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'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?
