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Topic: The inexpensiveness of foreign component dealers relative to US dealers. (Read 3533 times) previous topic - next topic

JoeN

I want to drive a bunch of matrix LEDs to make a display without a massive number of roll-your-own transistor drivers and I found the MAX7219CNG to be a part that would do this for me.  When I looked up the prices, in small quantities it is quoted around $8 (Jameco) and $10 (Adafruit and Sparkfun both), less in higher quantities, and down to about $5 if you shop around:

http://www.findchips.com/avail?part=MAX7219CNG

That seems a little high to bear, the driver is more expensive than the matrix I want to drive.  If you look this part up on eBay there are many sellers selling it for as little as $1, all in China or Hong Kong.  Here is a online overseas reseller in Thailand selling it for $1.25:

https://www.taydaelectronics.com/catalogsearch/result/?q=MAX7219CNG

I am wondering, how do they sell components for these prices?  Even if you assume they are no-warranty products because they are coming outside of the normal distribution channels, they are steals at these prices.  And many of these retailers do it on LEDs and all sorts of components in addition to ICs (Futurlec has unbeatable prices on many LEDs, which is where I got those excessively inexpensive LED matrixes.)

How do they do it?  It isn't cheap labor - they have to be getting these components at a quarter the price US dealers are getting them to sell at these prices.  The prices are lower than what the manufacturers quote for 1000 piece orders on their websites.
I have only come here seeking knowledge. Things they would not teach me of in college.

Grumpy_Mike

They often get rejects from the testing process. Some RGB LEDs I have got from China are a nice price but uneven light output.
Other times these parts are stolen, or bought up as surplus.

James C4S

Counterfeits is another option.


How do they do it?  It isn't cheap labor - they have to be getting these components at a quarter the price US dealers are getting them to sell at these prices.  The prices are lower than what the manufacturers quote for 1000 piece orders on their websites.

Not cheap labor in producing the parts, but much cheaper labor in handling the parts.  When you order less than a reel's worth of components from a regional distributor, someone has to handle the parts.  That adds cost to the distributor, not the manufacturer.  Plus distributors generally have other overhead, such as support.

Someone selling rejects, counterfeit, or surplus parts generally has much lower overhead and paid less than cost for the parts to begin with. 

I'm sure if you get a bad IC, the guy in HK will be quick to help you rectify the situation!  (that's sarcasm...)


I generally don't worry about where Passives on hobby projects.  They're all one-offs and I measure each passive before its goes into a circuit anyway.

Active parts on the other hand, I prefer to get genuine parts.  I really don't like debugging a FT232L to find out someone sanded off the label to a MAX232--just to save $2 or $3.
Capacitor Expert By Day, Enginerd by night.  ||  Personal Blog: www.baldengineer.com  || Electronics Tutorials for Beginners:  www.addohms.com

JoeN

I guess I am on the other side of you on this.  I would never use this for a production devices for obvious reasons, not that I get to make that decision anyway.  But for hobby devices, especially ones that breadboard easily, an occasional debugging session might be a reasonable tradeoff in order to save literally $400 on 100 $5 parts you paid $1 each for.

Also, even with soldered parts, the price for sockets at Tayda are dirt cheap.  Use sockets for your ICs.  :D

We will see, I am going to try to drive a 3x15 matrix of 8x8 LEDs with these once I receive them.  The LEDs I have already, bought cheaply from Futurlec, and the ones I have tried out seem to work just fine.
I have only come here seeking knowledge. Things they would not teach me of in college.

focalist

I'm the king of cheap ebay components.  I bottom feed continuously, nabbing up for pennies items that fall through the cracks.  They source from all over the world to me, but there is one fact:

They are made there (in China and other pacific rim nations), and ALL vendors are buying from the same factories.  Many times, these outfits simply are doing enough volume to purchase lots in the millions from the manufacturer, as they are selling thousands of units daily.  I purchase most of my LED's directly from two manufacturers who sell direct on ebay.. which explains the lack of a markup chain.

