A Hardware Founder's Glossary for 2026

The first factory meeting is mostly people firing three-letter abbreviations at you while you decide whether to interrupt. Most founders don’t. Then a quotation arrives with a line called NRE on it, and you work out alone whether €18,000 is normal or an insult.

This is the reference page for the rest of the series, and roughly the vocabulary we end up explaining twice a month at RMBG. It covers what turns up in a quotation, an inspection report, a customs entry, or a distributor’s compliance email. Some of these words have meant the same thing for thirty years. Others arrived in the last two, because trade policy and product regulation moved faster than the textbooks did, and a 2019 glossary leaves you blank on the parts that now cost money.

Definitions are short and practical rather than complete. Where a term carries legal weight, you get one line and a pointer to the post carrying the detail.

Design and engineering

DFA (design for assembly)

Designing so a person or machine can assemble the product quickly and in one orientation. The cheapest labour saving available, and only available before tooling.

DFM (design for manufacture)

Adjusting a design so the chosen process can produce it at volume and at yield. Read every comment in your CM’s DFM report; each one ignored returns as a tooling change.

Digital twin

A simulation model kept in sync with a real product or line using live data from it. Larger EMS partners use line-level twins for capacity planning; startups rarely need one.

Draft (draft angle)

The slight taper on a moulded part’s vertical walls, usually one to two degrees, so it releases from the tool. Draw straight walls and the toolmaker adds draft, and the part stops matching your render.

ECO / ECN (engineering change order / notice)

The document recording a design change, its reason, and the build it takes effect from. In production, the ECO number is how everyone agrees which version they mean.

PCBA (printed circuit board assembly)

A bare board with components soldered onto it. People use PCB and PCBA interchangeably and then argue about price, so be clear which you are quoting.

Tolerance stack-up

The accumulated variation across a chain of parts, checked to confirm the worst realistic combination still fits. Every product with a button that sticks on one unit in fifty skipped this.

Prototypes and phase gates

DVT (design validation test)

The second major build: near-final design, parts from intended processes, tested against your requirements. DVT tells you whether the product works, not whether it can be made to work.

EVT (engineering validation test)

The first build with real intent, usually tens of units, proving the architecture. Expect failures; a clean EVT means you did not test hard enough.

Golden sample

The signed reference unit both sides judge production against for fit, finish, and colour. Keep one at your own office; that argument is only winnable holding yours.

HALT and HASS

Life testing pushes a product past its rated limits to find the breaking point; stress screening applies a milder version to production units to catch weak builds.

Looks-like / works-like

Two prototypes: one that looks right and does nothing, one that works and looks like a science project. Splitting them is cheaper than making a single prototype do both.

PVT (production validation test)

The final build before mass production, on the real line with real operators, tooling, and jigs. PVT validates the process rather than the product, which is what cutting the quantity costs you. What the three gates are for.

T1 samples

The first parts out of a new injection mould, usually wrong somewhere, after which the tool is adjusted for T2. Budget for T1 through T3; nobody gets production parts off T1.

Factories, partners and the paperwork between you

Contract manufacturer (CM)

A factory that builds your product to your design, on your account. You own the design and the risk, they own the line, and it is usually your most consequential relationship.

EMS (electronics manufacturing services)

A CM specialising in electronics: board assembly, box build, test, often procurement. Large providers quote happily and then deprioritise you, so ask where your volume ranks.

NRE (non-recurring engineering)

One-off costs charged before production: tooling, test jigs, fixtures, firmware porting, line setup. NRE is where quotes differ most, and where a low per-unit price is usually hiding. What a development phase costs.

ODM (original design manufacturer)

A supplier that owns an existing design and adapts it for you. Fast and cheap; the design is not yours, the same platform goes to competitors, and the IP conversation is hard.

OEM (original equipment manufacturer)

Used two ways. In supply chains it means the brand that specifies and sells the product; in parts sourcing, an OEM part comes from the original component maker rather than a copy.

RFQ (request for quotation)

The package you send suppliers to get comparable prices: drawings, BOM, volumes, tolerances, test and packaging requirements. Vague RFQs get quotes that are revised upward later.

Tooling

The moulds, dies, and fixtures made for your product specifically. Steel tooling for a consumer enclosure runs into five figures and marks the point where changes get expensive. Write down who owns it and where it sits.

