How Do Chinese Suppliers Have So Much Better Prices, Even On American Products?

[JoeN]

I was watching a video on a competitor's  Youtube channel and saw a price that I thought was pretty incredible.  I know we all see incredible prices from time to time on eBay from Chinese suppliers and assume the parts fell off a truck or are fakes, but this is a reputable company as far as I know.  Anyone want to hazard a guess how this happens? 

Xilinx XC6SLX16-2FTG256C

JLCBCB price: $4.92
Digikey price:  $26.46

[madires]

Promotion to increase market share, market specific pricing, clearance sale, ...

[wraper]

Not nearly everything there is cheaper. Many parts are more expensive. However in general Chinese do not make huge markup on low quantities, unlike western companies.

[RoadRunner]

Digikey is most the the time has higher price than even mouser or arrow.  You can get better price than Digikey at many place.s

Offer on Chinese suppliers is most of the is just one off. may get in now may not again later in time.

[mikeselectricstuff]

FPGA companies have always had very wierd pricing, and in the past I've seen 50% differences between list prices at Digikey and franchised distributor quotes for "supported pricing", even for 100x qtys.

Any item where >1x pricing is not shown on Digikey means the supplier really wants you to talk to a specialist distributor

I'm sure there must be some reasoning behind it, but I have no doubt that they will have lost some design wins due to people seeing the DK pricing and not bothering to look any further

With China there may also be some grey market supplies floating about.

[Rick Law]

I was watching a video on a competitor's  Youtube channel and saw a price that I thought was pretty incredible.  I know we all see incredible prices from time to time on eBay from Chinese suppliers and assume the parts fell off a truck or are fakes, but this is a reputable company as far as I know.  Anyone want to hazard a guess how this happens? 

Xilinx XC6SLX16-2FTG256C

JLCBCB price: $4.92
Digikey price:  $26.46

The manufacturing cost of a product is typically only a portion of the price you pay when you purchase it.  The handling cost of getting it to you is a big portion, sometimes, it may even be the major portion.

* * *
This little factoid may say a lot: Some years ago, I attended an NAPM annual conference.  NAPM is National Association of Purchase Managers.  I wanted to know how they think if I am going to help make them want to buy from us.  In one of the educational session I attended, we did an exercise.  The summary result was: the cost of stocking/warehousing a product for 12 months is 1/3 the selling price.

That exercise was done for a generic products, 1/2 cubic feet boxed.  Price per item (boxed) was $100 to $200 mixed, and was a "non-perishable" meaning it wont rot (don't need refrigeration or other special care).  We were using New Orleans (Louisiana, USA) area prices/costs and as there was where the conference was held that year.  Cost of trucking to and from the warehouse are not included.

Besides the warehouse space cost, it costs to insure it (against theft), it costs to count it, it costs to move it from a truck to a rack...

That was decades ago.  Things change a lot (RFID itself would have altered the inventory counting).  One thing that hasn't change is, whether you are a truck driver or a warehouse clerk, you want to get paid.  That too of course can change, but not yet...
* * *

At least for the ones I was worked with, after production cost, the cost of handling it (including shipping, accounting, selling, etc.) was about 40% of the selling price (not including profit), and that was selling to a whole-seller/distributors purchasing the products in bulk.

[tszaboo]

You are not supposed to buy more than 1-2 "I need it for my prototype tomorrow" FPGAs from Digikey.
You are not supposed to buy complete reel of passive components from Digikey.
You are not supposed to buy production quantities from Digikey.

Digikey is great if you want 1-2 of something, or maybe a 100. Or if you cannot wait 12 weeks for your parts. Other than that, talk to a distributor.
I hope this is clear.

[Trader]

I had the same question a while ago. IMO the Chinese buy the Complete Reel, or even more, maybe they buy a lot of 10, 50, 100 Reels of some components for 2 reasons:

1) they Produce A LOT of Consumer Electronics.

2)  they Sell A LOT of Components.

The USA resellers, on average, charge 300% to 500% more for Less than 10 units than the Reel price.  I think china prefer to charge 20% or 30% more for unit price.

Another problem, the USA seller charges a high shipping price even for domestic shipping, China sends it free or for a small value.

Is sad, but even living in the USA is cheaper to buy American Components from China.  There is a risk of fakes, but the price is much better.

I wrote to an American reseller asking why their price was 8x more expensive, they don't care about that.  I think in a few years, these American resellers will disappear: Digikey, Mouser, Arrow (Arrow is almost Chinese), and Newark (UK)

[VK3DRB]

... I think in a few years, these American resellers will disappear: Digikey, Mouser, Arrow (Arrow is almost Chinese), and Newark (UK)

I doubt it. Digikey offers a superior service - faster shipping, great service, quality components, and of course and excellent website. Agreed, they are quite more expensive compared to 10 years ago. But it would not surprise me if Radio Spares disappears because they are generally really expensive and don't stock that much. RS is like the Tandy Electronics of the electronic component world. Maybe Newark/Element 14 and RS will merge one day.