I recently had a friend scream at me for buying components that aren't "American".  I proceeded to educate him on the fact that there are no American producers of the components, and furthermore, if I go to an American retailer to purchase the same components, I will pay $2 for FIVE resistors at Radio Shack while I can buy them from the same vendor they use, for $1.59 for a pack of ONE HUNDRED.  The same applies to YouDoIT Electronics, and every other retailer.  It's predatory price gouging.. and it's bad business practices by the American retailers that made me take my business overseas to the wholesalers and volume online vendors.
When the testing is complete there will be... cake.

JoeN

"I recently had a friend scream at me for buying components that aren't "American".  "

Yeah, that's funny, but there is one facet of truth to it.  You cut out an American that was making money by retailing, not manufacturing (and so am I so I am not pointing fingers here).  No Americans are making money these days manufacturing simple electronic devices.  All that work is in Asia now.
I have only come here seeking knowledge. Things they would not teach me of in college.

focalist

If that American is depending upon a markup of thousands of percent, that's not honest income.
When the testing is complete there will be... cake.

JoeN

I guess I understand why prices on generic and many-sourced components are cheap in Asia.  A TIP120 is a TIP120, who cares if Fairchild made it or WonTon Industries.  What I am not understanding is why a one-source component like the MAX7219CNG can vary so much.  You would think Maxim could control the supply chain such that this would not happen.  You don't see Intel processors costing 75% less if you order them in Asia.  This is what I fail to understand, unless they are truly counterfeit in some way (stolen IP, made on an alternate production line).
I have only come here seeking knowledge. Things they would not teach me of in college.

JoeN


If that American is depending upon a markup of thousands of percent, that's not honest income.


Well, I am not going to try to justify Radio Shack prices.  Jameco prices I feel totally fine paying, except when there is a real difference like this Maxim driver chip.
I have only come here seeking knowledge. Things they would not teach me of in college.

James C4S


What I am not understanding is why a one-source component like the MAX7219CNG can vary so much.  You would think Maxim could control the supply chain such that this would not happen.

All of the reasons you listed.  Although stolen IP is the least common because of the major cost of setting up the process even once the design is completed.

It is difficult to control the supply chain.  Counterfeiting / rebadging is a huge market for these parts.  If I'm working in a factory making dollars a day and someone offers me $20 to give him a bucket of rejects parts I was suppose to destroy, guess where that bucket is going.

Walking through electronics markets in Shenzhen is mind blowing.  Next to a "shop" selling iPhone cases is a "shop" selling reels of components.  Somehow I doubt many (if any) of those reels were legitimate.

An interesting article on counterfeiting.  BAE, a US-based military manufacturer, was found to have been unknowingly using counterfeited parts into one of their designs.
http://defensetech.org/2011/11/08/counterfeit-parts-found-on-new-p-8-posiedons/



 You don't see Intel processors costing 75% less if you order them in Asia.

Well, let's give it time.  The first Intel fab didn't open in China until 2010.
Capacitor Expert By Day, Enginerd by night.  ||  Personal Blog: www.baldengineer.com  || Electronics Tutorials for Beginners:  www.addohms.com

JoeN

Concerning:

http://defensetech.org/2011/11/08/counterfeit-parts-found-on-new-p-8-posiedons/

"and while the Pentagon and defense industry is working on detecting counterfeit parts, the counterfitters are becoming ever more adept at hiding the fact that their parts are fake."

You would think that these parts would be tested prior to inclusion in these mega-expensive systems.  It's harder to test an active component than a passive one, but it sure can be done.  If it correctly does what it is supposed to do within the spec voltages, frequencies, temperature, etc, then "conterfeit" or not it's a good component.
I have only come here seeking knowledge. Things they would not teach me of in college.

