehow manage to get an interesting component cheaply. This may mean they will only be able to make a limited run and never sell that product again. This is not the mindset of the Western companies. Many won't even start a design if they can't secure the component supply.

author: schmitt trigger
author_rank: Super Contributor
timestamp: June 15, 2024, 04:05:05 pm
content: My previous minimal-testing post was sarcastic, but I have a real world example of minimalism yet ingenious testing.The circuit itself was the classic two transistor astable, which would flash a pair of red LEDs. These would go inside a doll’s head and the LEDs would flash the eyes.The toy company purchased whole, untested pcb panels which had perhaps some 50 individual circuits.The individual circuits were arrayed in such a way that the negative of one would connect to the positive of the next. Since each individual circuit required 3 volts, the 50 board array was supplied with 150 volts DC. The LEDs would start flashing, and an operator would mark those boards that didn’t flash, the test was very, very quick.After the test, the panel would be depanelized and the nonfunctional boards put on a separate bin. Those non functioning boards were quickly inspected for simple errors like missing components or shorted joints. If no simple errors were found, the boards would be simply trashed.The board itself was thru-hole, single side, paper phenolic, no silkscreen nor solder mask, with only score lines for depanelization. The transistors themselves were no-name ones. As others have previously mentioned, any generic part number device that had been available during their manufacture, were used. Out of curiosity I tested some of the non- functional ones and found that some devices had essentially zero Beta. In other words, the transistor supplier hadn’t tested them either.

author: m k
author_rank: Super Contributor
timestamp: June 15, 2024, 06:41:20 pm
content: Think small simple round handmade lace tablecloth.How many steps the production hierarchy has.Every step is probably doubling the price.

author: soldar
author_rank: Super Contributor
timestamp: June 15, 2024, 07:23:40 pm
content: High volume. Even if they lose money in the manufacture they make it up in volume.

author: tooki
author_rank: Super Contributor
timestamp: June 15, 2024, 07:48:29 pm
content: Quote from: soldar on June 15, 2024, 07:23:40 pmThat makes zero sense. If you’re losing money on each unit, then by selling more units you will lose more money.High volume makes you money by reducing the cost of manufacturing, and the high volume itself means that a small profit per unit adds up to a lot of profit cumulatively.

author: TimFox
author_rank: Super Contributor
timestamp: June 15, 2024, 08:10:48 pm
content: Quote from: soldar on June 15, 2024, 07:23:40 pmThat's actually an old joke, dating back to 1833. Seehttps://www.barrypopik.com/new_york_city/entry/we_lose_money_on_every_sale_but_make_it_up_on_volume

author: HobGoblyn
author_rank: Unknown
timestamp: June 16, 2024, 08:56:18 pm
content: Quote from: mariush on June 15, 2024, 11:02:13 amI’ve probably said this before.A few years ago Record Power in Sheffield UK started getting most of their stuff made in the usual overseas places.I was talking to one of their employees who said that it’s massively cheaper to get their products made in a country with no emission laws, and ship them back to the UK, than it would be to get their UK factory up to the new emission codes.

author: coppice
author_rank: Super Contributor
timestamp: June 16, 2024, 09:06:13 pm
content: Quote from: Ram80 on June 15, 2024, 10:48:22 amWhat quantity did you assume when working out your component costs? Did you take published prices, or have access to some negotiated ones? If you've never worked in high volume products you might be astonished how much prices vary with how you get them. Even in large quantities it is not so rare to find people paying radically different prices for the same thing, based on how well they negotiated.

author: soldar
author_rank: Super Contributor
timestamp: June 17, 2024, 11:14:16 pm
content: Quote from: themadhippy on June 15, 2024, 02:16:38 pmThe "Chinese Export Mark" does not exist in any legal way. It is not mandated or recognized by China, or by the EU. It is simply a ruse to get around the requirement for CE mark with some plausibility of denial. In my opinion any court would rule that it is a fraud intended to deceive. Any product with that mark and not meeting the requirements of the CE mark should be confiscated and the importer fined. But inspections and enforcement are very weak.If anyone tried to do something similar with a trade mark they would soon find themselves in court and with a good chance of losing their asse(t)s.