Turnkey vs consigned

Turnkey: the factory buys components and sells you finished goods. Consigned: you buy parts and ship them in. Turnkey hides the component margin; consigned gives you visibility and control of scarce parts.

Quality, inspection and yield

AQL (acceptable quality limit)

The sampling standard deciding how many units get inspected and how many defects a batch may contain before rejection. Agreed levels belong in the contract, not an email.

First article inspection (FAI)

A full dimensional and functional check of the first parts from a new tool, documented against the drawing. Skipping it is how a 0.4 mm error becomes 10,000 units.

IQC (incoming quality control)

Inspection of components as they arrive, before they reach the line. With more parts bought from brokers in an allocation market, IQC is your defence against counterfeits.

OQC (outgoing quality control)

Final inspection of finished goods before shipment, usually to an agreed AQL. An independent pre-shipment inspection is a different thing from the factory checking its own work.

PPAP (production part approval process)

An automotive supplier-approval package defined by the AIAG, with up to eighteen elements and five submission levels. Asking for a Level 3 PPAP tells you how organised a supplier is.

RMA (return merchandise authorisation)

The process and reference number under which a customer returns a faulty unit. Investors ask about your RMA rate and your CM disputes it, so agree who pays beforehand.

Yield

The share of units passing test, reported per station and for the line. First pass yield, before rework, is the honest version; 98% after unlimited rework is something else.

Components and supply

Allocation

When demand for a part exceeds supply and the maker rations it against historical volumes rather than orders. Small buyers get nothing. Memory has been on allocation through 2026.

Approved vendor list (AVL)

The manufacturer part numbers your factory may buy for each BOM line. One entry per line guarantees any shortage becomes your shortage.

Bill of materials (BOM)

The structured list of every part, quantity, and source needed to build one unit. Your cost, lead time, tariff exposure, and compliance obligations all hang off it, so version-control it.

China+1

Keeping Chinese manufacturing while adding a second country of assembly, usually Vietnam, India, or Mexico. Most “+1” lines still take sub-assemblies from China, so it moves your country of origin without moving your dependency.

End of life (EOL) and PCN

A product change notification says a component is changing; an EOL notice gives a last-order date. Register for alerts yourself, because these go to whoever bought the part.

Lifetime buy

Buying enough of a discontinued part to cover the rest of production. It converts a design problem into a cash and warehousing problem, often the right trade.

MOQ (minimum order quantity)

The smallest quantity a supplier will sell, per part or per run. MOQs are why a product costing €40 to build at 10,000 units costs €95 at 500. They are more negotiable than founders assume. How the money math works.

Second source

A qualified alternative part from another manufacturer, already tested in your design. Doing it early is unglamorous; doing it during a shortage is a redesign under pressure.

Money, margin and cash

Cash conversion cycle

The gap between paying suppliers and being paid by customers. Startups die in this gap more often than they die of bad products, because a good sales month can consume more cash than a bad one.

Channel margin

What retailers and distributors keep. A distributor typically takes 15% to 25% and a retailer another 30% to 50% of shelf price, stacked, which is why direct-sales pricing rarely survives retail.

Cost of goods sold (COGS)

The direct cost of producing one unit: components, assembly labour, test, packaging, usually inbound freight and scrap. What counts varies by who is asking, so state your assumptions.

Gross margin

Revenue minus COGS as a percentage of revenue. Consumer hardware sold through retail needs 50% or better at brand level; a 30% margin product must get enormous before it works.

Landed cost

The full cost of getting one unit into your warehouse: ex-factory price, freight, insurance, duty, tariffs, customs charges, handling. The gap is now wide enough that quoting ex-factory to an investor misleads them. What the channel takes before you see a cent.

Payment terms

When the factory gets paid, typically 30% deposit on order and 70% before shipment for new customers. Every week you shift toward net 30 is capital you need not raise.

Sell-in and sell-through

Sell-in is what you shipped to the channel; sell-through is what consumers bought. Confusing them is how a company celebrates a record quarter and takes back stock six months later.

Should-cost

A bottom-up estimate of what a part ought to cost, from material weight, cycle time, labour rates, and a fair margin. Building one before you negotiate turns haggling into arithmetic.

