Key takeaways
- Choose a factory on verified identity, capability and contract terms, not on unit price.
- A factory cannot quote from a description or a photo. A structured bill of materials and manufacturing drawings are non-negotiable.
- An undetected trading company adds a hidden markup, kills customisation and removes your quality leverage.
- A standard NDA covers the wrong risk. The harm is not a factory talking about your design, it is a factory building and selling it.
Finding a manufacturer looks like a search problem: send some emails, compare quotes, pick the best price. It isn’t. It’s a due diligence problem. The founders who treat it as a search lose months to a factory that turned out to be a middleman, or find out two years later that they don’t own the mold they paid for.
The short version: choose a manufacturer on verified identity, capability and contract terms, not on unit price. Unit price is the number that changes most between quote and production, and it matters least when something goes wrong.
This guide assumes you already know what kind of partner you need and roughly where you’ll build. If you don’t, start with OEM vs ODM vs EMS and where to manufacture your product. What follows is the next step: what to send a factory, how to tell a real one from a trader, and what to put in the contract before you pay a deposit.
If you’re still weighing a region, see our guides to manufacturing in China, domestic US manufacturing, nearshoring to Mexico and Vietnam and India as China alternatives, plus how tariffs change your manufacturing math and what working with an overseas supplier requires.
Be clear what you’re asking a factory for
Factories respond to the vocabulary you use. If you email asking for “an OEM,” you’ve told them you don’t know it: you are the OEM, the brand owner. What you usually want is a contract manufacturer (CM) or an electronics manufacturing services (EMS) company that builds to your files. An ODM is a different arrangement, where the factory supplies its own design and typically keeps the IP. Our guide to OEM vs ODM vs EMS covers which one fits your stage.
The other split you’ll be asked about is turnkey versus consignment. Turnkey means the factory buys all components; consignment means you supply them. Consignment sounds cheaper. For commodity passives it usually isn’t: reel minimums, attrition overage and per-line handling charges tend to erase the savings and add shortage risk. Keep consignment for genuinely hard-to-find or custom parts, and say which model you want in your RFQ.
Where to find manufacturers worth contacting
Finding names is the easy part. Every channel below will give you dozens. What differs is how much each one has already filtered for you, and what it cannot tell you.
| Channel | Best for | What it does not tell you |
|---|---|---|
| Referrals from your design firm, PCB fabricator or component distributor | Factories already building products like yours, with a track record someone will vouch for | Whether they have capacity for a small program right now |
| Trade fairs (for example the Canton Fair in Guangzhou or the Hong Kong electronics fairs) | Meeting engineers face to face and seeing many suppliers in one category in a few days | Whether the booth belongs to a factory or a trader. Many exhibitors are traders. |
| B2B platforms (Alibaba, Global Sources, Made-in-China) | Breadth: finding who makes a given process or component category | Badges confirm a company paid for a listing or had a site visit, not that it is a factory or that it can build your product |
| Industrial directories (Thomasnet for North America) | Domestic and nearshore suppliers searchable by process and certification | Pricing, or whether they take startup-sized orders |
| Sourcing agents | Language, local verification and someone on the ground | How they are paid. An agent earning commission from the factory is not working for you. |
Aim for a shortlist of three to five, not twenty. Run the free identity checks in the trading-company section below before you send anyone your full documentation package. Every factory that receives your files is one more place your design sits, so the shortlist is also an IP decision.
Platform badges deserve one more sentence. A paid membership or an inspection-company assessment tells you the business exists at an address. It does not tell you the business scope on its license, who actually runs the machines, or whether your product suits its lines. Treat a badge as a reason to check, not as the check.
When you’re ready to approach a manufacturer, and what they need from you
A factory cannot quote from a description or a photo. Two documents are non-negotiable:
A structured bill of materials: manufacturer names and part numbers, reference designators, quantities. Not “a microcontroller.” The exact part.
