Avionics Production Costs

LevelWing

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LevelWing
R&D aside, why are avionics so expensive? Do the parts and production of a single unit (transponder, radio, etc.) really cost that much? Is part of the reason companies charge so much simply because they can? I understand companies are in the business to make money and I suppose there's no reason to lower costs knowing people will pay what you're asking for, but I'm curious as to how much the parts and production of a single unit actually cost. (I realize different unit types cost different amounts to produce)
 
Quantity. Spread R&D, production, overhead and profit margin over 100 units. Do the same for 100,000 units.
 
Quantity. Spread R&D, production, overhead and profit margin over 100 units. Do the same for 100,000 units.

There are fewer experimental planes than certified, look at the difference in pricing between the equipment for the two even within the Garmin line itself; certification costs don't make up that difference.
 
You can't just dismiss R&D costs, nor certification costs, nor the cost of product liability insurance. Those three things probably make up the vast majority of the cost of things like GPS nav systems.

Mechanical devices, like vacuum driven AI or an altimeter, are quite expensive to manufacture, especially in smaller quantities. I wouldn't even want to think about what it costs to manufacture a certified piece of vacuum driven gear.

For the "simpler" electronics like transponders and radios, you still have pretty high R&D and certification costs, plus you're manufacturing in relatively small quantities. When Samsung spends a couple million bucks on the latest whiz-bang phone or TV, they know they can spread the development cost over a few million units. When Garmin develops a new transponder, they might sell a few thousand of them. Big difference. That new SL30 or A210 radio may only have a materials cost of a couple hundred bucks, but the Garmin and Icom are at the very least hundreds of thousands of dollars into the project before any get sold. Design, software development, prototyping, testing, certification, advertising and marketing - they've got to recover that cost somehow.

Add to that the relatively small pool of competitors and the nature of the market... it's not conducive to price wars.

If you want to see the low end of the cost spectrum, look at Dynon, AFS, GRT, Trig and other manufacturers in the E/AB market. It's a lot cheaper than certified avionics, because they don't have the crushing burden of certification testing and fees and paperwork. It's still not cheap stuff.
 
I don't buy the production cost BS, considering there are no certification requirements other than frequency compliance.
 
I don't buy the production cost BS, considering there are no certification requirements other than frequency compliance.
What part of the "BS" are you not buying? As someone who has some experience in the development, testing, manufacturing and sales of electronic equipment in a smaller market, I may be able to shed some light on where a manufacturer incurs costs you might not think of.
 
What part of the "BS" are you not buying? As someone who has some experience in the development, testing, manufacturing and sales of electronic equipment in a smaller market, I may be able to shed some light on where a manufacturer incurs costs you might not think of.

Why don't you lay out a sample scenario for our education if you would.... I understand there are costs involved, but please recognize that with a company like Garmin, much of the R&D costs are spread across multiple platforms, and their marine gear is no where near as expensive as the aviation gear while being even more complex.
 
I don't buy the production cost BS, considering there are no certification requirements other than frequency compliance.

Not true.

Paperwork. The cheap consumer electronics don't need to track parts and suppliers. Plus, the cheap consumer electronics can use whatever parts they want to and can change them at will. A certified box cannot change any of the internal parts without an evaluation of the functional and safety impact.
 
To the OP - the companies that know how to reduce certification costs generally don't share those gems with others (competitive advantage and all that).
 
Why don't you lay out a sample scenario for our education if you would.... I understand there are costs involved, but please recognize that with a company like Garmin, much of the R&D costs are spread across multiple platforms, and their marine gear is no where near as expensive as the aviation gear while being even more complex.

Marine gear have a lot of software certification costs, do they?
 
Marine gear have a lot of software certification costs, do they?

What are the costs?:dunno: I'm asking for a sample of the costs. The development to the relevant standards costs are still the same, what is the extra cost to certify?
 
Why don't you lay out a sample scenario for our education if you would.... I understand there are costs involved, but please recognize that with a company like Garmin, much of the R&D costs are spread across multiple platforms, and their marine gear is no where near as expensive as the aviation gear while being even more complex.
You might think R&D costs are spread across multiple platforms, but they're really not. Every product has to stand on its own. If I spend money for engineering time and prototyping on a product, that product has to sell enough and generate enough profit to justify its development costs. Development resources are finite, and time spent on product X is not available for product Y. The econ and business majors will recognize opportunity cost here, and companies are run by econ and business majors.

