What does it cost to develop a product?
Copyright 2018 McKenzie Electronic Design
PO Box 592, Eastwood
NSW 2122, Australia
www.mckenzieelectronicdesign.com © 2018
Before you get started down the road of product development, you need to have an idea of the ball park costs involved.
A simple small audio player using a custom silicon chip is going to cost more than $1000 to develop. It will cost more like $4.5 million to develop, simply because it is using a custom chip. With an off the shelf chip and plastic box (keeping the functionality plain and simple), the electronics and firmware will cost around $25,000 to $30,000 to develop a prototype, depending on your requirements. $45,000 to $55,000 once in production.
Ball park figure - What is it going to cost?
There is no point in wasting your time and money if
the cost and time involved is beyond what you are prepared to pay.
What does it cost to develop a product?
Where does your idea fit on this scale of products that have been developed?
How do companies make electronics so cheep?


A product that costs $15 million over 3 years to get into production and then sells 2 million products per annum could be on the shelf for $59.95, depending on the cost of parts, manufacturing and distribution.
A gift card with a custom music chip would cost $4.5 million to get into production and raises the cost of the card by around $1.80 retail.
Incremental development makes electronics even cheeper.
It is much cheeper to modifiy an existing product than to create a new product.
For this reason (and to trial out new ideas before the next big release of a product), a product is often itterated. New RF chip, larger memory, upgraded and improved firmware. This allows for continued sales, the periodical introduction of the product improvements, market testing of new ideas and the cash pool from the incremental sales helps pay for the development costs of a new product. When that new product is released, the develpment cost has already been partially paid for. When less development costs have to be recovered, the electronics is even cheeper.
With volume production using existing distribution channels to get large quantities of product shipped into many markets.
Apple's original iphone
mobile telephone
USD $150 million
2.5 years
LG's
Flatscreen TV
$22 million
4 years
For any project of this size, multi-disciplined engineering teams with project management oversight is required.
How about buying and or adapting something that already exists.
Mains Power Adapter
AUD $115,000
8 months
Wireless Network Router
AUD $400,000
15 months
Development Costs
For any project of this size, contracting the work out is best as you get highly skilled expertise without the expensive payroll to fund year round. The work required is not full-time on the one project.
The more complex the product is, the higher the development costs and the longer it takes to develop.
Too Expensive?
The following two sites issue a word of caution when trading through Alibaba
"You can window shop on Alibaba to get a sense of pricing and product categories, but for anything else you need a plan for opportunistic through strategic sourcing, a sourcing professional and a presence on the ground in China to execute a multi-phase evaluation and vetting project." - China Law Blog
Products
POTS Telephone Handset
AUD $250,000
12 months
This is as cheep
as a project will get when plastic injection
moulding and electronics are involved.
The prices and times listed are indicative only as actual prices and times vary depending upon specific customer requirements
Note: Factories in China do not like to work with order volumes under 10,000 units or 30,000 units with the larger factories.
en.wikipedia.org
In BIG bulk VOLUME