This article will review all the essential information about the NRE Charge that one needs to understand. In a nutshell, the NRE Charge stands for Non-Recurring Charge; from that, one can already conclude that it is an expense that is paid once.
As many people know, recurring refers to a repeated activity; however, in the case of NRE, it is non-recurring. Hence, its payment is conducted straight away. Further, depending on the industry, it can have countless meanings. But in our case, this is how we define NRE Charge.
Typically, the NRE Charge should be computed before proceeding with the production since its calculation includes personnel wages, materials, prototype construction, production of test products, an inspection of products, and all sorts of fixture costs needed. Thus, it is essential that it should be thoroughly planned and allot adequate budget for the manufacturing.
On that account, we intend to inform our readers of the necessary details they must have an idea about NRE Charge; this includes the definition, purpose, payment methods, process, ways to reduce the costs, and detailed approach to calculating the expense. All of this information is the essential details one should know about NRE Charge; hence, we recommend completing the entire post to comprehend its principle fully.
Introduction to NRE Charge
What is Non-Recurring Engineering (NRE) Charge?
As mentioned, the Non-Recurring Engineering (NRE) Charge is a payment performed in a single time; it already includes the research, development, designing, inspection of the board, and other necessary actions and components for the production to proceed.
In addition, the NRE Charge’s covered expenses should be conducted before production begins. Once it already commences, it will no longer be incurred. Hence, if a customer intends to create or modify a product, it is recommended to plan the project extensively. In that way, they can be ready to pay the NRE Charge and other extra costs.
Nevertheless, not every product the manufacturer offers is subject to NRE Charge; there are only two (2) cases wherein NRE Charge partakes in tooling and programming. Essentially, the tooling covers fixtures, presses, stencils, artworks, metals, jigs, and press-fits. While programming includes machinery that necessitates arrangement. Overall, the NRE Charge strictly covers the process and materials needed for the project. In that way, the manufacturer can produce an accurate, timely, and quality output device.
Definition of NRE Charge
Purpose of NRE Charge
As stated, there are two (2) categories that the NRE Charge is frequently associated with; we have tooling and programming. In this section, we will dig deep into each of these classifications to further understand the concept and principle of the NRE Charge.
In the previous section of the article, we’ve made clear that some of the toolings include fixtures, presses, artworks, jigs, metals, stencils, and press-fits since they are mainly designed for a specific purpose and application. Take, for example, a Solder Stencil; since they are regarded to have the characteristics of a fingerprint, they can only be incorporated in a product that was programmed to function in that particular print. Otherwise, it won’t work.
As mentioned, the programming handles the labor and machinery program costs. It is regarded as a setup fee and a non-recurring expense. Further, many experts state that it is one of the vital aspects in computing the NRE Charge.
Ways to Pay NRE Charge Cost
In a nutshell, there are two (2) approaches to paying the NRE Charge Cost; we have the breakout and amortize. However, each of these ways has its own pros and cons. In this section, we will thoroughly differentiate them to fully decide whether the other option is better than the other one.
Essentially, in the breakout option, there is an upfront payment for the tooling and programming; it can be relatively expensive. On the contrary, the amortize option, wherein the customer will pay for the unit cost with the additional expenses for the NRE, is usually done in periodic payments with an increasing amount due to its principal interest. If the item value for an assembly is $200, the selected manufacturer might demand $210 per piece. Then, the per-unit price would fall to $200 when the NRE is completed.
Although some people might say that amortization is a better option, it can be complicated to manage and monitor them. In some cases, the less experienced manufacturers can’t determine whether the amortization value is already enough for removal. Therefore, a lot of experts would recommend the breakout option.
Different Methods of Paying NRE Charge
Extensive Process of NRE Charge
In order to fully comprehend the process of the NRE Charge, we will share the several stages it passes through in this phase of the article. Generally, there are three (3) fundamental phases that the NRE Charge undergoes; we have system definition, design and development, and the platform design process. We will dissect each of these aspects in detail.
It is the initial step in calculating the NRE Charge since the definition of the functions and performance of the item is conducted in this particular phase. Thus, the manufacturer can simply understand the necessary specifications of the project.
Design and Development
As its term indicates, this stage includes designing and developing the product, like its necessary specifications, costs, components, structural demands, and the roadmap to ultimately produce a quality and functional output.
Platform Design Process
These include things like the design document, the description of the project, the client’s appraisal of the proposal, and so on. Additionally, creating and revising new block diagrams, bills of materials, design reviews, and other documents come next.
Various Ways to Lessen NRE Costs
There are countless factors to reduce the NRE Charge Costs. In this section, we’ll try to help our readers to minimize their costs; hence, it is essential to understand the following parameters thoroughly. In that way, one will have adequate awareness of NRE Charges.
As its term indicates, increasing the number of orders one will purchase can significantly reduce the resulting cost of the NRE. It would be better to ask some of the people in the same industry if they’d like to collude. In that way, both parties can enjoy reduced expenses.
Layers and Dimensions
If necessary, it is recommended to order a Small PCB since the more layer it has, the more it’ll be costly. We suggest going for a compactly designed board if it isn’t needed to have countless layers. Thus, only purchase a board with several layers if it is highly needed.
Some manufacturers keep a record of the previous stencils and programming; hence, if one opts to purchase from that particular producer repeatedly, they will likely still have the exact configurations for the previous orders made from them. In that way, the consumer can reduce the costs of the programming and tooling.
Calculations for NRE Charge Expense
One of the crucial aspects to consider is to have a grasp of the compelling way to calculate the NRE Charge Expense. In that way, one can carefully set a desired budget that will align with the expected project output.
Basically, the process of calculating the NRE Charge Cost is pretty straightforward. Firstly, it includes the project’s dimension; however, it will solely depend on the board’s purpose. Hence, thoroughly considering this aspect, especially on a tight budget, is essential. Since the NRE is composed of the junction of the development process and project, expect that even if it has been thoroughly calculated, it can still be relatively costly in some ways.
Consequently, we recommend determining the budget beforehand. Following the considerations, it is suggested to specify the project period since time can significantly contribute to the cost of the NRE; the longer it takes, the higher the cost will be. Besides that, consider the costs of acquiring the project’s location, its staff’s wages, and other expenses.
In conclusion, NRE Charge is an upfront payment that must be performed by the consumer before commencing the production of the desired project. In terms of its payment method, it can be either through the breakout or amortization approach. Although NRE Charge Costs can be expensive, we’ve mentioned several ways to reduce such expenses.
If you still have questions, do not hesitate to reach out. PCBTok is constantly available for the needs of its consumers; we always guarantee complete client satisfaction if you choose us. Due to our unique treatment of our customers, we have gained countless praises across the globe. All of these wouldn’t be possible without the clients that continuously believe in our capabilities.
If you’re still unsure where to acquire your specified PCBs due to expensive NRE Charges, look no further, as we are constantly offering daily discounts. We can quote you NRE Charges that will surely fit your liking without settling for mediocrity! Contact us today!