So you'd think Big G could whip out a G3X display for maybe $50 worth of parts and sell it for a couple hundred, right? I mean, a PC motherboard only costs fifty bucks, and there can't be more than $4 worth of plastic in that housing, right? Not so much. Let's take a look at some of the costs involved that I can think of off the top of my head...

Software development. This stuff isn't done by a guy in a cubicle, it's done by a team programmers, all earning pretty good money, led by a team lead and a project manager. Their tools are not free, and they work in offices that have to be paid for, and take up company resources like phones, computers, Ethernet ports, and so on. Then you have their taxes (7.something percent of gross that the company pays), insurance, benefits, and on and on. Even parking spaces get rolled into project costs. Employees are really expensive. Remember -- they're working on THIS project, so all that cost has to be rolled into the project. And since the software will have to be maintained and updated, that software team is an on-going expense. Figure low six figures annually per programmer, plus the project manager.

Hardware development. See software development. Probably a smaller team, but you've got the design engineers, a couple of PCB CAD guys, and prototypes aren't cheap to make. Some manufacturers will have some in-house PCB fab capability for prototyping, and that stuff is frighteningly expensive. You either shell out big bucks for a pick & place and reflow line, or you pay techs to do it by hand. Actual production will likely be farmed out to a PCB manufacturer/assembly house, but they don't work for free either. Setup and electrical test costs are rolled in, and those will recur every time even the slightest change is made to a PCB. Ask me how I know.

Mechanical design. You're paying a staff to figure out how to put this stuff together and lay out the panel, and they're going to go through a lot of iterations before everyone's happy. And this team doesn't work for free, either.

Plastic injection molding dies. They've probably got a couple hundred grand tied up in those, it's not cheap to have them designed and made. Then you have low volume production, so that G3X bezel that looks like a $2 item probably costs quite a bit more than that. None of this stuff is off the shelf parts, it's all got to be designed, developed, prototyped, tested, refined, fixed and done in house.

Testing and certification.
Even if it's not FAA certified, you're still going to shell out for test labs. UL, FCC and CE are good places to start. For avionics you're going to spend tens of thousands just for environmental, shock & vibration testing. It may not be a huge part of the cost, but even simple FCC Part 15/CE testing will cost you a few grand. If you do have to get FAA or FCC certification (you do have to do FCC testing regardless) there's the cost of that certification, done by an outside lab, and it will cost anywhere from thousands for simple FCC Part 15, to God only knows how much to certify a GPS for navigation. But for avionics, even if you don't go the FAA certified route you're going to have to do a lot of testing.

Product documentation. Manuals don't write themselves. Tech writers aren't the most expensive staff in the world, but good ones are not cheap either, and you're going to need several. Then you need to pay to have them done in Spanish, French, German, etc.

Oh, and if you're going to sell it outside the US... the EU, Japan and MANY other countries have all kinds of nifty new regulations you'll need to contend with, like the "wheelie bin" electronics recycling program in the EU (Add an EU legal representative, supporting documentation and fees).

Training. You're going to need to have product support, which means you're going to have to spend money training a support staff. You can't just have the engineers handling all the support calls and emails; they're too valuable to waste on first-line support. So now you have at least 3-4 people you have to train, even for a very small product audience.

Corporate overhead. There's going to be a product manager and several others, probably not dedicated but at least part of their time is going to be charged to this product. They will be some of your more highly compensated employees.

Now you finally have a product, encumbered as it is by all of the money you've spent to get it ready to sell. You're also going to have to keep spending money for support, the software developers, hardware rework every time a part goes obsolete (this happens a LOT), spare parts inventory, warranty repairs, marketing, sales, advertising, and so on. Then on top of that -- there's this pesky profit thing, you've got to make some to stay in business. In fact, you've got to make a substantial amount or your investors will have your head on a platter (as it goes out the door). That's going to be a percentage of the total cost of the product, not just a percentage of your cost of materials.

So yes, maybe the marine market carries with it a lower profit margin because of more competition in that market segment. Garmin is almost certainly making a lower percentage on a consumer Nuvi GPS or a fish finder than they are on a G1000 or a G3X, for multiple reasons (volume and competition, to name two). There's no doubt that certain market segments carry a higher reward, usually because of much higher risk and/or because the barriers to entry are so high that few people are willing or able to compete with you.
 
