Beyond Digikey - High Volume Component Pricing

[Poe]

How do you make cost decisions when the volume/price curve has plateaued on websites like Digikey?  What if your volumes are not large enough to buy direct?

When designing a low volume product, I typically use Octopart to determine component costs.  I'll assume the CM or buyer might do better, but everything will scale such that one part is still a good choice regardless of slight volume changes.  Working for a CM, I've seen this mostly hold true if sufficiently large volumes are used as a starting point.  For example, an entire reel as a starting point scales better than cut tape.

Listening to the most recent AmpHour though, got me thinking about the Steam Controller's BOM cost.  iFixit lists three of the ICs with a total of ~$10 at 100pcs.  Octopart distributors give little price break from there up to 10k.  Obviously those prices will drop when buying direct with a large (~100k MOQ), but what about the in-between?

What do you use as a price/MOQ/lead-time reference when designing at higher volumes? 

[lgbeno]

I would have a conversation with the manufacturers and ask them what they recommend at your volume.  Each chip company's commercial policies very so widely that there is no one single answer.  For example the rule that I would use for TI is to take their 1k published pricing apply a volume discount like 10% or 20% and then have the TI sales guy set up a quote with Avnet at that price.  Atmel supposedly gives strong breaks at low volumes in a direct way (or through disti).  Microchip will sell you 10 parts direct.  Like I said each co is different but I think it all circles around become friends with your sales guy


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[Poe]

So there's no easy way to approximate higher volume pricing data? 

If anyone here has designed a 'high volume' & price sensitive product, what was your work flow like?

Most of my designs have been very price sensitive with our foreign factory buyer feeding me pricing info only when it didn't scale with Digikey.  e.g. All Digikey prices dropped roughly the same percent except one because it was made in the states and was difficult to get.

Unfortunately I've only had a few designs where cost wasn't under the microscope. 

The thought of contacting three dozen sales reps for pricing, just to consider one of several design options sounds crazy. 

I guess that's what buyers are for?

[uoficowboy]

I used to do a lot of high volume design (1M+ units per year with manufacturing in China).

I ignore low power passives - they can be second, third, and two hundredth sourced and tend to be a small % of the BOM. I aim to use commodity transistors and diodes when possible - for example, the MMBT3904 is available for less than a penny (~$0.0075) when you hit volume... BAT54J is crazy cheap, etc. Always use standard footprints so you can second source everything (for example - LEDs!). When I can't use commodity Si parts I'll get quotes and try to design in multiple vendors (and get quotes from both).

For high power passives parts - I get quotes from companies making parts I'm interested in and will play them off each other without revealing much if any competing information - in other words - tell vendor B that a competitor is doing better on pricing, but leave out who the vendor is and what the exact offered price is.

For microcontrollers I normally choose a family and talk to the vendor about which specific part will be cheapest.

For most ICs I'll have a quote in hand before I design it in.

In other words - there's a lot of getting prices, and there's a lot of negotiation. For me it was not fun, which is why I'm back in an R&D environment now

[AndyC_772]

Poe, it sounds as though you don't have an established relationship with any of the major distributors.

Talk to your account manager at somewhere like Arrow or Avnet. These are the distribution channels that work for orders in the 100+ to 100,000+ region. Invite them in, discuss your project, and get your design registered with the manufacturers of the major components on your BoM. You should be able to get a supported price, technical support, a firm quote, and at least a reasonable estimate of lead time.

[DutchGert]

Poe, it sounds as though you don't have an established relationship with any of the major distributors.

Talk to your account manager at somewhere like Arrow or Avnet. These are the distribution channels that work for orders in the 100+ to 100,000+ region. Invite them in, discuss your project, and get your design registered with the manufacturers of the major components on your BoM. You should be able to get a supported price, technical support, a firm quote, and at least a reasonable estimate of lead time.

Exactly. and as well as offer you prices they can be supprisingly helpful on other aspects of the design as well.