author: soldar
author_rank: Super Contributor
timestamp: June 17, 2024, 11:28:56 pm
content: Quote from: mariush on June 15, 2024, 11:02:13 amI think this is a much smaller part of low costs than most people think. I think other factors have much more effect on cost.Also, China is moving very quick in the direction of reducing pollution, developing solar power and other green energy sources.These things are complex and defy simplistic explanations.I saw a documentary that explained how shipping consolidators can wait for free space in shipping containers and ship at ridiculously low prices because it would be wasted space otherwise. It's like flying on standby. The complexity of the logistics is astounding.

author: Kim Christensen
author_rank: Super Contributor
timestamp: June 18, 2024, 02:46:42 am
content: Quote from: Ram80 on June 15, 2024, 10:48:22 amA PCB in digital calipers won't be much bigger than 20mm x 30mm...If I go to JLCPCB's site and enter that size PCB, in 2 layer, for 1000 pieces they give me a price of $48 Canadian which works out to 5 cents a board. x1000 4 layer PCBs works out to 10 cents a piece.Then compare the component prices at JLCPCB's assembly service vs places like Digikey...

author: vk6zgo
author_rank: Super Contributor
timestamp: June 18, 2024, 02:53:30 am
content: The "Elephant in the room" is "exchange rates".Most countries float their currency, so that the rate of exchange is largely determined by people who buy & sell currency as if it was just another resource.The upshot is that those countries whose currency is little in demand can buy less from countries with a stronger currency, & conversely are in a more advantageous situation to sell to those other countries.Some countries don't float their currency, like the PRC, who can hold the value of the Yuan artificially low & benefit from this.The silliness of the exchange rate mechanism can be seen by any Australian who travels to Thailand.The baht is well down against the $A on the exchange rates, so our hypothetical Oz tourist can live really well on his/her Australian wage.A moment's reflection will reveal that Thai people aren't starving, & can obviously live a reasonable life, so the rate of exchange seemingly has no direct relationship to the real value of goods & services that a citizen of either country can get for their wage.

author: Haenk
author_rank: Super Contributor
timestamp: June 18, 2024, 06:51:04 am
content: Quote from: soldar on June 17, 2024, 11:28:56 pmWe ordered quite a bit of packaging material from Taiwan and China. The former is quite a large manufacturer, (being in the market for decades) you had something packed into packaging made by them, that's 100% sureHowever their promotional videos showing manufacturing were hair raising. Every possible working safety rule was completely ignored - but stating "modern production lines".Sure enough, even considering shipping, taxes and protective duties, their products came at about 1/5th of the price of the same packaging made in Germany.And those were not gigantic volumes, and from a known and respected company. So manufacturing on lowest standards possible, with cheaper machines, workers, material and huge quantities would drop the price probably way below raw material prices found in western countries.

author: SeanB
author_rank: Super Contributor
timestamp: June 18, 2024, 12:40:01 pm
content: On the selling side an old joke is the farmer at a flea market, selling new pliers for around 10% less than the hardware store. Buyer asks him where he gets them, as they cost more at the local hardware store. He replies the local store. buyer asks how come he is selling at a loss, losing 10% on each sale. Farmer replies it is still more profitable than farming.

author: Ranayna
author_rank: Super Contributor
timestamp: June 18, 2024, 12:50:38 pm
content: Quote from: soldar on June 17, 2024, 11:14:16 pmSince you can self-certify CE conformity for most products, the CE mark is pointless anyway. It has no value at all.

author: TimFox
author_rank: Super Contributor
timestamp: June 18, 2024, 03:29:40 pm
content: In Joseph Heller's WWII novelCatch 22, the entrepreneur Milo Minderbinder buys eggs for 7 cents each on Malta and sells them to the mess hall for 5 cents each.The profit comes from his buying eggs at 1 cent on Sicily and selling them on the market in Malta for 4.5 cents.Nobody discovered the Sicilian angle since everyone knew that Milo obviously would know where to get the best deal on eggs.

author: SeanB
author_rank: Super Contributor
timestamp: June 18, 2024, 03:38:57 pm
content: Remember the Chinese OEM also buys locally, the same parts you in the EU buy, just the OEM there does not pay for the shipping half way around the planet, the markup by at least 2 middle dealers, and the shipping and customs cost to bring them into the EU/UK/USA, plus also not the final distributor mark up, which basically means the $1 part you buy costs the Chinese OEM 1c, and he also can get them by walking across the road to collect. Same for the PCB, the solder paste, the housing and wire, plus a box, all local to the Chinese OEM, and likely all within 5 minutes of the assembler as well. Only one single shipping charge, and a single customs fee to pay, all on a much lower cost final part as well.