I don't buy the production cost BS, considering there are no certification requirements other than frequency compliance.

If any of you really give a damn about this, rather than listening to some blowhards who have never been in the inexpensive avionics manufacturing business, I'd be glad to share.

Tom knows; he has a few of my boxes.

.
Jim
 
Why don't you lay out a sample scenario for our education if you would.... I understand there are costs involved, but please recognize that with a company like Garmin, much of the R&D costs are spread across multiple platforms, and their marine gear is no where near as expensive as the aviation gear while being even more complex.

This is how capitalism works. If another company could profit off of providing equivalent products while significantly undercutting Garmin, King etc... in price, they'd sell like hotcakes.
 
I think a great deal of what dale is saying is spot on, but I also think that some of the price is purely them pushing the price up because they can.

The G1000 is the top dog right now, they know it.
 
You might think R&D costs are spread across multiple platforms, but they're really not. Every product has to stand on its own. If I spend money for engineering time and prototyping on a product, that product has to sell enough and generate enough profit to justify its development costs. Development resources are finite, and time spent on product X is not available for product Y. The econ and business majors will recognize opportunity cost here, and companies are run by econ and business majors.

So you'd think Big G could whip out a G3X display for maybe $50 worth of parts and sell it for a couple hundred, right? I mean, a PC motherboard only costs fifty bucks, and there can't be more than $4 worth of plastic in that housing, right? Not so much. Let's take a look at some of the costs involved that I can think of off the top of my head...

Software development. This stuff isn't done by a guy in a cubicle, it's done by a team programmers, all earning pretty good money, led by a team lead and a project manager. Their tools are not free, and they work in offices that have to be paid for, and take up company resources like phones, computers, Ethernet ports, and so on. Then you have their taxes (7.something percent of gross that the company pays), insurance, benefits, and on and on. Even parking spaces get rolled into project costs. Employees are really expensive. Remember -- they're working on THIS project, so all that cost has to be rolled into the project. And since the software will have to be maintained and updated, that software team is an on-going expense. Figure low six figures annually per programmer, plus the project manager.

Hardware development. See software development. Probably a smaller team, but you've got the design engineers, a couple of PCB CAD guys, and prototypes aren't cheap to make. Some manufacturers will have some in-house PCB fab capability for prototyping, and that stuff is frighteningly expensive. You either shell out big bucks for a pick & place and reflow line, or you pay techs to do it by hand. Actual production will likely be farmed out to a PCB manufacturer/assembly house, but they don't work for free either. Setup and electrical test costs are rolled in, and those will recur every time even the slightest change is made to a PCB. Ask me how I know.

Mechanical design. You're paying a staff to figure out how to put this stuff together and lay out the panel, and they're going to go through a lot of iterations before everyone's happy. And this team doesn't work for free, either.

Plastic injection molding dies. They've probably got a couple hundred grand tied up in those, it's not cheap to have them designed and made. Then you have low volume production, so that G3X bezel that looks like a $2 item probably costs quite a bit more than that. None of this stuff is off the shelf parts, it's all got to be designed, developed, prototyped, tested, refined, fixed and done in house.

Testing and certification.
Even if it's not FAA certified, you're still going to shell out for test labs. UL, FCC and CE are good places to start. For avionics you're going to spend tens of thousands just for environmental, shock & vibration testing. It may not be a huge part of the cost, but even simple FCC Part 15/CE testing will cost you a few grand. If you do have to get FAA or FCC certification (you do have to do FCC testing regardless) there's the cost of that certification, done by an outside lab, and it will cost anywhere from thousands for simple FCC Part 15, to God only knows how much to certify a GPS for navigation. But for avionics, even if you don't go the FAA certified route you're going to have to do a lot of testing.

Product documentation. Manuals don't write themselves. Tech writers aren't the most expensive staff in the world, but good ones are not cheap either, and you're going to need several. Then you need to pay to have them done in Spanish, French, German, etc.

Oh, and if you're going to sell it outside the US... the EU, Japan and MANY other countries have all kinds of nifty new regulations you'll need to contend with, like the "wheelie bin" electronics recycling program in the EU (Add an EU legal representative, supporting documentation and fees).

Training. You're going to need to have product support, which means you're going to have to spend money training a support staff. You can't just have the engineers handling all the support calls and emails; they're too valuable to waste on first-line support. So now you have at least 3-4 people you have to train, even for a very small product audience.

