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PCB design, short production runs are big hurdles for IoT startups

One of the biggest challenges internet of things startups face is surviving beyond the printed circuit board design process and short production runs without going broke.

Once IoT startups have created their product prototype and are ready to take it to the next level by transferring it to PCBs with circuits and sensors via short production runs, they face several hurdles to survive beyond this stage.

From finding the right manufacturer to deciding your involvement level in PCB design to money woes, these issues must be dealt with quickly and effectively to scale IoT prototypes properly.

Finding a PCB manufacturer

The first hurdle is often finding a printed circuit board (PCB) manufacturer, but this is becoming easier thanks to the internet. "Five to 10 years ago, getting access to PCB fab manufacturing or assembly was nearly impossible for a small-scale run," said Evan Petridis, chief system architect at Enlighted Inc., a provider of IoT solutions for commercial buildings. "Now, vendors are offering online quote services for PCB manufacture and assembly."

Search engines like PCB Shopper will quickly help IoT startups locate a PCB manufacturer simply by entering PCB size, the number of layers, its rough component counts and so forth. "You can get unbelievably cheap estimates from numerous vendors, and then request a formal quote," Petridis added.

This entire ecosystem is evolving and eliminating some of the complexity involved in getting quality short-run PCBs. "Even five years ago, there were a lot of vendors who weren't providing high-quality PCBs, or were unreliable or difficult to deal with, but they seem to have professionalized," Petridis pointed out. "The internet has flattened it out and globalized it; vendors are operating out of Eastern European countries, many are in China ... but vendors exist within the U.S. as well, and you'll get high-quality PCBs."

In the IoT world, many who set out to create IoT end nodes -- the things of the internet of things -- lack manufacturing skills.
Xavier BignaletIoT marketing manager, Microchip Technology

There are, however, distinct regional differences in cost and the amount of help IoT startups will receive. For example, a quick search reveals that U.S. vendor Advanced Circuits' boards cost $2 each, compared to ones with the exact same design specifications that in China go for $0.58. It's important to note that these costs are for short runs, which would likely drop to $0.05 to $0.10 in volume production.

Not into dealing with the hassle of PCB design and finding a manufacturer? Semiconductor manufacturer Microchip Technology provides a global "Design Partner" program, in which medium- to large-sized manufacturing companies offer PCB manufacturing and assembly services as their core expertise.

Microchip's design partners provide software as a service delivery of IoT platforms, mobile application companies, manufacturing partners and design houses. "They're all familiar with Microchip IP, which means they can deliver under short timelines," said Xavier Bignalet, IoT marketing manager at Microchip.

This can help IoT startups struggling with PCB design, which can be an incredibly complex process. "In the IoT world, many who set out to create IoT end nodes -- the things of the internet of things -- lack manufacturing skills," Bignalet continued. "Budget constraints drive them to try to develop the layout themselves without taking into consideration things like noise issues on power supplies, electromagnetic compatibility requirements on board layouts, high-speed interface design optimization ... just to name a few."

The manufacturing phase of product development is also generally where new and early-stage companies fail when they encounter unexpected delays and costs. "Our design partners can help startups avoid these pitfalls and reduce their time and cost to market," Bignalet added.

Selecting a PCB manufacturer for IoT 'things'

Once you've decided how much involvement you want in the PCB design and manufacturing process and have rounded up quotes from manufacturers, what should IoT startups take into consideration? One of the most important things to do is to "ask to see examples the company has done in the past," said E. Jan Vardaman, president at TechSearch International, a technology and licensing company specializing in the electronics industry.

The key is to "understand the reliability requirements of your product's environment, and to attend to design at the system level all the way to the components and boards," she pointed out.

Petridis recommended selecting manufacturers based not only on examples of their work, but also on reputation analysis and their vendor. "Is the work they've done similar to what you want to do, can you get references, do you know anyone who's worked with them and can tell you how they are to deal with?" Petridis asked. "Do they help with the front-end design for manufacturing and design for testability to help you avoid silly problems?"

In some cases, online vendors will let you use their own version of CAD software for free -- which cuts out a big fee for startups because "CAD tools aren't cheap," Petridis said. "And they'll even provide a little step-by-step tutorial to help out."

Local vs. offshore PCB manufacturing

Another big consideration is whether to choose a local or offshore manufacturer. Back when Enlighted got started, it knew local shops in the Bay Area/Silicon Valley area willing to do one week or even a couple days' turnaround for them.