If you want to get prices from various trusted vendors in the west, I suggest trying www.findparts.com. I use them quite a bit when looking at off-the-shelf availability and prices when doing design work.
For lowest prices on Texas Instruments parts, you cannot beat TI Direct: https://www.ti.com/store/ti/en
For lowest prices on Microchip (Atmel) parts https://www.microchipdirect.com/.

[Trader]

Just like everything in China, politically, economically and scientifically, we like to trade freedom for efficiency.

Yes, I said before that the reason is "Bulk purchase", not only the entire Reel, but maybe several Reels.

I wonder, what the percentage of Chinese components are completely FAKE.

I guess "chips" maybe a low percentage are fake, but Power Transistors, maybe 99% are fake, e.g.: 2SA1943 & 2SC5200

What do you think?

[asmi]

I guess "chips" maybe a low percentage are fake, but Power Transistors, maybe 99% are fake, e.g.: 2SA1943 & 2SC5200

What do you think?

Absolutely not. But if you go there looking for $0.01 FETs, yes, they will be crap. Quality stuff costs money, even in China.

[Trader]

Absolutely not. But if you go there looking for $0.01 FETs, yes, they will be crap. Quality stuff costs money, even in China.

Really?!  Show me 1 (one) Original 2SA1943, 2SC5200 from china (aliexpress). LOL

[Ground_Loop]

Much of a product's cost in the US is covering risk exposure and regulatory compliance. Neither of which apply to Chinese manufacturers.

[james_s]

I would guess there's a lot of surplus parts there too. We used to have loads of surplus stores in the US that would sell leftover bits acquired from various companies. Now almost all of the production is in China so it stands to reason that most of the surplus would be in China. There must be loads of resourceful people developing widgets based on batches of cheap parts they scored.

[SilverSolder]

I would guess there's a lot of surplus parts there too. We used to have loads of surplus stores in the US that would sell leftover bits acquired from various companies. Now almost all of the production is in China so it stands to reason that most of the surplus would be in China. There must be loads of resourceful people developing widgets based on batches of cheap parts they scored.

I'm pretty sure a lot of the cheap parts on Ali Express, eBay, etc., come from those kinds of sources.

[dietert1]

Yesterday i opened a 2N3055 marked TRANSUN (chinese origin), that failed in a linear power supply after some weeks taking about 40 W at 30 °C case temperature. During repair that transistor first seemed OK except i noticed a somewhat higher Ube. Then while testing the repair the transistor failed with the emitter interrupted. Yesterday i opened it and found a good chip inside soldered to a steel base plate, with two loose bond wires for the emitter. The base bond wire came off when i tried to blow away the sawdust from inside the transistor.

They knew they had a problem with bonding. There were two emitter wires instead of one and some white rubber-like glue on top of the chip meant to hold all bond wires in place. We have another of those supplies with two similar TRANSUN 2N3055 and their Ube exhibits a 0.1 V difference. Probably one of them already lost one of its emitter bond wires, too. And when the second bond wire goes, so will the other 2N3055 in that supply.

Just an example. Sometimes the decision for the lowest price isn't exactly wise.

Regards, Dieter

[SilverSolder]

Simple. We order in bulk. [...]

My grandmother taught me that when I was a kid.   As a 7 year old, I was in awe at her 25Kg sack of sugar to do her fruit preserves in the fall - I had never seen so much sugar in one place.  She said, "poor people buy sugar one tiny bag at a time, and pay three times as much for it.  That's why they are poor, they never do the smart thing."

[BravoV]

Simple. We order in bulk. [...]

My grandmother taught me that when I was a kid.   As a 7 year old, I was in awe at her 25Kg sack of sugar to do her fruit preserves in the fall - I had never seen so much sugar in one place.  She said, "poor people buy sugar one tiny bag at a time, and pay three times as much for it.  That's why they are poor, they never do the smart thing."

The words ... size does matter come into play here.

If you're bored, just skip to year 2012 when China toppled the top one, abit flip flopped, but once 2017, it just went on booster mode.




... or just technology exports which covers aerospace, computers, pharmaceuticals, scientific instruments, and electrical machinery, China moved to the top at 2004.

[Trader]

since Toshiba has stopped producing them decades ago

Toshiba still producing and selling those FETs.

https://toshiba.semicon-storage.com/ap-en/semiconductor/product/bipolar-transistors-igbt/detail.2SA1943.html

https://toshiba.semicon-storage.com/ap-en/semiconductor/product/bipolar-transistors-igbt/detail.2SC5200.html

Chinese branded, parameter (or at least paper parameter) equivalent to be fake or not fake

If you cannot comply with all the Specs, you cannot use the same part name, this is called "Counterfeit".

And the chinese NEVER release a "New" datasheet, they sell the FAKE component with the same Name and Specs as the Original one.

[SilverSolder]

[...] If you cannot comply with all the Specs, you cannot use the same part name, this is called "Counterfeit". [...]