Corporate overhead. There's going to be a product manager and several others, probably not dedicated but at least part of their time is going to be charged to this product. They will be some of your more highly compensated employees.

Now you finally have a product, encumbered as it is by all of the money you've spent to get it ready to sell. You're also going to have to keep spending money for support, the software developers, hardware rework every time a part goes obsolete (this happens a LOT), spare parts inventory, warranty repairs, marketing, sales, advertising, and so on. Then on top of that -- there's this pesky profit thing, you've got to make some to stay in business. In fact, you've got to make a substantial amount or your investors will have your head on a platter (as it goes out the door). That's going to be a percentage of the total cost of the product, not just a percentage of your cost of materials.

So yes, maybe the marine market carries with it a lower profit margin because of more competition in that market segment. Garmin is almost certainly making a lower percentage on a consumer Nuvi GPS or a fish finder than they are on a G1000 or a G3X, for multiple reasons (volume and competition, to name two). There's no doubt that certain market segments carry a higher reward, usually because of much higher risk and/or because the barriers to entry are so high that few people are willing or able to compete with you.


These are development costs that one sees whether for the $7k experimental unit or the $22k certified unit (granted the G500 has 2 screens vs the G-300's single screen,still not a huge cost difference)Are you saying that certification cost is $15k per unit?:dunno:
 
These are development costs that one sees whether for the $7k experimental unit or the $22k certified unit (granted the G500 has 2 screens vs the G-300's single screen,still not a huge cost difference)
Well, yeah, the original question was, "why are avionics so expensive?"
Are you saying that certification cost is $15k per unit?:dunno:
An apples-to-apples comparison isn't really valid, since the G500 is completely different from the G3X. Different screen size is just the beginning. If you were to build out a G3X system to match the $22K G500 system, you'd probably be about $10K apart.

And from what I've seen and read, given the miniscule numbers of G500 systems Garmin is likely to sell over its lifetime and the astronomical cost of certifying an IFR GPS... yeah, I'd guess that explains it.
 
Well, yeah, the original question was, "why are avionics so expensive?"

An apples-to-apples comparison isn't really valid, since the G500 is completely different from the G3X. Different screen size is just the beginning. If you were to build out a G3X system to match the $22K G500 system, you'd probably be about $10K apart.

And from what I've seen and read, given the miniscule numbers of G500 systems Garmin is likely to sell over its lifetime and the astronomical cost of certifying an IFR GPS... yeah, I'd guess that explains it.

The G-500/600 units are not GPS equipped, they are just PFD/MFD displays.
 
What part of the "BS" are you not buying? As someone who has some experience in the development, testing, manufacturing and sales of electronic equipment in a smaller market, I may be able to shed some light on where a manufacturer incurs costs you might not think of.


Tooling, equipment, Gages & test equipment, shipping, invoicing, general overhead, ....
 
The G-500/600 units are not GPS equipped, they are just PFD/MFD displays.
Yeesh. It's worse than I thought. Still, think about it... for every G500 Garmin sells, they'll likely sell ten G3X. It's not just certifying the hardware either, it's the software reliability certification. What's the price diff between the G500 with SVT and a G600?

If you want to get a handle on what it costs to get something FAA certified, look at the cost of ANYTHING that is certified vs. the experimental/non-certified equivalent. From airplanes on down.
 
It must be close to 10 years ago now that I saw some announcement that VxWorks (an embedded OS) had achieved some level of FAA-approved status. This will always stick out in my mind, because the license fee for that version was $30,000. Basically the same OS for consumer grade stuff was in the neighborhood of $3,000. Aviation-approved was an order of magnitude more expensive! :eek:
 
It must be close to 10 years ago now that I saw some announcement that VxWorks (an embedded OS) had achieved some level of FAA-approved status. This will always stick out in my mind, because the license fee for that version was $30,000. Basically the same OS for consumer grade stuff was in the neighborhood of $3,000. Aviation-approved was an order of magnitude more expensive! :eek:

That doesn't mean it costs 27k more to certify they just think they can get 27k more for the certified version. Post #2 answers the question. Everything else is self justification trying to convince ourselves we aren't suckers for putting up with it.:lol:
 
That doesn't mean it costs 27k more to certify they just think they can get 27k more for the certified version. Post #2 answers the question. Everything else is self justification trying to convince ourselves we aren't suckers for putting up with it.:lol:
To some extent you're not wrong; avionics are high cost in part because it's a high cost market. But the market doesn't lie. If it were economically feasible for someone else to come in at half Garmin's price for a certified glass panel, I can guarantee you that there would be a manufacturer offering a certified glass panel for half the cost of a Garmin (or Bendix/King, or Rockwell Collins, or Avidyne). It's not like there aren't half a dozen manufacturers who would love to do it, but so far they haven't been able to justify the cash outlay and risk to do it. That should tell you something.
 
