What is Your PCB IQ? - PCB Pricing


Reading time ( words)

Take The Printed Circuit Girls and Geeks' 10-Question Pop Quiz on PCB Pricing.

Part One: Multiple Choice Questions 1. What is the largest factor the unit price of a PCB?a. Laborb. Materialsc. Capital Equipmentd. Profits

2. What is the second-largest factor?a. Laborb. Materialsc. Capital Equipmentd. Profits

3. What is the third-largest factor?a. Laborb. Materialsc. Capital Equipmentd. Profits

4. What is the fourth-largest factor?a. Laborb. Materialsc. Capital Equipmentd. Profits

5. The technology that impacts pricing the most is:a. Layer Countb. Hole Sizec. Line width and spacingd. Controlled impedancee. Substratef. All the above

Part Two: True or False Questions

6. PCBs are a commodity.

7. For low-volume PCBs, organic solderability preservative (OSP) is the least expensive surface finish.

8. Asking the suppler to waive NREs is a shrewd negotiating tactic.

9. It's best to let the assembly contractor handle the PCB procurement.

10. You can get better unit prices by cutting out the middleman.

Answers

1. Correct answer: a. Labor

Approximately 40% of your unit price can be contributed to labor and other overhead. That's why so much of it is sent offshore or to lower labor cost regions.

2. Correct answer: d. Profits

I know; it's surprising, and it doesn't seem to make much sense with all those U.S. shops going out of business or overseas. Although the survivors might not admit it, they are maintaining a healthy profit margin and there is absolutely nothing wrong with that.

3. Correct answer: b. Materials

Not only do raw materials rank relatively low in cost influence, their costs are pretty much the same for all fabricators...unless a fab shop sucks at negotiating with their suppliers, which should not be your problem anyway.

Now I know what you're thinking: If material cost isn't the primary driver, then why is everyone so concerned about the cost per square inch of circuit board? Because when we talk about cost per square inch, we're talking a lot more than material costs.

This is the smoking gun: Your price per square inch isn't based on material cost alone. It's got labor and profits--the bigger, more variable factors--rolled into it. That's why it's so important! With a little simple algebra you can figure out who's charging more or less for profit and labor. I'm not encouraging you squeeze all the profits out of your fabricator, but I don't want you to get robbed either.

So, how does one figure out the price per square inch for their PCBs? For the longest time I believed that if an equation even existed it must be well guarded, deep in the magical forests where the unicorns live. But after a decade of working in this business, I finally derived a formula that allows me to back calculate the average price per square inch from any particular PCB quote. And now I'm going to share it with you!

If I disappear suddenly without notice, you'll know why; I'm a marked woman for letting this cat out of the pink ESD bag.

To calculate price per square inch (PpSQ), get pricing from five or so suppliers that run in the same league. Remember to be fair and do apples-to-apples comparisons: Compare proto shops with other proto shops, high-volume with high-volume, offshore with offshore shops and so on. Likewise, compare similar technologies: Similar layer counts, microvia or HDI technologies and performance requirements. Then, simply plug the information in the equation below:Example:Qty: 10 pcsDimensions of a single board: 5" x 10" = 50 square inchesTooling: 250.00*Test: 180.00*Total: 720.00* If the tooling and test charges are not itemized I use typical values, which I am also going to share with you!

In our example, we figured price/square inch to be $0.58. Repeat this with the other quotes and compare the PpSQs. They should all be in the same ballpark. And if they are not? Then you have identified the shop that is putting more in their pocket, paying more for labor or running near capacity. Also, be wary of the low bidder--anorexic profit margins, under-staffed support departments and excess capacity are all signs of bad health. I usually take the average PpSQ of all of the quotes and use that as a benchmark for fair pricing. If a particular quote seems exceptionally high or low, I might not include it when I figure the average so that I don't skew my own reference point.

Now we all know you geeks love to do math, but, let's face it, true geeks are extremely busy individuals. I'm sure you don't have time to crunch simple numbers when you could be solving nonlinear differential equations or inventing a time machine--and I mean a real time machine, not just file backup software for Macs. So I've done all the prep work for you, putting the calculations into a spreadsheet that estimates the tooling and test charges and computes your PpSQ in a less than a nanosecond. To download it free, click here.  

4. Correct answer: c. Capital Equipment

While it might not top the list with labor and profits, capital equipment is still a big burden for fabricators. It is expensive not only to purchase, but also to maintain. A portion of each PpSQ is based on the cost of the equipment. The more complex your board is, the more sophisticated the equipment needs to be. Thus, higher technology boards cost much more than lower technology ones.

5. Correct answer: f. All of the above

That was a super easy question. I thought I'd throw you a softball for a change.

6. Correct answer: True--PCBs are a commodity.

Oh, yeah...there, I really said it. Let me clarify, anything in the 0.062" thick, 8 layer or less, plain vanilla range is indeed a commodity.

To make sure you are not overpaying for your PCBs, I've made this chart to help you understand the current state of the market and what is and is not considered a commodity in 2011:

7. Correct answer: True and false. It’s a freebie!

If you answered false, then you’re right, but only for high-mix, low-volume PCBs. Why?  Most small-to-medium fabricators do not have this process in-house and have to send to a third party, thus increasing cost and lead time. For these requirements, your conventional hot-air solder leveling (HASL) is the least expensive finish. And if you need a RoHS-compliant finish, then lead-free HASL is your next best choice, coming in at only about 5% more costly than regular HASL. Add another 5% to that for electroless nickel immersion gold (ENIG), and another 5% on top of that for immersion silver or white tin. I know…surprising! Immersion silver and white tin are not precious metals like gold, but for the same reason OSP is higher, so are these processes.  Finally, OSP tops the list with a 10% adder over silver or tin finishes when used in low volumes. 