Gerber files: top copper, silkscreen, mask, bottom copper, X-Y placement coordinates, stackup.
Helpful additions that speed everything up: assembly drawings, 3D CAD, tolerances, a test specification, packaging specification, and a named engineering contact who can answer questions without a three-day delay.
What your quote is worth depends entirely on what you hand over. One PCBA manufacturer publishes the accuracy tiers directly: a basic inquiry with minimal data gets you roughly ±40%; a BOM plus board specs gets ±20%; comprehensive documentation gets ±5 to 10%. A budgetary quote is explicitly non-binding and only becomes firm once specifications and volumes are locked.
That spread isn’t the factory being difficult. Ambiguity gets priced. A manufacturer facing an incomplete package either quotes high to protect themselves (and you pay for your own vagueness) or quotes low to win the work and then discovers the real cost later. Neither ends well for a startup.
Approaching with only a prototype is the most common version of “too early.” Prototypes are built from 3D-printed parts and hand-soldered boards, using processes production doesn’t share. A factory looking at that has to guess at everything you haven’t specified. And a single perfect unit proves nothing about whether a process is stable. A skilled technician compensating by hand for machine drift hides exactly the problems that show up across a thousand units.
One live disagreement worth knowing about: should you send a costed BOM? A quantified BOM with part numbers is mandatory. But some sourcing practitioners argue you should never hand a CM your component costs, because your quote comes back built on top of them. That’s a negotiating judgment, not a requirement.
How to compare factory quotes like for like
Three quotes for the same product routinely differ by multiples, and usually not because one factory is cheaper. Each one has priced a different scope, a different shipping point or a different volume. Before you compare prices, make the quotes comparable.
Send every factory the identical package. Same BOM revision, same drawings, same volumes, same deadline. If one factory asks a question that changes the scope, send the answer to all of them.
Ask for the quote broken out the same way. A single unit price hides everything you need to compare. Ask each factory to fill in the same lines:
| Quote line | What to check |
|---|---|
| Unit price at three volumes | Where pricing becomes competitive, not just the minimum they accept |
| Tooling and NRE, listed separately | Whether it is amortized into the unit price, and what asset each item produces |
| Incoterm (EXW, FOB or DDP) | Where the price stops. EXW ends at the factory door, FOB at the departure port, DDP at your door with duty paid. Comparing an EXW quote with a DDP quote compares two different things. |
| Sample and production lead times | Whether the clock starts at deposit, at sample approval or at tooling sign-off |
| Component sourcing and attrition | Turnkey or consignment, and the overage applied to small parts |
| Payment terms and quote validity | Deposit percentage, what the balance is conditioned on, and how long the price holds |
Then convert each quote to landed cost: unit price plus freight, insurance, duty and your own inspection costs, at the volume you will actually order. Duty depends on classification and country of origin, which our guide on how tariffs change your manufacturing math explains. The lowest unit price is often not the lowest landed cost.
Read the quote as evidence, not just as a price. A factory that asks sharp questions about your tolerances before quoting has read your drawings. One that returns a round number in a day without a single question has not.
Minimum order quantity: what to ask, and what it tells you
Every factory will quote you a minimum order quantity, driven mostly by tooling, line setup and component reel minimums. Our guide to factory MOQs covers what sets the number and what is negotiable. For choosing between factories, two points matter.
MOQ is not the same as the minimum economical quantity. A supplier may accept 500 pieces while unit pricing only becomes competitive around 3,000 to 5,000. Negotiating an MOQ down often just means paying a per-unit price that kills your margin. Ask for pricing at several volumes, not just the minimum they’ll accept. Our guide on low volume vs mass production covers when that economical-quantity threshold is worth crossing.
An unusually low MOQ is a warning, not a win. Real factories have rigid minimums tied to line setup and material costs. A “manufacturer” happy to make fifty units of a custom-spec product at sample pricing is almost certainly a trading company.
