Electronic components sourcing and procurement in China

I quite often receive request for buying and procuring electronic components from China based on design which have been developped overseas. Our dear overseas customers usually imagine that buying western components from China will be cheaper considering that those IC may be manufactured in Asia. They usually get disappointed when they find out the price is finally not cheaper.

However, when they develop an electronic product by themselves in the west and come to us for manufacturing after they have finished their electronic development, and we issue them the cost estimation of their product for mass production,  they usually wonder "how come this product with similar function is cheaper than mine ?"

Well the answer is usually quite straight forward and simple: Electronic products designed in China are mostly developped with Asian components. This is how it get cheaper.

Why develop product directly in China make it cheaper for mass production

The battle of the cost is on the bill of material, not on the sourcing effectiveness of the components simply because big brand of components usually uniformize their pricing worlwide. Hence a microcontroler from Microchip is not really cheaper in China than in Norway. The bill of material depends on the solution used to engineer the product. So all the cost consideration actually comes from the design and engineering and not only from manufacturing (read the article about [intlink id="281" type="post"]design for manufacturing in China[/intlink])

If you are thinking that a msp430 is going to be cheaper because you are buying it in Chine where it might be produced,  then you are wrong, it is mostly the same price. Those big chipset manufacturer brands have uniformized their distribution and implemented a fair strategy to avoid that Asian distributors sell more than usa one at equal chance, so they don't have better price than western distributors. The myth of Asia is cheaper is gone for some products. This is the same than buying an iPhone in China: it will not be cheaper (whereas it should) just because Apple has decided that if Chinese people are able to buy some iPhone with sacrifying two months of their salary for some of them, then why reducing the price...if you want to buy an iphone at cheap cost, then i recommend Europe or USA

In fact some components might be even more expensive in China than in other countries due to import taxes reason. It all depends on the components brand and part number.

Choose component and solution strategically when developping an electronic product

 

Once again, I repeat it:  the battle of the cost is on the choice of the solutions not on the sourcing of the components.

Here is an example:

If you want to manufacture a LED display for shop like this one below:

If you develop it in the USA or in Europe, you would use a Microchip PIC8f or 16f microcontroler may be. If we would develop a LED sign, we would perform the electonic development in China using a microcontroler from the brand STC which is cheaper and can realize the same function. Have you heard about STC before ? Probably not and if you would, here is how is their unique website looks like.

Those microcontrolers are cheap and can do most of what you need for such application, but the service of the company who produce them is cheapt too. Good luck to find information, get some datasheet and obtain proper support if you are not locally based in China, not able to read and speak chinese...

You don't even know where are their office, fab etc...

I have seen in the past some bill of material including some Chinese components and chipset which the company producing them doesn't even have a website to contact them to purchase.

And you, what is your experience about sourcing electronic components in Asia ?

About Christopher Oliva 65 Articles
Christopher Oliva is an Engineer based in Shenzhen since 2008 involved in Product Development, Supply Chain, Sourcing, Quality Management and Manufacturing activities. With a Msc Electrical Engineering and a Business Administration background, an ISO 9001 Lead Auditor Certification, a Six Sigma Certification and a Quality Engineering Certification, he works as a consultant on mission and contract oriented to Product Development, Manufacturing Management, Quality Assurance & Quality Management System setup. He works in the product development and engineering field, and as well as an advisor and quality consultant for several quality control and quality assurance companies.