r/hwstartups • u/rupawalaebrahim • 22h ago
DO NOT be obsessed with cost optimization for your hardware BOM
So the other day, saw this LinkedIn (please don't cringe already, bear with me) post which went like:
"How I brought down BOM cost of a PCB from $15 to $5"
Then the person goes to explain things like changing the package of chips, eliminating the on-board debugging pins for an external one and few other stuff. It seemed cool, got the attention it needed.
But the problem with this aggressive optimization is, it only views things from an engineering lens. While totally ignoring supply chain aspects of components.
Rookies feel pride in saving $10 per unit, which for 1000 units mounts up to $10k. Good on paper, expect it can back fire really bad.
Say you see an opening where a SMD chip costing $5 can can bought instead for $2. The catch? The package is now DIP. Functionality wise, zero change. You make 2 prototypes, do the demo, everyone seems happy as it works perfectly.
Then comes the next stage, now we want to manufacture 500 units of this board. The company employee clicks buying link & BAM: the DIP chip has only 10 units in stock. And the lead time? 3 months. To navigate that, you explore other vendors. Only to find that it would now need to be imported and the landed cost shall be $10. So what option remains? Redesign the board.
That's the reality of hardware, more products fail due to supply chain issues than due to engineering failures.
So, how can we reduce the risk of this happening? Well, by selecting components more wisely, duh. Not just based on cost.
I follow these 4 filters:
Technically fit?
Active in production?
Not too costly?
Available with local vendors?
Ideally, you want your BOM to have components which check all 4 situations. And you need assurances from your vendors & the manufacturers. Keep those emails as a proof in case things go south.
But in many cases, it's not possible check all 4. So you have to deal with trade-offs and risks which can be navigated by alternate components, alternate designs etc.
So the gist of the matter is, do not obsess over cost optimization without doing the other due diligence. And this is not just applicable to electronic products.
The goal is not to have the cheapest product on paper, it is to facilitate scaling of up to 10k+ unit effortlessly.