If you answered true, then you are right, but only for mass production or if your fabricator has this process in-house. Mike Carano of OMG Chemicals, my go-to guy for all things PCB, claims the OSP is ~$ 0.15 per surface square foot including all the preplate cleaning, and accounting for new bath make-ups over the life of the bath. Their ENIG process is costing about $4-4.50 per surface square foot – due to the soaring price of gold. OSP is equal or slightly less than HASL when everything is considered! A great choice, as long as this process is done in-house.

Now, don't freak out and specify a finish based solely on cost – specify the finish that is right for your assembly and service environments. Carano explains, "Overall, your wet chemistry only contributes to about 2.5% of the selling price of a board." When we discuss price adders relative to each other, they might seem large, but the actual difference in the price of a PCB between the least and the most expensive is less than 1% of the total cost of the board.

In general, I recommend lead-free HASL unless the design has fine feature devices, like QFNs, BGAs, 0402s or QFPs measuring 0.5 mm or less. In that case, I recommend ENIG for its better printability. Both processes can be controlled well and are usually performed in-house for low-volume PCB shops, making them reliable and economical. Both are also very assembly-friendly, offering excellent shelf lives, solderability and testability. 

8. Correct answer: False--Asking the supplier to waive NREs can backfire and cost you more in the long run.

What you want is a low unit price. If you ask the supplier to waive tooling and test costs, they aren't going to provide the service for free--they still have to pay their engineers to tool up and program a test for your boards. What they will do to appease you, however, is disguise those costs into the unit price. Now, guess what? Every time you place a repeat order for that part number, you will be unwittingly paying for the NREs that were recouped with your first order. So you will basically be adding to the fabricator's profit margin with every subsequent order. Not shrewd at all.

My advice to you is to know what reasonable one-time tooling and test costs are and be willing to pay them up front. For a baseline of reasonable costs, download the cost calculator spreadsheet from my Web site and look on the tab titled "NRE Table" in the workbook.

9. Correct answer: Fase--It's best to maintain control of your PCB procurement.

No doubt about it, contract manufacturers are in a competitive business. They will plug in the lowest bidder every time. And while that may be okay if you have generic or commodity technology, it is not okay for anything else--especially when dealing with offshore suppliers who may not be UL approved or who are using an inadequate traceability system.

10. Correct answer: False--You can get better pricing and service by working with a PWB distributor.

Trick question. We had this on the last pop quiz. If you failed this question, click here to retake the supplier qualification quiz from January.

Basically, it all boils down to sales volumes. PWB distributors such as myself have the combined purchasing power of many assemblers and OEMs. The pooled demand gives us better quality, delivery and vendor response to last-minute changes.

Even with the price markup associated with brokerage, customers still get a better deal by working through a broker than if they do it alone. This is true with just about any broker, not just The Printed Circuit Girls and Geeks.

ScoringOkay, hotshot, how did you score on this PCB Pop Quiz? Give yourself one point for each correct answer and deduct one point for each incorrect answer.

If you scored 8-10 you're "Kevin Mitnick" quality.

You know who Kevin Mitnick is! He was the most sought-after computer hacker/fugitive in the world. He spent several years in federal prison for unlocking some of the most complex information systems on the planet. He used very specific guidelines and protocols to crack sophisticated security systems. You're cool and smart like him, just with PCBs...and you haven't been caught yet!

If you scored 0-6, you're "James Bond" quality.

Okay, so you have a lot of gadgets. And you probably know how to use most of them, but you don't know how to make them--much like very cool M--and you certainly don't know how to price them! So apart from being a potential customer, you're worthless to our industry. The good news is the PCB007.com Web site was designed for spies just like you (pun intended!). Keep visiting and one day you will emerge as an intelligent electronics geek... though once you do, you may never have normal romantic human relationships ever again.

If you scored LESS THAN ZERO, you're "David Beckham" quality.

Sounds good, right? WRONG! Playing professional, major-league soccer for the Los Angeles Galaxy and being irresistible is not all that it's cracked up to be. David Beckham couldn't transform the guys' locker room into a space shuttle, nor could he even recognize a PCB from a door knob. You REALLY don't want to be rich and famous. Keep taking our pop quizzes every other month and, hopefully, you wont fall into his miserable life of agony and misfortune.About The Printed Circuit Girls and Geeks

The Printed Circuit Girls and Geeks are a small, close-knit group with exclusive PCB distributorships with Asia and the United States. They are experienced (yes!) electronic professionals who have a reputation of being "all that and brains too." For more information, visit www.pcgandg.com.

About Shea Engineering

Shea Engineering Services provides technical marketing, sales and training materials to the electronics industry. Founded by Chrys Shea in 2008, the company leverages her 20+ years of process engineering experience to help suppliers test and introduce new products, promote their technical capabilities, and produce top quality reports, presentations and white papers. The company also provides customized on-site SMT and wave solder process assessment and training to assemblers. For more information, visit www.sheaengineering.com.

Share



Copyright © 2015 I-Connect007. All rights reserved.