What are Non-Recurring Expenses (NRE) and why are they important in EMS industry?

There are a couple of things in the EMS industry that have always been and will always be with us when quoting for any new project - one-off costs called Non-Recurring Expenses, or NRE for short.

These are the costs associated with implementing a new product into production and are the opposite of production costs, which are volume dependent and paid on an ongoing basis. NRE costs are associated with developing, designing and putting your project into production

Why do you pay NRE at all? As such general terms go, they include any activity that is unique to your project or its new version. New revisions for either may or may not result in there being one-off costs. NREs are only created for your project and are not equal to the costs charged to other clients. Once all the necessary work and tools for that particular production are in place, you can say that you can produce that exact project for the rest of its life (in the same company, of course).

What is usually (they vary from project to project) included in NRE costs?

  • Design and stencil production
  • Programming and profiling of machines
  • Preparation of documentation
  • Preparation of fixtures
  • Preparation of testers
  • General production preparation

The key to success is always transparency and honesty in negotiations and discussions. When talking about a new project with an EMS company, you have to remember that NREs will always come up eventually.