NRE Fees Explained

NREs, or Non-Recurring Engineering fees, refer to one-time charges to design, develop, and produce a new product. NREs can vary widely from company to company, but typical fees in the electronics manufacturing industry can be roughly divided into three categories; tooling fees, programming fees, and documentation fees. In most cases, these costs are passed on to the client or built into labor charges, but some contract manufacturers (CMs) may choose to absorb these fees.

Categories Of NRE Fees

Tooling

Tooling fees apply when custom tools or fixtures must be created for production to run smoothly. The upside is that you own the tool once you pay for it (much like the assembly itself). Typically, your CM will store it in their facility, unless requested, for future use. Examples of tools or fixtures include:

• Stencils: Necessary for any build requiring surface mount assembly, stencils are used in the solder paste printing or adhesive printing process. Multiple stencil fees are typically charged for assemblies utilizing surface mount technology on both sides of the Printed Circuit Board (PCB). And, because the paste printing process is often where defects occur, most CMs will not utilize stencils from other CMs.
• Wave Pallets: This board fixture is made for the wave soldering process. Wave pallets can be utilized in a variety of ways, from processing PCBs with surface mount components on both sides to reducing flux amounts in a no-clean process.
  In most scenarios, this fee will only occur in larger volume production runs. The increase in selective solder machines in the industry has reduced the occurrence of this fee; however, if you do see this fee, it will most likely appear on the invoice at least twice – each wave pallet supports only a few PCBs and, to increase throughput, more than two wave pallets will be needed.
• PCB Fixtures: This tooling style is most used in flexible PCB, large PCB, or small PCB applications to support the assembly or make it possible to produce the PCB in a standard production environment.
  
  • Flexible PCB cannot be supported by the rails on a standard assembly line, so board supports are used to create a rigid surface in production.
  • Large PCBs have a similar issue, even when using rigid PCB materials. If a PCB is greater than twelve inches long and has a low layer count or thin layers, the board can warp or bend during the assembly process. Board fixtures can help prevent this by supporting the board as it is transported down the line or through the oven.
  • Board fixtures are used on small PCBs when PCBs cannot be (or have not been) panelized and are provided in sizes smaller than what the machines in the production process can handle. When this happens, fixtures can be created to allow the assembly to run smoothly on the machines. Keep in mind, most machines cannot handle boards smaller than two inches.

Overall, tooling is specific to the PCB used in an assembly. If two or more assemblies use identical PCBs, then the same tooling may be used. Similarly, tooling can be used across revisions to an assembly, so long as the PCB has not changed in any way (e.g., board dimensions, component locations).

If manufacturing in large volumes, you may see tooling NRE fees more frequently due to wear and tear on the tool or fixture. Other tooling fees may include molds, test fixtures, programming fixtures, or cable tooling. If you are unsure of what a tooling fee is referring to, don’t hesitate to ask your manufacturing partner.

Programming

While there are many benefits to utilizing automated manufacturing equipment, these machines incur additional charges to program. The upside to automated manufacturing equipment is drastically faster build times, higher quality assemblies, and decreased labor costs.

• Pick and Place: Pick and place machines are the bread-and-butter of surface mount technology. With placement times now exceeding 150,000 components per hour (CPH) and accuracy down to .03 mm, the benefits are clear. Unfortunately, these are also the most complex machines to program. Programming fees almost always include the programming of these machines.
• Automated Optical Inspection (AOI): AOI machines are used for quality control – the AOI inspects everything on the boards; every solder joint, component identifier, and component polarity is inspected in about 30 seconds per board. The AOI provides higher quality inspection at a much faster pace than the human eye. The programming fee for an AOI machine can be denoted as a separate line item or rolled in a general programming fee, along with the pick and place NRE.
• Selective Solder: Selective solder machines have grown in popularity but are still not commonplace. This machine uses a miniature wave nozzle to selectively solder through-hole joints, allowing for better flow at lower temperatures than a soldering iron can offer. This also drastically increases the speed and quality of soldering operations where wave solder cannot be utilized. CMs that employ this process may charge for programming but could opt to include this in the board price.

Other areas that may incur programming fees include wave solder profiling, reflow profiling, solder paste printing, testing setups, programming setups, or auto-insertion programming. The great news is that these fees are highly unlikely to occur again as engineers create the initial program and make minor adjustments over time.

Unlike tooling fees, programming fees may be waived on new revisions of an assembly. Due to the easily adjusted nature of programs, engineers may simply alter the dimensions, locations, or part numbers in a program rather than re-create the program itself.




Documentation

Documentation fees are the broadest category of fees by far and every CM charges differently for documentation. If your CM doesn’t list what this fee includes, ask them. A few of the documents that could be included in this NRE are:

• Licensing: Depending on the product being built, licensing may be required. This (usually arduous) process entails: creating and submitting a licensing proposal, hosting site tours for the licensing group, and paying the applicable licensing costs to the governing agency. Because this is not typically factored into the initial labor cost and is not standard across all projects, this fee will cover the estimated time required to secure the licensing. Some types of licensing are UL, FDA, Mil-Spec, and USDA.
• Materials Tracking: While most CMs can provide tracking information on the raw materials used in a product, it’s not usually requested. If you require materials tracking, let your CM know ahead of time so they can ensure you receive what you need. Going against the namesake of NREs, this is a recurring fee on every order, but is still listed as a separate “NRE” line item. This is due to the ever-changing sources of raw materials.
• Engineering Documents: Also referred to as production documents, every build requires that engineering documentation be created. This includes the assembly’s technical information, from orientation of components to final assembly drawings, and provides instructions for all production workers to build the product.
  Much like some programming fees, this fee will (normally) never reoccur, even across build revisions, as the documents are maintained by process engineers or management and can change on-the-fly when needed. This charge can vary CM to CM depending on several factors, such as how long it takes to create the documents.

There are many variations of documentation fees, but they all pertain to office or engineering time required to meet industry standards.




Making NREs Fees-able

NREs are commonplace in modern contract manufacturing. It’s imperative to understand what NREs you’re paying for and how they affect the final cost of your project. Understanding what these fees include will also help you gauge what to expect on repeat orders and how to reduce your overall cost of production. Educating yourself will help ensure integrity, quality, and clarity when communicating with your CM for a smooth production run.