Trade, customs and getting it across a border

Country of origin

Where a product was made or last substantially transformed, which sets the duty rate and the marking on the box. Final assembly elsewhere does not automatically change origin, and getting it wrong brings a penalty.

DDP (delivered duty paid)

The Incoterm where the seller carries everything to your door, duty and clearance included. Convenient, and it buries your real landed cost in someone else’s invoice.

De minimis

The value threshold below which imports enter duty free. The US indefinitely suspended its $800 exemption for shipments arriving by every mode except international post on 24 June 2026, and the EU replaced its €150 exemption on 1 July 2026 with a flat €3 charge levied per tariff classification, with a further handling fee from November. Cheap-parcel business models no longer price the way they did.

EXW (ex works)

The Incoterm where you collect from the factory door and carry every cost and risk onward. Cleanest view of real product cost, and it makes you responsible for export clearance where you have no entity.

FOB (free on board)

The Incoterm where the seller delivers onto the vessel at a named port and risk transfers there. The most common term in consumer hardware, and often used loosely for air freight where it does not apply.

HTS code

The Harmonized Tariff Schedule classification determining your duty rate and any additional tariffs. Classification is the importer’s legal responsibility, and one digit can move duty by tens of percent.

Importer of record

The legal entity responsible for the customs entry, the duties, and the accuracy of the declaration. Selling into the US or EU from outside, someone must hold this role, and if you have not chosen, your forwarder will.

Incoterms

The standard three-letter trade terms from the International Chamber of Commerce, defining who pays what and where risk transfers. They cover cost and risk, not ownership, and they decide whether two quotes are comparable.

Section 301

A US statute, from the Trade Act of 1974, letting the USTR impose tariffs against unfair trade practices. It sits behind the China tariff lists and, since July 2026, forced-labour tariffs across roughly 60 economies. Tariffs stack, so total them against your HTS code.

Compliance and the marks on the label

Battery passport

A digital record of a battery’s composition, carbon footprint, and lifecycle, required in the EU from 18 February 2027 for batteries above 2 kWh. Most consumer products sit well below that threshold.

CE marking

Your own declaration that a product meets the applicable EU rules. Nobody issues you a CE certificate, and a consultant offering to sell you one is selling something else. UKCA is the UK parallel. The full certification map.

Covered List

The FCC’s list of communications equipment deemed a US national security risk under the Secure Networks Act. Devices using modules from listed vendors can be refused authorisation, which makes it a BOM question.

Cyber Resilience Act (CRA)

The EU regulation setting cybersecurity requirements for products with digital elements. It entered into force on 10 December 2024, vulnerability reporting obligations start on 11 September 2026, and full obligations apply from 11 December 2027.

Declaration of conformity (DoC)

The signed document stating which standards your product meets and taking responsibility for it. It must name a real person at a real address in the market, and distributors will ask for it.

Digital product passport (DPP)

A machine-readable record of a product’s materials, repairability, and compliance data under the EU’s Ecodesign for Sustainable Products Regulation. The first working plan covers steel, textiles, tyres, aluminium, furniture, and mattresses, with nothing yet for consumer electronics.

EN 18031

The European standard series for cybersecurity of internet-connected radio equipment, harmonised under the Radio Equipment Directive. It is the checklist your test lab works through for anything with a radio.

EPR (extended producer responsibility)

The principle that whoever places a product on the market pays for its collection and recycling. Registration is per member state, and marketplaces refuse to list you without the numbers.

FCC equipment authorisation

The US approval route for anything emitting radio frequency energy, by supplier’s declaration or full certification. The FCC ID goes on the label, and the process assumes your radio module is already authorised.

GPSR (General Product Safety Regulation)

The EU regulation applying since 13 December 2024, requiring a responsible person established in the EU, traceability information, and safety details in online listings. It catches brands selling into Europe without an entity there.

Harmonised standard

A European standard cited in the Official Journal, giving presumption of conformity with a piece of EU law. Testing to one is the cheap route to a CE mark; anything else means arguing with a notified body.