But even the brand owners are not living up to all the specs, when they move a product from an old process to a new one.  The new product is therefore an imperfect copy...  it may be "good enough for Australia" in most ways, but it isn't necessarily going to perform like the old model.

[wraper]

[...] If you cannot comply with all the Specs, you cannot use the same part name, this is called "Counterfeit". [...]

But even the brand owners are not living up to all the specs, when they move a product from an old process to a new one.  The new product is therefore an imperfect copy...  it may be "good enough for Australia" in most ways, but it isn't necessarily going to perform like the old model.

Unless they make a new part number such as using different suffix, it will fully match the old specs. If your design relied on some unspecified features which changed by moving to another process, it's your problem. With clone/counterfeit parts, they easily may not match published specs.

[MIS42N]

How much postage do the Chinese pay on items? I bought a small regulator to replace one that failed. It was 90¢AU for 10 delivered (weren't sold singly). Standard postage in Australia for a letter at the time was $1. So the Chinese were able to send an item by international post cheaper than I can send a letter to my neighbour.

And how do local suppliers justify the prices they charge? I understand there are overheads but - a few years ago I was looking for a TTL to RS232 adapter to interface a little microprocessor with an old laptop (which had an RS232 port). Local supplier wanted $29.99. Identical item from China - $1.48 (including postage). If the local markup were 100% (which would make the item $2 because they buy in bulk and don't post it to me) I'd go down the street and buy it. But markups of over 1000%?

While the price difference is so high, I'll continue to import stuff. Sure, maybe 1 in 10 things gets binned and I don't buy from that person again. So far ahead on the rest it's a minor hit.

[coppercone2]

well if you ever worked in a factory you know how much money you can save by 'speeding along' manufacturing. Cure times, testing (say, why do we need that megger test anyway?, it never showed a fail), inspecting work, etc. regulatory compliance busts you for not doing that.

fun one: cure time for double sided tape is seven days. Try telling a manager we need to leave this on a shelf for a week before we do more stuff with it. You might as well break into their house and start writing cryptic shit on the wall with lip stick. Same reaction. I am sticking to adhesives because its something that almost everyone I know had a problem with, because of bad process control, for home repairs, etc. (i.e. sheetrock and compound is cheap as fuck but the job entirely depends on the workers doing little bullshit steps right).

You can do all the manufacturing stuff 'bugs bunny' style if you can wing it (you know the bar tender throwing a drink at someone then having them grab it mid air and turn it side ways so whiskey does not go flying all over the pretty lady sitting next to them). We don't need a funnel to pour this HF....

I kinda wonder if ultimate silicon wafer frizbee happens..

we don't need pesky robots with Bentley grade suspension driving around those wafers with robotic arms, I can just throw them to that guy over there.


Another one is of course safety in manufacturing, having OSHA shut you down because some guard is out of spec (measured with gauge blocks of course). In a Chinese factory they might take that off and screw it to a table and have a free mini anvil.

Then you have taxes, cheap labor, low storage costs (they have abandoned cities over there, talk about cheap warehousing), goverment subsidies (huge).

You might call American manufacturing a little oppressive because of this (but the workers and customers do benefit in the long run). Not if its being suffocated by dumb shit though (sometimes happens).

[coppercone2]

Simple. We order in bulk. [...]

My grandmother taught me that when I was a kid.   As a 7 year old, I was in awe at her 25Kg sack of sugar to do her fruit preserves in the fall - I had never seen so much sugar in one place.  She said, "poor people buy sugar one tiny bag at a time, and pay three times as much for it.  That's why they are poor, they never do the smart thing."

well I mean it locks you into having to deal with a 25lb bag of sugar. I noticed stupid little problems developing from this kind of thinking, i.e. air circulation problem in refrigerator packed with eggs. When there is too much bulk products in a house it kinda starts to suck as a house I think. That needs to be done very carefully. I.e. start shopping in costco and turn into mayonnaise and ketchup based life form

Kinda a reason why people with bigger houses can be more successful economically.

[SilverSolder]

Simple. We order in bulk. [...]

My grandmother taught me that when I was a kid.   As a 7 year old, I was in awe at her 25Kg sack of sugar to do her fruit preserves in the fall - I had never seen so much sugar in one place.  She said, "poor people buy sugar one tiny bag at a time, and pay three times as much for it.  That's why they are poor, they never do the smart thing."

well I mean it locks you into having to deal with a 25lb bag of sugar. I noticed stupid little problems developing from this kind of thinking, i.e. air circulation problem in refrigerator packed with eggs. When there is too much bulk products in a house it kinda starts to suck as a house I think. That needs to be done very carefully. I.e. start shopping in costco and turn into mayonnaise and ketchup based life form

Kinda a reason why people with bigger houses can be more successful economically.

If you keep the the price per square foot of your house in mind, all inclusive (mortgage/rent, heating, taxes, everything) when you store something...   pretty soon, you figure out that there is a balance to be struck between "bulk" and "just in time" buying!