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Why Non Recurring Engineering Cost (NRE Charge) is Important for Your PCB

NRE stands for Non recurring engineering. It is a term that refers to a one-time cost to manufacture and design a new product. Also, this term can have different meanings in different industries. However, in the PCB industry, NRE refers to the setup costs for producing a recently introduced PCB assembly.

What is the NRE Charge?

This is a charge that covers the development, design, and testing of a new PCB design. Also, this charge includes the up-front costs incurred during the design and manufacturing of a new product. This charge is inevitable in any PCB manufacturing.

NRE cost will have to be budgeted and planned for in the project plan. Also, NRE will add the cost of labor, material for prototypes, testing the products, and more. This cost all includes all expenses incurred in pre-production requirements and activities. Also, it covers all the software and electronics development.

In addition NRE is a one-time cost. This means that all the processes and materials will be properly reviewed and analyzed. This is to ensure that NRE cost is as accurate as the production or unit cost.

What is the NRE Charge for?

The non recurring engineering charge is in two different categories: programming and tooling.

Programming

This is also known as “setup fee.”  It usually takes labor and time to program machines for a specific PCB. The setup fee is non-recurring. The contract manufacturer can utilize the programmed data to produce the PCBA.  Programming costs is crucial when calculating NRE.

Tooling

The expenses incurred in getting some tools add to NRE cost. These tools include fixtures, metal, stencils, artwork, and more. They are specifically made for a particular product and for a particular customer. For instance, solder stencils are like finger prints. Also, you can only use them for a kind of circuit board. Therefore, they are only designed to fabricate one PCB. After this, you don’t need new stencils to continue manufacturing the assembly.

The tooling cost is the most complicated item when it comes to circuit boards. Also, it is a major part of this cost. The tooling cost requires consistency. Some engineers make a mistake because they think the PCBs involved in the project demands for multiple layers.

How to Pay NRE Cost

There are two different ways to pay non recurring cost. These break out or amortize. When you “break out,” you have to pay for programming and tooling a lot. The amortize option involves including the NRE to the unit cost. In this way, you can NRE in increments.

For instance, a contract manufacturer may have to charge $110 as per unit cost if the unit cost is $100 for each assembly. In this case, the per-unit charge will drop to $100 after paying the NRE.

The break out option is better. This is because it is difficult for contract manufacturers to monitor amortized costs. Some manufacturers don’t know when to get rid of the amortized NRE.

The NRE Process

The NRE process involves several stages which include:

System definition

This stage is important. It defines the performance and functions of the proposed product. Also, this helps to determine the specifications of a product.

Design and development

This stage involves product design. Also, there is a technology roadmap to get the final phase of the new product development.

Platform design process

This consists of elements like customer’s review of the plan, project plan, and statement of works. Also, this includes designing and reviewing final specifications. Once you approve the design and specifications, the manufacturer produces and delivers to the customer.

How to Reduce NRE Costs

Some parameters have a huge impact on NRE costs. Therefore, it is important to understand how these parameters affect cost. This awareness will help you minimize NRE charges.

Order quantity

You can minimize your cost by increasing the quantity of your orders. Also, you can panelize multiple projects. For instance, you placed two orders for two different projects, with each comprising 50 boards. If you separately placed these orders, your manufacturer will charge you NRE cost for each order. However, you will only get one NRE charge if you requested panelization of two orders.

Number of layers and physical dimensions

Using a greater number of layers or creating test beds for circuit boards will increase the material used and effort expended. Therefore, you can reduce NRE cost by designing a small PCB. Also, you should only incorporate multiple layers if needed.

Repeated orders

Another way to reduce non recurring engineering cost is by placing repeated order. Some manufacturers keep the programming files and stencils used in manufacturing your PCB assembly projects. If a manufacturer already has the programming files and stencils of your PCB design, it will provide a substantial discount.

Consideration During the NRE Process

Non recurring engineering (NRE) can be internally performed within the manufacturing company. Also, you can outsource to a third party service provider. The experience and skill needed for PCB manufacturing will determine this decision. The NRE costs don’t just play in the regular per-unit cost of a product. However, there are factors that impact the NRE costs. These factors include:

  • Type of technology
  • New product design’s complexity
  • Packaging type
  • Required skills
  • Amount of work
  • Required special procedures

When to Use Non Recurring Engineering

You can use non recurring engineering (NRE) when:

  • A producer stops supporting a customer needs ad a product to change the product and keep using the newer model.
  • A new product differs in performance with other standard products from a manufacturer
  • When a paying customer requests for added feature or capability to a product

How to Calculate NRE Cost

It is important to know how to calculate NRE cost. Calculating this cost entails deciding how large the project is. Although this cost depends on certain assumptions, you still need to consider some things. Also, NRE is a combination of the development process the project will go through.  

You need to determine your budget before you start calculating this cost. After this, you have to consider the time frame of the project. This helps to determine the cost of other aspects of this project.  Other aspects include the amount of renting or acquiring the location of the project.  Also, when calculating this cost, don’t forget to include the wages and salaries of staff and personnel.

Conclusion

Now you know what non recurring engineering cost is. Any questions? Ask us immediately. We will respond as fast as possible.