High-volume manufacturing professionals will tell you it's a $2 part, but what they're not saying is that's only if you're shipping a million per week. If you're shipping 10 per week, it can become a $200 part.
Tanuj Mohanfounder and CTO, Enlighted

"It really depends on how much you're willing to pay," explained Tanuj Mohan, Enlighted's founder and CTO. "Mintronics and a few other local players are set up to do small runs, with as few as 10 PCBs. A PCB from China might cost $0.20 in volume, but for a small volume run it will likely cost $5 to $10 per small PCB. So for a small-volume proof of concept, it's fairly practical to do it in the U.S."

If you want to keep your short run in the U.S., "Flextronics has a pilot line in San Jose and works with people who have prototype designs," Vardaman said. "Multek also makes PCBs, and there are a few others."

Choosing a local manufacturer, even if it costs more, can help ensure short production runs go smoothly. "I'd advise anyone contemplating a project requiring 500 boards that the difference between going direct to offshore versus going to someone local -- who you can communicate with well and who can help you with your design for manufacturing or design for testability -- is dramatic," Petridis noted. "I would pay that 4x penalty in a heartbeat for 500."

For example, say you're an IoT startup doing 500 small boards for $2 for one sample run. At a total cost of $1,000. Petridis would rather pay the difference than go to China to do it for $250, he said. "Some vendors offer free design for manufacturing, but if you don't have that you may put a pad in the wrong place during the surface mount technology process and you'll need to go manually correct 500 boards. And it's the manual, post-assembly fix-up process that causes enormous headaches."

Surface mount technology involves placing or mounting components directly onto the surface of PCBs. In a nutshell, before placing the components, a solder pad must be applied to the boards. Boards are then screen printed to mark them with a "blueprint" of the components and circuitry. Next, solder is dispensed. Then the chips are "placed" onto the PCBs, often by an automated pick-and-place machine -- which is extremely expensive to run. Then, the boards are heated during a "reflow" process, during which the PCBs enter an oven so the solder will melt and bond the components and circuitry to the boards. Finally, they are inspected using x-ray machines to detect problems such as misplaced components. If any issues are detected, it moves on to a process called "secondary reflow," or for cleaning, if necessary.

If you aren't a surface mount technology expert, Petridis offered a bit of advice: "Go talk to a vendor willing to help you avoid some of the obvious mistakes. Overseas vendors often won't be able to do that because they just aren't set up for it, they'll just take your design and manufacture it."

IoT startups, PCB design and money woes

If you're getting into the hardware manufacturing business, you'll need funding on the order of a few million dollars for your initial production run. "One key thing to know is that you'll need to build in massive quantities -- 50,000 or 100,000 units at a time -- for the factories to be able to give you $5 per unit pricing," Mohan said.

In the beginning, "even if you have one-million-unit pricing, the small unit runs will be an order of magnitude more expensive than your end goal. The problem is high-volume manufacturing professionals will tell you it's a $2 part, but what they're not saying is that's only if you're shipping a million per week. If you're shipping 10 per week, it can become a $200 part," Mohan explained.

This means that it's all too easy to run out of money. "A design that costs $5 at a million units is more like $50 per unit at a quantity of 10,000," Mohan explained. Startups sometimes tackle the money problem with crowdsourcing through services like Kickstarter.com. But beyond money, Mohan said, "You'll need to prove yourself before you can move to volume production. Kickstarters tend to die because they don't have the bank balance to convince an offshore manufacturer that they will ever need a million units, so they get stuck selling at or below cost and bleeding money." Enterprises have deeper pockets, but that may simply enable losses for a longer period.

Navigating the transition to volume production is particularly tricky -- much more so than many IoT startups realize. "No one really covers how to transition to volume production," Mohan pointed out, noting that this is where particular caution must be exercised. "The time and run of the machines is what costs money. Once a machine is up and running, it can churn out 10 devices or 10,000."

Future-looking 'things'

To avoid going broke, it wouldn't hurt to follow Enlighted's lead and focus on designing future-proof solutions.

"People are still building single-purpose widgets and not thinking of the future," Mohan said. "If you're making internet-connected temperature sensors to solve data center problems, why not distribute more sensors and software that can be upgraded in the future to also detect fires in the data center or other applications? At the design stage, it's important to ask: What can disrupt us really quickly? We're focusing on this to ensure we provide long-term value that isn't just a flash in the pan."

Next Steps

Manufacturing is embracing IoT; learn why

Read up on 10 IoT startups and 10 legacy giants shaping the face of IoT

This was last published in September 2016

Dig Deeper on Internet of Things (IoT) Strategy

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