Hardware cost reduction becomes a priority when your electronic product works, but its manufacturing cost is too high. You may be preparing a prototype for production or reviewing an existing product as sales volumes increase.
Perhaps your bill of materials (BOM) costs €42 per unit, and your target is €30. Or saving €2 per device could make a meaningful difference across thousands of units.
There are two questions to answer: where can you reduce costs, and will the savings justify a redesign?
Manufacturing costs can be reduced through component selection, architecture changes, PCB optimization, and improvements to assembly or testing while maintaining the product’s required performance, reliability, and compliance.
Those savings must be weighed against the cost of engineering, prototypes, validation, and any required certification work.
In this guide, we’ll explore practical ways to reduce hardware costs and show you how to calculate the production volume needed for a redesign to pay for itself.
How to Reduce Hardware Costs
Start by identifying the components and manufacturing steps that contribute most to the cost per unit. Include PCB fabrication, assembly, programming, calibration, and testing alongside component prices.
Review the Biggest Cost Drivers
Sort your BOM by cost and examine the largest contributors, such as processors, wireless modules, displays, sensors, and connectors.
For each one, ask: does the product need all the capabilities we are paying for?
Components selected during prototyping often prioritize availability, development support, and flexibility. Once the requirements are established, some of that flexibility may no longer be necessary.
For example, an MCU may have more memory, processing power, or peripherals than the finished product requires. A smaller device within the same family may offer savings with fewer design changes.
Review specifications such as sensor accuracy, component tolerances, and temperature ratings, while preserving the engineering margins needed for reliable operation.
Check sourcing prices at your expected production volume, too. Better purchasing terms may reduce costs before any hardware changes are needed.
Simplify the Hardware Architecture
Look for functions that can be combined or handled by components already in the design. An MCU’s internal peripherals may replace an external IC, or a wireless MCU may combine processing and connectivity in one device.
Other opportunities include removing external memory when internal capacity is sufficient, reducing unnecessary power rails, and eliminating interface circuitry that is no longer needed.
Figure: Component choices shape hardware complexity and manufacturing cost
Removing a component can also remove its supporting passives and reduce PCB area and assembly work. Check each change against the product’s requirements, including accuracy, power consumption, and protection, before counting it as a saving.
Figure: Component choices shape hardware complexity and manufacturing cost
Evaluate Module-to-Chip Changes
Wireless modules simplify development by integrating the radio and supporting circuitry. Depending on the module and its integration conditions, existing approvals may also reduce some compliance work.
At higher volumes, implementing the circuit directly on your PCB, often called a chip-down design, may lower the cost per unit.
However, compare the module price with the complete replacement circuit, including supporting components, PCB fabrication, and assembly. The radio IC price alone does not represent the new manufacturing cost.
The change may also require RF engineering, antenna matching, firmware changes, and additional testing or certification. These upfront costs determine whether the unit savings are worthwhile.
Optimize PCB Fabrication and Assembly
Review board dimensions, layer count, and fabrication requirements with your PCB manufacturer. Savings may come from better panel utilization or removing features such as blind vias, via-in-pads, or special materials where they are unnecessary.
Reducing layer count can also lower fabrication cost, but the revised layout must still meet signal integrity, power integrity, thermal and EMC requirements.
Assembly offers another source of savings. Look for manual soldering, cable installation, multiple board connections, and lengthy programming or calibration steps.
For example, removing an unnecessary connector and cable could save €1.50 in parts, plus the labor required to install them. Standardizing component values and reducing unique parts may also simplify purchasing and production.
Use manufacturing quotes to confirm the expected savings. A smaller board or fewer components does not always produce a proportional reduction in cost.
Include the Full Redesign Investment
Once you have identified potential savings, estimate the full cost of implementing the changes. Depending on the scope of the redesign, include:
- Hardware, firmware, and mechanical development
- Prototype builds and validation
- Required compliance testing and certification
- Manufacturing setup and test fixture changes
- Transition costs, including unusable inventory or tooling
For a product already in production, agree on a transition plan. Existing components, finished stock, and supplier commitments can affect when the savings begin.
Is a Hardware Redesign Worth It? Calculate the Break-Even Point
With the expected unit savings and full redesign investment estimated, you can calculate how many units are needed to recover that investment.
Use total manufacturing costs for both versions, priced on a comparable basis at the intended production volume.
Saving per unit = Current manufacturing cost − New manufacturing cost
Then calculate:
Break-even units = Total redesign investment ÷ Saving per unit
For example:
| Item | Illustrative amount |
| Current manufacturing cost | €42 per unit |
| Manufacturing cost after redesign | €34 per unit |
| Saving per unit | €8 |
| Total redesign investment | €24,000 |
| Break-even volume | 3,000 units |
In this example, manufacturing 3,000 units with the revised design would recover the €24,000 investment.
If you manufacture 20,000 units, the estimated net saving would be:
(20,000 × €8) − €24,000 = €136,000
This estimate assumes the projected unit savings are achieved and does not account for when costs and savings occur. If the redesign does not reduce manufacturing cost per unit, it cannot recover its investment through unit savings.
Calculate the Break-Even Volume for Your Product
Use the calculator below to enter your current manufacturing cost, estimated cost after optimization, total redesign investment, and expected remaining production quantity.
| Colour | Option name | One-time cost (NRE), EUR | Cost per unit, EUR | Remove |
|---|
| Option | Total cost |
|---|
Not counted: tax, financing, risk, quality, time to market.
Compare the break-even volume with your expected remaining production quantity. Count only units that will use the redesigned hardware, since earlier production does not contribute to recovering the investment.
Check How Sensitive the Decision Is to Sales Volume
A redesign may look attractive under one forecast and lose money under another. Test low, expected, and high production scenarios before committing.
For a redesign that costs €30,000 and saves €3 per unit, the break-even point is 10,000 units:
| Remaining production volume | Total unit savings | Net savings after redesign investment |
| 5,000 units | €15,000 | −€15,000 |
| 20,000 units | €60,000 | €30,000 |
| 50,000 units | €150,000 | €120,000 |
If a change only pays off under the most optimistic forecast, consider whether a smaller redesign or sourcing improvement would offer a more dependable result.
Choose Which Changes Are Worth Pursuing
Several changes may offer savings, but they do not all need to be implemented.
Estimate the unit saving, upfront investment, and break-even volume for each opportunity. Then assess what the change could affect, including firmware, RF performance, EMC, thermal behavior, reliability and production schedules.
A component substitution with modest savings may be preferable to an architectural change that requires extensive validation. Conversely, a larger redesign may be justified when sufficient production volume remains.
A redesign may be difficult to justify when:
- The product is approaching end-of-life
- Remaining volume is below the break-even point
- Validation or certification costs outweigh the savings
- Production delays would consume the expected benefit
- Engineering resources would deliver more value elsewhere
For future products, set a manufacturing cost target alongside the technical requirements and specify the production volume it is based on. Reviewing costs before the design is finalized can reduce the need for expensive changes later.
Need to Reduce the Cost of Your Hardware Product?
At Oxeltech, we help companies identify practical ways to reduce manufacturing costs through component selection, hardware redesign, PCB optimization, and manufacturing improvements.
Whether you are preparing a prototype for production or reviewing an existing product, contact us to explore potential savings and assess whether a redesign is worth the investment.