author: soldar
author_rank: Super Contributor
timestamp: June 18, 2024, 04:25:47 pm
content: Quote from: Ranayna on June 18, 2024, 12:50:38 pmWell, it is the responsibility of the European authorities to check for compliance. You occasionally see in the news that a shipment was stopped at the border or that a warehouse was raided and the merchandise confiscated but it seems it is not done enough to discourage the importation of non-conforming products.I suppose the EU authorities could penalize the importers with big fines and if they are repeat offenders fines big enough to shut them down.

author: soldar
author_rank: Super Contributor
timestamp: June 18, 2024, 05:27:00 pm
content: Quote from: vk6zgo on June 18, 2024, 02:53:30 amThis, like most things, is more complicated than meets the eye and is often distorted and misused to paint China in bad light like what they are doing is unfair. I do not see it that way at all.The USD and the CNY are fundamentally different. The USD is used worldwide for exchange and for reserve and it is THE measure of value. The RMB is used internally in China. The USD today is the reference, it is like gold was 100 years ago.The US and other countries buy from China in USD, not in RMB but is USD. Well, EUR and others in lesser scale but the point stands.A buyer somewhere in the world agrees to pay X USD to a Chinese seller in exchange for some goods. He agreed to a price which he believes to be good for him and he pays those X USD. I do not know to what extent the seller is obligated to change all or part of the USD by selling them to the State but let us assume it is all. The State pays a rate which it has the authority to set and which may be more or less advantageous or detrimental but it is no different from other countries imposing taxes or giving subsidies to their own manufacturers or exporters.There is nothing nefarious or immoral about it like some people want to make it sound. It is one more instrument of monetary policy which western countries have used many times in the past when it suited them and which, no doubt, they would use again if it was useful.Link to a graph showing the exchange rate since 2004. I hate it when they use the inverse and the graph goes down when the value goes up.https://www.cityindex.com/en-au/-/media/shared-media/2024/01/cny-mar-26.png

author: Krotow
author_rank: Regular Contributor
timestamp: June 18, 2024, 09:26:22 pm
content: Quote from: schmitt trigger on June 15, 2024, 02:53:32 pmUnfortunately true. Got two Chinese PCBs in days. One was "the same", but 5$ less expensive from different supplier. It turned out only half-functional. Dismantling revealed lack of solder mask under one of output MOSFET drain (D2PAK package). Obviously nothing happened when expected to happen. That board also had slight cloning marks like blurry silk screen text and lack of manufacturer logo. I believe that cloners skip even the plugging in part. Luckily components was functional so probably will go into some DIY prototype.

author: vk6zgo
author_rank: Super Contributor
timestamp: June 18, 2024, 11:31:34 pm
content: Quote from: soldar on June 18, 2024, 05:27:00 pmI agree there is nothing immoral or nefarious, & would contend that the concept of "floating" currency leads to the situation where countries whose currency is valued less by the market are normally at a disadvantage.China is a developed country who are using their manufacturing base to "play the other rich countries at their own game".The mighty "greenback" dipped down in value during the GFC, to the point were it was valued at less than the $A.During this period, DSOs were quite affordable to Australian buyers, even including the delivery costs, but that was then.Later versions are still touted as "cheap"on EEVblog, but at the current exchange rate are far from being so.OK, DSOs are not bought by every household, but the same thing happens to other products which are.

author: golden_labels
author_rank: Super Contributor
timestamp: June 19, 2024, 01:18:26 am
content: Quote from: soldar on June 17, 2024, 11:14:16 pmThere is no such thing as “Chinese Export” mark, legal or otherwise.It’s an urban legend. Those are just poorly drawn CE marks.It’s not an indication of failing to meet requirements either. In particular not a conscious attempt to circumvent the law, as that wouldn’t work. The regulations must be obeyed regardless of what you draw on your product.

author: coppice
author_rank: Super Contributor
timestamp: June 19, 2024, 10:57:49 am
content: Quote from: golden_labels on June 19, 2024, 01:18:26 amIt probably comes from conflating a couple of things. A Chinese company can't just export a product because it can make them and find a foreign market. They need a licence to export classes of products. I think in some cases they might need a specific licence for individual models of a product, but its usually a licence for a class of products. So, there is a concept of a product being a Chinese export approved product, but that CE mark has nothing to do with it.