Because they don't have the engineers to beat Garmin or because they don't have the marketing team to beat Garmin? <-half joking.
 
I'm more so referring to transponders and radios, not necessarily glass systems. I have no doubt that glass systems cost a substantial bit more.
 
This is how capitalism works. If another company could profit off of providing equivalent products while significantly undercutting Garmin, King etc... in price, they'd sell like hotcakes.

Precisely. Look to Aspen for a real-world example.
 
I'm more so referring to transponders and radios, not necessarily glass systems. I have no doubt that glass systems cost a substantial bit more.
Same things apply. High development costs, high support costs, high certification costs. Even a radio or transponder needs a software team - just not as big as the PFD/MFD/nav system does. Still have all of the mechanical and packaging development and expense, support, training, etc. And you're not going to sell very many of them, or sell them very quickly, from an electronic manufacturing standpoint.
 
It must be close to 10 years ago now that I saw some announcement that VxWorks (an embedded OS) had achieved some level of FAA-approved status. This will always stick out in my mind, because the license fee for that version was $30,000. Basically the same OS for consumer grade stuff was in the neighborhood of $3,000. Aviation-approved was an order of magnitude more expensive! :eek:

Having been a VxWorks customer in the past, they're pretty good at milking their OS for cash. They only have two competitors really, Microware OS-9 which has seen many years of mediocre management focused on the wrong things (they bash the Linux RTOS patches when they should just ignore it and get back to competing with folks who are actually in their space - the CEO has a hard on for the low end stuff Linux took off his plate... His real customers were always big companies doing Defense and Telecom and big cash cow systems... He focused on the little dog snapping at his heels instead of his big customers liking their GUI Dev toys better on VxWorks) and Green Hills. G

reen Hills is also aviation "certified" and lots cheaper than VxWorks. Knowing one of the heavies at Green Hills personally, and his dedication to amazingly good code and customer service, I know where my money would be going if I were in need of an RTOS. VxWorks is kinda like Apple in pricing and quality. You pay through the nose and get whatever they deem you will. GH will customize tools and things and deal on price.
 
Again, since this is regardless of certification or not, I ask what the cost of certification is?
Is it possible to compare the cost of the G3X with the G500 and get a good estimate?
 
Again, since this is regardless of certification or not, I ask what the cost of certification is?:dunno:
Not so. As certification will add months or years to the project schedule, you've got a lot more money invested for a lot more time (increasing the cost of money). You're also paying your engineering and testing staff, plus some more to deal with paperwork and the certification process (your software and hardware engineers won't do that), for months or even years before you sell the first unit off the shelf. And there's significant risk of failure, plus more than likely a lot more rework to deal with.
 
Not so. As certification will add months or years to the project schedule, you've got a lot more money invested for a lot more time (increasing the cost of money). You're also paying your engineering and testing staff, plus some more to deal with paperwork and the certification process (your software and hardware engineers won't do that), for months or even years before you sell the first unit off the shelf. And there's significant risk of failure, plus more than likely a lot more rework to deal with.

All the factors given were indeed regardless certification or not, as is any product liability insurance. I am asking someone who KNOWS what is involved in certifying the instruments what the cost of certification is and in what actually does one certify to?
 
"Garmin earned $2.72 billion in revenue in 2012. Our gross margin finished at 53 percent and our operating margin closed at 22 percent — very strong numbers for a consumer electronics company." ..... Garmin's own words
 
Again, since this is regardless of certification or not, I ask what the cost of certification is?:dunno:

Ask Whelen who spent 3 years and $1M getting an LED tractor headlight certified as a landing light.
 
why are avionics so expensive?...

Because there isn't much competition that would typically drive prices lower. Hungry entrepreneurs with great ideas usually take care of this but few can overcome the barriers to entry (years of certification before a penny can be made, insurance, etc.).
 
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