[tszaboo]

Poe, it sounds as though you don't have an established relationship with any of the major distributors.

Talk to your account manager at somewhere like Arrow or Avnet. These are the distribution channels that work for orders in the 100+ to 100,000+ region. Invite them in, discuss your project, and get your design registered with the manufacturers of the major components on your BoM. You should be able to get a supported price, technical support, a firm quote, and at least a reasonable estimate of lead time.

And it is also worth mentioning, that when the numbers go high, that Digikey is not a good source anymore, that is the time to step back and give the purchasing job to someone else. It takes surprisingly high effort and a different skillset to navigate this world, and engineers should be focusing on the design itself.
I know it sounds scary, but the reason you are asking this on a forum suggests, that your company is missing a manager or two.

[AndyC_772]

I don't know I'd ever suggest adding managers as being a solution to a problem!

What's needed here is simply experience. If you've not designed a product with this type of volume in mind before, there's no magic involved, just the knowledge of what needs doing and how to go about it.

[lgbeno]

Keep in mind that disti has margin expectations above and beyond the semi guys.  If you van buy directs and the lead times and MOQ makes sense then direct is a better option.  Disti adds value but you have to be sure that you are using it before paying the premium.  Sometimes once the lead is registered, the hidden tax applies.  The same thing goes with independent sales reps.


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[Poe]

All good advice, thank you.

Unfortunately I don't think some understand exactly what I'm asking.

Getting prices isn't hard.  Rather how to do it efficiently.

Has anyone found an easier/faster/cheaper way other than using a buyer?

I work for a CM.  Sales and engineering is state-side.  Factories in India/China/Germany.  Each factory has buyers who deal with the component manufacturers or distributors. 
Thank god I'm out of that. 

Anyways, those buyers are great and obviously required for any competitive CM, but dealing with them as a designer is laborious.  Since design work is only value-add for our company, requesting pricing on more than a handful of components means I'm not getting any feedback for weeks... and for good reasons.

Designers working for our high volume customers appear to simply have the margins to not worry about it during their design process.  It's like an afterthought, considered as needed.  They pick the parts that work then move onto something else.  Some care so little that they use one chip manufacturer and get them to do the design work.  When the customer starts worrying about the pennies, they tend to stop using CMs like us and pull everything in-house... even if they could save dollars by using a better DFM design.

Now I find pricing at low/mid volume easy because Digikey/Mouser/Avnet/etc all apply roughly a similar markup.  It scales and transfers well enough to other countries such that I can just use those prices for the entire design and only consult with our buyers when practically done.

As volumes increase though, I've found that the prices no longer scale and some buyers are limited in volume/MOQ/LT.  Some components appear to have no bottom, others stagnate, while most of the expensive parts feel like the price has more to do with my company than the volume we're looking at.

In conclusion, it feels like the consensus is that there's no way around a buyer.  Companies hire them for a reason and above a certain volume they are an essential part of the design process... if the price matters?

[dannyf]

What do you use as a price/MOQ/lead-time reference when designing at higher volumes? 

Distributors' quote for large volumes are a very good indicator of the best deals you could get from the OEM directly. Those guys make most of their money from low-quantity orders and there is very little mark-up on high volume orders.

[Someone]

What do you use as a price/MOQ/lead-time reference when designing at higher volumes? 

Distributors' quote for large volumes are a very good indicator of the best deals you could get from the OEM directly. Those guys make most of their money from low-quantity orders and there is very little mark-up on high volume orders.

This isnt true on specialist parts (where a lot of the BOM cost will go) you pay for capabilities used.

most of the expensive parts feel like the price has more to do with my company than the volume we're looking at.

Partly the company/volume/stability/reliability you can offer and then the price of competitive parts/options, processors/DSP/FPGA pricing is based largely on how much computation you get out of it since they compete to fill the same need in many projects.

Ignore digikey pricing on these, negotiated you can end up with wildly different options.