Docedison

Electronics moved "Off Shore" simply because the cost of labor (and life) is so very much different "Off Shore". Cheap Labor = High Profit, real simple as it is the Dollar that drives Everything. Parts that seem unreasonably cheap are so for several reasons most of which have been covered by others in this thread. There is one more thing that needs to be said and that is the parts like the MAX7219CGN are end of life parts commonly "Not recommended for New Design" or they are surplus typically production over-runs. Thus the Price differential. America and many other Countries have "Price Lists" that were generally created at the time of manufacture of the part, in many cases decades ago. These Lists do not reflect the parts real value (remember surplus, over-run, counterfeit, Discontinued and also there is the fact that they typically were purchased many years ago, written off in taxes (thus paid for already) and this makes even pennies per part pure profit. The other reason is simply avarice... Greed. The difference in Greed (profit whether deserved or not) is the difference in the standard of living. Obviously no one is going to sell something at it's cost simply because there are always "hidden Costs" in everything from labor to the price of money (Bankers Profit). In my professional experiences before I retired these were the factors governing the cost of parts. I did leave out one factor and that is the "WoW or New factor", the increase in apparent value because 1. it is single sourced (new) and 2. the Utility or "Wow" factor... That Part is So GREAT it does something Better... Both have a great effect on the parts sale price. They do not have any effect on or of the parts cost to manufacture... which "should" be the determining factor for the actual cost of a part. When a part is manufactured in the thousands on a single wafer, obviously the unit cost is relatively small even counting parts (chip) yields @ 40%/wafer. The packaging costs are nominal, as well as all the previously mentioned factors are well known. I am not trying to say that a manufacturer is not to be rewarded for innovation, there is however a time where innovation is no longer a factor age and (second sourcing) just to name two. The economics of electronics like most other economics subjects aren't simple and are poorly treated here, however I did want to bring my perspective into the general conversation as "I been there & Done that" for a number of years. IMO

Doc
--> WA7EMS <--
"The solution of every problem is another problem." -Johann Wolfgang von Goethe
I do answer technical questions PM'd to me with whatever is in my clipboard

terryking228

#12
Jun 06, 2012, 09:34 pm Last Edit: Jun 06, 2012, 09:39 pm by terryking228 Reason: 1
There's a middle ground in all this, and I've been working on finding it for over a year.

The newer parts from TI, National, Maxim, Intel etc. are coming only from their somewhat-controlled supply chains.  But think about where their VOLUME is going. Not to you and me and the DIY or small production world. It's going to big manufacturers who are building many thousands of boards and assemblies. WHERE are they? In China, of course.

So where is most of the actual in-stock electronics parts volume in the world? In China, of course.

So where do I buy parts to sell to you guys??  In China, of course.  :)

Shenzhen, China is the Radio Row (New York City history for us GrayBeards) of 2012.  My partner is on the street in Shenzhen with cash (RMB) in his hand. There are 900 electronics parts shops in one building in Shenzhen. I'll post a photo (below)..  I lived there for two years, and I decided that there must be a long-term connection between this environment and my Parts Junkie personality. This stuff is so cool. And so inexpensive.

I have 3 levels of choices for individual components: The big distributors (Avnet etc) Chinese branch, who don't want to talk less than 10,000 quantity, or the SEG Market guys and the other online TaoBao.com (Chinese Ebay) sellers, who would LIKE to sell 1000 of something, or the Bargain-Surplus-Backstreet guys who sell at a really low price and usually don't really understand what they are selling or if they will have it next week.  There are some really good sellers, who buy components and really nice subassemblies and Arduino clones in pretty large quantities.  They are pretty good at knowing fakes (they pull out their magnifier like a jeweler!).  And they have a decent supply stream and are almost never out of stock, and warn me when some stock thing is getting funny.  I have 3 of those guys we have settled on over the past year, and they are all good in their way.  They don't speak much English and a lot of their online sales are to Taiwan and Japan.  

Some Chinese Ebay guys and TaoBao guys sell at a very low margin. I don't know how they eat, even in China.  But many of them don't know their sources, don't answer questions, and don't show How-To use the stuff (or just pirate some other sites alleged How-To Info).  I have tried to find a middle ground.  Low but reasonable profit, know the suppliers, immediately replace the occasional failed part/board, show as much How-To as I can find time to write.  (http://arduino-info.wikispaces.com/)

This wouldn't be worth it except for three things:

- The people who are doing this DIY electronics/Arduino 2012 are so cool and friendly, and they are from ALL over the world and I get to connect personally with them. Bending pipe in Bosnia, Teaching kids robotics in Lithuania, running a greenhouse in a small island in the Pacific, incubating sea turtle eggs in Mexico.. ect. etc. Way Cool.

