Start An Electronic Contract Manufacturing Business

Electronics manufacturing requires specialized equipment

Electronics manufacturing is a lucrative field that offers a lot of growth potential for the right company. Many original electronics manufacturers are choosing to outsource their manufacturing operations so they can concentrate on their core competency which is research and development. This outsourcing movement opens the market for contract manufacturers to take up the slack. For newcomers to the industry, the challenge will be maintaining equipment and expertise while also showcasing your talents to new customers.


1. Register your business with the local county officials and purchase a business license. Due to the significant capital equipment requirements, it is necessary to incorporate your business. Contact U.S. Small Business Administration for assistance in determining where and garner start up financing. Their mandate is to help find you a lender and introduce you to the many loan and grant opportunities for businesses in the United States.

2. Lease a manufacturing space to support your new operation. Due to the noise and size of the required equipment, you should look in an area that already has manufacturing facilities. Residential and retail areas typically have noise restrictions that may prohibit your operation. Choose a building with at least 10,000 square feet of open floor space so your entire operation will fit in one area. Schedule an OSHA visit and get chemical clearance. Many of the materials used in electronics manufacturing, such as lead, are also potential environmental risks so you will need to have your manufacturing facility approved through OSHA. The Occupational Safety and Health Administration will visit your facility and review how you store your chemical. Once they are satisfied you have acceptable procedures in place for chemical storage and disposal, they will give you certification.

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3. Purchase or rent surface mount equipment. To make a profit in contract electronics manufacturing, you must keep your equipment up-to-date with both the latest designs and technology. Printed circuit boards are the primary product OEM’s outsource the manufacturing of and surface mount equipment eliminates the need to hand place each component. Surface mount machines feed the resistors and capacitors through a placement head which adheres the components to the circuit board. These machines are the single most expensive item contract manufacturers invest and can run from $50,000 to well over $1 million per unit, so if your working capital is low, consider renting until you can support an outright purchase. Some of the manufacturers that allow leasing include: Fujitsu, Panasonic and Ekra.

4. Hire a marketing and sales manager. This person will be responsible for contacting OEMs and selling the OEM on your company’s capabilities. Since contract manufacturers do not build their own designs, it is imperative to have a good sales manager that has experience in the industry. Often contract manufacturers hire sales managers that previously worked for OEMs since they would have an working knowledge of how the OEM makes its outsourcing decisions. As the company grows, there may be a need to add additional sales managers and split them by customer. This is especially true if the OEM being built for is large or has multiple locations. The best avenue for finding the right sales managers is to use an executive recruiter. These types of recruiters are familiar with higher level managers and can typically find professionals who have the experience you are looking for.

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5. Hire experienced manufacturing associates or certified trainer. Since IPC is the electronics industry standard for solder skills, the trainer must have a current IPC certification and also be a certified “train-the-trainer.” If your region has experienced and IPC certified manufacturing associates, it would make it easier to start with high quality and efficiency. If your area is new to electronics manufacturing, you may be able to hire a trainer who has experience operating your equipment who can train your manufacturing associates. Wages of inexperienced personnel are typically lower but be prepared for lower quality and less efficiency initially until the new associates gain some experience. Work with your local employment agency to screen job applicants. You may want to make IPC certification a condition of employment to determine how big the potential job applicant pool initially is. If you do not meet with much success, then consider hiring less qualified applicants that you feel could be trained to meet the job specifications.