How to tell a real factory from a trading company
An undetected trading company adds a hidden markup (one sourcing firm estimates 5 to 25%), kills your ability to customize, removes your quality leverage, and leaves you with a thin-asset counterparty if you ever need to enforce anything.
These checks are mostly free and take minutes.
Check the business license scope. On China’s national registry at gsxt.gov.cn, look at the registered business scope. Manufacturing verbs (生产, 制造, 加工) mean they make things. If it only says 销售, 批发 or 贸易, you’re talking to a trader.
Ask what VAT invoice they issue. Factories are general taxpayers issuing 13% VAT special invoices. Traders often issue only 3% simplified invoices. One question, one minute.
Check the industry code. Under GB/T 4754, codes 13 to 43 are manufacturing; 51 to 52 are wholesale and retail.
Sanity-check the scale. Free annual reports show social insurance participants and paid-in capital. Factories typically show 30 to 800+ insured employees. A “manufacturer” with four insured staff isn’t one.
Look at the catalog shape. Factories are narrow and deep: many variants within one process family. Traders are wide and shallow across unrelated categories. Anyone claiming to make both textiles and electronics is sourcing, not manufacturing.
Send a real drawing with tolerances and materials. A factory replies within 24 to 72 hours, in engineer vocabulary, with specific material and tolerance options. A trader takes 5 to 10 days, stays vague, and defers to “the real factory.”
Ask for an unscheduled video call. Live, not pre-recorded, with you choosing what to look at. The wall-mounted business license should match the company you’re contracting with.
To be fair to traders: they’re a legitimate answer for orders under a few hundred units, for consolidating many product categories into one shipment, or when you want a quality control layer and have nobody on the ground. The problem is paying factory prices for trader service without knowing it.
Manufacturer certifications that actually mean something
Match the certification to your market: ISO 9001 is the baseline quality management system that nearly every serious buyer requires, ISO 13485 applies to medical devices, IATF 16949 to automotive and AS9100D to aerospace and defense. A certificate is the floor, not a differentiator.
Verify the certificate, don’t accept the PDF. Check the entity name, certified address and certified scope against the company you’re actually contracting with, using IAF CertSearch or the issuing body’s own registry. A certificate issued to a different entity, to a warehouse address, or with a sales-only scope is a borrowed credential.
For the full walkthrough of checking entity status and accreditation independently, see our guide on how to verify a manufacturer’s certifications.
How to audit a factory before you commit
Five areas worth assessing, with the red flag in each (the same discipline applies to design partners; our guide on how to vet a hardware development company sets out the full six-stage process):
Capabilities. What’s genuinely in-house versus subcontracted? A factory may claim to do injection molding and actually outsource all of it, with no transparency into who’s really making your parts.
Manufacturing fundamentals. Employee turnover and training records. High turnover destroys the consistency you’re paying for.
Quality management. Is the system implemented or is it paperwork for auditors? Look for live performance metrics, corrective action records, and calibration records. Documents that exist only for audit purposes are worse than none, because they create false confidence.
Engineering support. R&D staff and test infrastructure. Smaller factories often lack the capacity to support complex development, which matters if you need help rather than just hands.
New product introduction. Do they have a structured NPI process and can they build their own test fixtures and standard operating procedures?
One question founders skip: ask about their sweet-spot volume range and current customer mix. A factory running near 90% equipment utilization will deprioritize small programs, and yours is the small program.
Agree what “good” looks like before production. Use signed golden samples for appearance and dimensions, and first article inspection for the process. Our guide to quality control in manufacturing covers both, along with AQL sampling.
Protecting your IP: why an NDA isn’t enough
A standard NDA covers non-disclosure. That’s the wrong risk.
The harm isn’t a factory telling someone about your design. It’s a factory building and selling your product. That’s why China-practice lawyers recommend an NNN agreement: non-disclosure, non-use and non-circumvention. Non-use is the clause that matters.