- I get to play with all the parts, fulltime, shipping my tools and oscilloscope and boxes of components and books around, following my wife who is designing Libraries.. Africa, China, Middle East, Italy, and soon home to Vermont USA.  

- I'm "retired" and I could wait a year to start making some money.    This is NOT a business plan for the big guys.

The "Foreign Component Dealers" in China are where the stuff is stocked.  Commodity components like 7805's, TIP120, 555s are sold in large quantities and they have to work or the bigger customers won't buy. We get almost the same price.  Even new parts are in stock in volume, and some get sold to the middlemen who run a low margin.  But the big value-add is in small boards and assemblies.  Look at this: http://goo.gl/FQonZ  I know who makes these, and buy them about 50 at a time through Mr. Tang for about 34 RMB or about $5, and I sell them for $9.  They are nice boards and good workmanship. Amazing. I have sold hundreds and the only return was for a broken switch.  This kind of thing used to be a $50 part.

Sorry for the LongWind... it's a small world and an amazing time for a guy who built his first radio with a single 1S4, and started work the first day at a broadcast station in Connecticut that had 100% vacuum tubes.  

For fun, go to http://taobao.com and look around a bit. Then put "arduino motor driver" in the top orange box and click on the right side two Chinese characters. You don't have to read Chinese.. just look at the pictures.  Or try  ?? ???ATMEGA328P-AU
Regards, Terry King terry@yourduino.com  - Check great prices, devices and Arduino-related boards at http://YourDuino.com
HOW-TO: http://ArduinoInfo.Info

Docedison

I am an Auld Phart and I remember Courtland Street in New York, Akibara in japan and I have a friend in Shenzhen China... He sent me a Mega Clone for free... It says Arduino and on the rear 'Designed in Italy" instead of Made in... If he can afford to send me a part that has a retail price of nearly $60.00 US then it cannot be very expensive in "Town" likely the postage is the real issue here as far as cost goes. There is one other point and that is "Where Are Arduino" products made??? Betcha it isn't Milan... The only thing China really has is a lot of hungry people so labor is cheap and so are parts as they are typically surplus or yesteryears parts. Another participant in this thread mentioned testing parts for "Mega expensive Military Grade parts" the Sad but true fact is that it simply isn't required anymore, That requirement was legislated out many years ago. Now the parts supplier relies on "Certificates of Merit" or something similar (it's been many years since I worked in the defense industry). The manufacturer's rely on the honesty of the suppliers and sometimes people whether through ignorance or greed (deliberate ignorance) sell parts that are either counterfeit or simply not qualified for the application... However the Old Mil883 Testing Standard which was a 100% test at Extreme Operating Conditions was retired long ago... Mil Qualified parts were typically 10 X the cost of the same part in a plastic package instead of the "Frit Seal" package that was required for Mil 883... There is an Extensive article in Wiki on Mil 883. Since the American Space and Military programs have gone through so many convolutions in the years past and the requirement standards have been cheapened. There will always be issues with bad, counterfeit or unqualified parts... Remember the HumVee's that went to Iraq without the specified armoring??? That "mistake KILLED people", although not the same it is typical of the "errors" made today. Remember it's ALL About the MONEY, Honey...  Again IMO

Doc
--> WA7EMS <--
"The solution of every problem is another problem." -Johann Wolfgang von Goethe
I do answer technical questions PM'd to me with whatever is in my clipboard

James C4S


You would think that these parts would be tested prior to inclusion in these mega-expensive systems. 

They might have been.  Just because a bad part doesn't fail immediately, doesn't mean it won't fail eventually.
Capacitor Expert By Day, Enginerd by night.  ||  Personal Blog: www.baldengineer.com  || Electronics Tutorials for Beginners:  www.addohms.com

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