How Much Does It Cost to Build a Custom Embedded System in 2025 From PoC to Mass Production

When an innovative company decides to bring a new product to life, the vision is often grand. They imagine a device that is intelligent, efficient, and seamlessly integrated into users’ lives. But between that initial idea and a successful product launch lies a complex engineering journey—and a question that always surfaces: what is the true cost? In 2025, with the embedded systems market nearing $120 billion globally, the answer is more nuanced than ever. It’s influenced by project scope, technology choices, Edge AI trends, and the growing prevalence of opensource hardware and software architectures.

Understanding real costs demands clarity on two development phases: a lean, focused Proof of Concept (PoC) and the far more demanding mass production stage. Each stage comes with unique financial rules, challenges, and tradeoffs. Recognizing these differences from the start is a vital step toward effective budget planning.

The Proof of Concept Phase — Validating Your Vision with Purpose

The PoC phase is about proving feasibility, not creating a polished device. The primary question at this stage is: does the core idea work? Does the chosen sensor capture data accurately? Can the microcontroller or edge AI unit execute necessary computations reliably?

Focusing narrowly on one capability keeps costs controlled. A typical PoC may rely on off-the-shelf boards such as Raspberry Pi, ESP32, or Jetson kits. This allows teams to validate functionality without spending on hardware design or tooling. A simple PoC might cost around $20,000, depending on the number of features and the region of development.

PoC teams are typically small—one firmware engineer, a software developer, and a project manager. Hourly rates vary significantly. Companies based in Western Europe or North America may spend three to four times more on labor than those in Eastern Europe or Southeast Asia.

One important benefit of PoC is its value for fundraising. A working prototype turns an abstract concept into something tangible—providing stakeholders confidence and facilitating early buy-in before larger investments begin.

From Prototype to Product — Costs That Multiply

Once the PoC demonstrates feasibility, the project advances to the productization phase, where goals shift from experimentation to scale and reliability.

Off-the-shelf boards give way to custom hardware. PCB engineering becomes necessary: schematic capture, trace layout, form factor optimization, and sourcing reliable components. Bills of Materials must be detailed and optimized for each production variant.

Custom enclosures replace prototype cases. Professional mechanical engineers produce CAD designs. Plastic injection molds cost tens of thousands, sometimes reaching six figures depending on complexity and required tolerances. These expenses are nonrecurring engineering (NRE) costs that must be amortized over production volumes.

Regulatory compliance is a significant cost driver. Products destined for multiple regions require certifications such as CE in Europe, FCC in the US, and safety approvals like UL or industry-specific marks. Each certification can run into the tens of thousands of dollars and adds both time and complexity.

Software development also enters a maturity stage. Prototype code gives way to production-grade firmware. A secure-by-design mindset becomes standard—secure boot, cryptographic signing, OTA update infrastructure, and hardened error handling must be baked in. Embedded Linux teams, cybersecurity engineers, and QA specialists often join the project to ensure reliability and long-term support.

Automated testing and quality assurance become essential. Simulation platforms, hardware-in-the-loop rigs, and HIL frameworks are used to minimize failure risk. These measures prevent expensive recalls and preserve brand trust.

Cost Breakdown for 2025 — What Drives Development Budgets

Hardware Engineering:

The complexity of the PCB and selected components heavily affects cost. A simple MCU-based board costs significantly less to design than a full AI-capable board with custom FPGA or high-performance SoM. Several prototype revisions may be needed, each requiring fresh fabrication.

Software and Firmware:

Often the largest single category of expense. Ranges vary widely: a minimal firmware effort could cost tens of thousands, whereas a full-stack embedded Linux project with Edge AI, secure connectivity, and cloud integration can exceed $300,000 to $500,000, depending on team size and regional rates.

Mechanical Design:

Includes enclosure design, material selection, CAD modeling, prototyping, and production tooling. Molds for high-volume production can cost $50,000 or more, and DFM optimizations add to engineering hours.

Project Management & QA:

Project managers and QA engineers are critical. They keep schedules on track and conduct rigorous testing campaigns (manual and automated). QA may account for 10–20 percent of total project costs but helps avert costly product failures down the road.

Manufacturing & Supply Chain:

This category is volatile. Components fluctuate in price; global delays may force redesign. Manufacturing partners, logistics, and packaging all influence per-unit cost. For high volumes, per-unit BOM and assembly may stay under $30–40, but materials such as displays, sensors or RF modules can significantly increase expenses. Working with multiple suppliers and designing modular hardware helps mitigate risk.

Compliance & Certification:

Costs include testing per region and safety requirement assessments. A multi-region product may spend $30,000–70,000 on certifications alone, depending on industry. Failing to plan early can lead to timeline delays.
 

Real-World Illustrative Examples

A smart agriculture device start-up built a PoC using RISCV boards for under $25,000; mass production design costs reached $250,000 due to custom PCB complexity and compliance testing in multiple countries.

An industrial inspection company invested in hardware-in-the-loop testing rigs and embedded Linux engineers for secure OTA features. Firmware costs exceeded $400,000, but successful qualification under safety standards enabled enterprise adoption.

Planning for Success — How to Approach Budget Strategy

Begin with transparent estimates for key stages:

• Estimate PoC at $20k–50k depending on scope and region.
• Budget hardware engineering and PCB iterations at $50k–200k depending on complexity.
• Software and QA may range from $100k to over $500k.
• Mechanical and tooling may add $50k–150k.
• Certification costs vary from $30k–100k depending on market reach.
• Manufacturing volumes must be forecasted—unit BOM can range from $20 to over $200.

Understanding these categories early helps align expectations across stakeholders and investors, preventing costly surprises in later stages.

Final Thoughts

The cost of developing a custom embedded system in 2025 should never be reduced to a single number. It's a layered investment shaped by ambitions, technical complexity, regional labor costs, and regulatory demands. From PoC to mass production, strategic decisions—from PCB architecture and software stack to tooling and certification—define whether an idea becomes a profitable, scalable product. Teams that plan with careful cost forecasting, choose modular technologies like RISCV or open frameworks, and build security and compliance from the start are better positioned to thrive in a competitive global market.