What makes one enforceable, according to firms that litigate these:
Chinese law should govern, and Chinese should be the controlling language. Foreign law feels more comfortable but comfort isn’t the objective; usability is. English-controlling documents invite translation fights.
The right Chinese court usually beats foreign arbitration. Foreign arbitration invites delays, service fights, procedural fights, and then an enforcement fight in China anyway.
Liquidated damages must be grounded in a reasonable estimate of actual harm, usually framed as lost profits. Chinese courts enforce money awards well through asset freezing. Invented or inflated damage figures get struck out.
Enforceability depends on the jurisdiction and the facts of a dispute, so have a qualified attorney draft or review the agreement rather than relying on a template.
A weak agreement is worse than none, because it gives you false confidence.
What actually protects you is structural, not legal. Split the build: have one vendor program blank chips in bulk and a different manufacturer assemble boards, so your firmware never sits with the factory building your hardware. Don’t let firmware rest on factory computers. And reconcile chips shipped against boards built, because that count is what catches overproduction.
One honest note that cuts against the usual scare stories: the documented cases of hardware startups being copied (a machined camera filter system and a cable-stabilized tripod, both killed by knockoffs) traced back to public crowdfunding pages, not factory leaks. Campaign pages publish specs, images, pricing and video, and copycats can reach market before the original ships. Your factory is a risk. Your own marketing may be a bigger one.
Who owns the tooling: settle it before you sign
Without an explicit contract, factories often behave as though they own the molds you paid for, and some suppliers ask for an extra 15 to 30% on top of the original tooling quote before they will release a mold to another factory. The ownership arrangements, the real cost of amortized tooling and what moving a mold involves are covered in who owns the tooling, and what a mold costs in the first place in our guide to injection mold tooling cost.
At the selection stage, the test is simple: ask every shortlisted factory, in writing, whether you own the tooling on payment, whether it will be marked and inventoried, and what the release terms are if you move. A factory that hedges on this question is telling you how the relationship will go.
And know that a paid NRE line does not automatically give you ownership. For every NRE charge, ask what asset it produces and whether that asset is portable to another manufacturer.
NRE, deposits and payment terms
NRE (non-recurring engineering) covers one-time project-specific work: stencils, artwork, machine programming, jigs, test fixtures and procedures, molds. It can be charged as a separate line or amortized into unit cost. Ask which, because it changes your per-unit maths.
For low-volume board assembly, setup fees itemize roughly as: engineering and DFM review $50 to $150, solder paste stencil $50 to $200, pick-and-place programming $50 to $150, and SMT line changeover $100 to $300+. A typical total lands around $300 to $450 per run.
Payment terms are usually 30/70: 30% deposit on order confirmation, 70% before shipment. Three things to know:
The deposit funds material procurement, and once cutting starts it’s usually non-refundable. Cancellation windows can be as short as 48 hours before material release. Cut fabric, printed boxes and custom hardware are sunk costs.
Condition the 70% in the purchase order, not in emails. Make the balance payable against receipt of the original bill of lading (accepting a copy lets a supplier hold your cargo at port) and against a passed third-party pre-shipment inspection, with the inspection conditions written into the PO.
Third-party inspection in China runs roughly $100 to $400 per man-day, with a typical pre-shipment inspection landing around $300. Against the cost of a rejected container, that is not where to economize.
Above roughly $50,000 to $100,000 per order, a letter of credit shifts risk to the banks. 30/70 suits repeat orders with a supplier you’ve already proven.
What to put in writing for after you sign
Most factory relationships that go wrong do so quietly after the contract: a cheaper component substituted without notice, a tool or process change on the line, a shipment held over battery packaging rules nobody checked. Managing that is an ongoing job, covered in what working with an overseas supplier requires, and catching it is what quality control in manufacturing is for.
What belongs in the selection decision is whether the factory will agree, in writing and before you sign, to notify you before any component or process change, and to accept third-party inspection written into the purchase order. Budget a 15 to 20% contingency on manufacturing costs regardless.