Radio Equipment Directive (RED)

The EU legislation covering anything transmitting or receiving radio, including cybersecurity requirements mandatory since 1 August 2025. In February 2026 the Commission adopted a regulation repealing that delegated act with effect from 11 December 2027, when the CRA takes over, so check which instrument applies to your ship date.

RoHS and REACH

RoHS restricts hazardous substances such as lead and certain phthalates; REACH governs chemicals more broadly, with a candidate list that grows twice a year. Both are only as good as the supplier declarations you collected.

UL listing

Safety certification from Underwriters Laboratories or another nationally recognised testing laboratory. No US law requires it for most consumer products, yet retailers, insurers, and Amazon do, which makes it a commercial requirement in a regulatory costume.

WEEE

The EU directive on collection and recycling of electrical and electronic equipment, with registration and reporting in each member state you sell into. The crossed-out wheelie bin symbol is this.

Connected products, radios and firmware

eSIM and eUICC

A SIM soldered into the device, with the operator profile downloaded over the air rather than swapped by hand. GSMA’s SGP.32 made this workable for devices with no user interface.

LTE-M and NB-IoT

Two low-power cellular standards for devices sending small amounts of data. LTE-M handles mobility and lower latency; NB-IoT reaches deeper into buildings and costs less per module. Coverage varies enormously by country, and the 2G and 3G networks are being switched off.

Matter

The application-layer standard for smart home devices, run by the Connectivity Standards Alliance, so a device works across Apple, Google, Amazon, and Samsung. Version 1.5 arrived in November 2025, adding cameras and closures.

OTA (over-the-air update)

Delivering firmware updates to deployed devices over the network. The CRA makes update capability effectively mandatory in the EU, and retrofitting OTA after launch costs far more than designing it in.

Pre-certified radio module

A wireless module already holding FCC, RED, and other approvals, letting you inherit most of that certification instead of testing a bare radio. A few euros per unit, tens of thousands saved in lab time.

SBOM (software bill of materials)

A machine-readable list of every software component, library, and version in your firmware, open source included. The CRA turns it into evidence you must produce, and generating it at build time beats reconstructing it later. What the CRA demands, and when.

Secure boot

A boot process that cryptographically verifies firmware before running it, anchored in a hardware key. It stops attackers loading their own firmware and it will also stop you, so plan key management first.

Sunset policy

Your written commitment on how long the product gets security updates and what happens to its cloud features afterwards. Regulators and retailers now ask for this in writing, and after several smart home shutdowns, so do customers.

Thread

A low-power mesh networking protocol carrying IPv6, used underneath Matter for battery-powered devices. It needs a border router in the home, usually a speaker or hub the customer may not own.

Sources

• Cyber Resilience Act — European Commission, Shaping Europe’s Digital Future
• Regulation (EU) 2023/988 (General Product Safety Regulation) — EUR-Lex
• General Product Safety Regulation: a new era of product safety for the EU — Baker McKenzie
• RED cybersecurity requirements mandatory on 1 August 2025 — SGS
• European Commission repeals RED cybersecurity delegated regulation as CRA comes into full effect — CSA Group
• EN 18031 is now a harmonized standard — Nemko
• Introduction of the EU battery passport from February 2027 — Switzerland Global Enterprise
• ESPR delegated acts: status by product group and working plan timeline
• Digital Product Passport — European Commission, Single Market and Economy
• Indefinite suspension of the de minimis exemption — Federal Register, 24 June 2026
• E-commerce: 150 EUR customs duty exemption threshold to be removed as of 2026 — European Commission, Taxation and Customs Union
• EU ends €150 duty exemption, charging €3 per item — PPC Land
• Section 301 forced-labor tariffs replace expiring Section 122 tariffs — Honigman
• Section 301 of the Trade Act of 1974 — Congressional Research Service
• FCC list of equipment and services covered by Section 2 of the Secure Networks Act
• UK government announces extension of CE mark recognition — GOV.UK
• Matter 1.5 introduces cameras, closures and enhanced energy management capabilities — Connectivity Standards Alliance
• Production part approval process — AIAG
• What is SGP.32? A practical guide to the new IoT eSIM standard — Monogoto
• Chip industry update, Q2 2026: memory goes on allocation — PCIM
• EPR authorized representative in the EU — Ecosistant
• 2G and 3G sunset: what it means for IoT connectivity — Telenor IoT