Why Contract Electronics Manufacturers Charge for Non-Recurring Engineering (NRE)

April 03, 2018

Why Contract Electronics Manufacturers Charge for Non-Recurring Engineering (NRE)

If you are involved in the procurement of printed circuit boards or electronic assemblies you likely see a line item on your quote for non-recurring engineering or NREs on a contract manufacturer’s first-time build of you product. It’s a common question in our industry— “what are NREs and why do I have to pay for them”?

NRE is a comprehensive term that refers to any step that is unique to the manufacturing of your project and isn’t needed in any subsequent build of that version of your project.

NRE steps include:

Design
Set up is recurring, for every lot built
Tools
Programming development
Test development

NRE is a one-time fee that provides transparency of these costs from the building of products, in this case printed circuit board (PCBs) or electronic assemblies. It is developed solely for your project and won’t be utilized for other customers. Once the service or tools stipulated by NRE is complete, it will be available for the manufacture of that version of your product for its life. (it is possible that some tools may need to be replaced due to wear and tear).

NRE can also be amortized across one or more builds of the product. If amortized, the NRE is embedded in the unit cost of the product.

Consider it this way: If you paint your house with a color you’ve invented, the chances that the painters will ever be able to use that paint again is minimal, so they’ll charge you not only for the labor of painting, but also for the development, creation, and testing to get the exact custom shade you want.

In the world of printed circuit board manufacturing, common NRE charges that you may be charged a separate NRE for are:

Stencils
Artwork
Press-fit tools
Programming machinery

For electronic assemblies, including mechanical parts, common NRE charges that you may incur a separate NRE for are:

Molds for plastic components
Placement jigs
Special punches for sheet metal
Stamp tools
Silkscreens for labeling

Additionally, depending on requirements, developing test fixtures and procedures may be included as NRE items.

Each of these tools would be unique to producing your product so a one-time fee is charged when manufacturing a new product. Repeat production runs are not susceptible to NREs unless revisions have been made—which may or may not affect NRE costs.

You can moderate NRE fees when you’re working with one manufacturer from start to finish. When the same team works on each stage, many of the NRE steps can be consolidated or adjustments can be made to certain stages to help minimize the cost per step—making your project more efficient.

Because we are a one-stop-shop for design, development, and manufacturing of electronics, ACDi will work with you to help mitigate the NRE charges wherever possible. We can suggest common tools and NRE development across multiple product lines where applicable to help to minimize NRE expenses. Our goal is to help you make the most of your ROI and provide the best possible comprehensive all-in-one experience for your electronics manufacturing project.

Blog