Questions to ask a factory before you sign
Put these to every shortlisted manufacturer in writing. The answers are easier to compare side by side, and a factory that won’t answer one in writing has told you something too.
- Are you the manufacturer, and does your registered business scope say so?
- Which processes are done in-house, and which do you subcontract?
- What volume range suits your lines, and how loaded are they right now?
- What is the unit price at three volume tiers, not just at your MOQ?
- Turnkey or consignment, and what attrition overage do you apply to components?
- Which NRE items produce an asset, and is that asset portable to another manufacturer?
- Who owns the tooling on payment, and what are the release terms if we move?
- Will you notify us in writing before any component or process change?
- Will you accept a third-party pre-shipment inspection written into the purchase order?
- Will the balance be payable against the original bill of lading?
How Inventornest helps founders choose a manufacturer
Most of what determines your quote is decided before the factory conversation starts. A low quote is only useful when the supplier understands the requirements and can deliver the agreed result.
We handle product design and development in-house and prepare the production package appropriate to the product and agreed scope, so a factory quotes from real documentation rather than a description, backed by prototype testing rather than a single working unit. When production is handled by our manufacturing partners, we retain responsibility for engineering coordination and design clarification: we clarify questions with the factory, review initial samples and address discrepancies before scaling production. Each product still requires its own manufacturing checks, and formal manufacturing preparation remains dependent on the agreed scope.
If you’re weighing factories or trying to work out whether you have enough to get a real quote, book a consultation. If you’re earlier in the process, start with product feasibility analysis, or read the difference between a prototype and an MVP to work out which build you actually need first. Our OEM services page explains how we coordinate with manufacturing partners once development is complete.
Finding a manufacturer: frequently asked questions
What documents do I need to get a manufacturing quote?
At minimum a structured bill of materials with manufacturer part numbers and reference designators, plus Gerber files including copper layers, silkscreen, mask, placement coordinates and stackup. Assembly drawings, 3D CAD, tolerances, a test specification and packaging specification will materially improve the quote you get back.
Where do I find manufacturers for my product?
The most reliable leads come from referrals by people who already work with factories in your category: your design firm, your PCB fabricator or a component distributor. Trade fairs, B2B platforms such as Alibaba or Global Sources, and directories such as Thomasnet widen the search but filter less, so run identity checks on anyone you find there before sending your files.
How many manufacturers should I get quotes from?
Three to five shortlisted factories is usually enough to see a realistic price range without spreading your design files too widely. Send all of them the identical package and ask for quotes broken out the same way, so you are comparing prices rather than different scopes.
How can I tell if a supplier is a factory or a trading company?
Check their business license scope on the Chinese national registry for manufacturing terms rather than trade-only terms, ask which VAT invoice they issue, check their industry code, and look at their insured employee count and paid-in capital. Then send a technical drawing: a factory answers in 24 to 72 hours with engineer-level specifics, a trader takes a week and stays vague.
Is an NDA enough to protect my product with a manufacturer?
Usually not. A standard NDA covers disclosure, but the real risk is the factory using your design to build and sell the product itself. An NNN agreement covering non-disclosure, non-use and non-circumvention addresses that, and to be enforceable in China it should be governed by Chinese law, written with Chinese as the controlling language, and carry liquidated damages grounded in a reasonable estimate of lost profits. Enforceability varies by jurisdiction, so have a qualified attorney draft or review it.
What should I ask a manufacturer before signing?
Ask whether they are the actual manufacturer, what they subcontract, their pricing at several volumes, who owns the tooling and on what release terms, whether they will notify you before component or process changes, and whether they accept third-party inspection and payment against the original bill of lading. Get every answer in writing so you can compare factories side by side.
What are typical payment terms with a manufacturer?
Commonly 30% deposit on order confirmation and 70% before shipment. Condition that 70% in the purchase order on receipt of the original bill of lading and a passed third-party pre-shipment inspection. Deposits are generally non-refundable once material cutting begins.
