Buyers often read three quoted prices as negotiation. They are usually three different cost structures. Understanding them makes every future conversation shorter.
Where the unit cost comes from
- Materials — roughly 35–50% on a hair dryer, dominated by the motor, heating element and battery.
- Direct labour — assembly and testing, typically 12–20%.
- Overhead and depreciation — factory, moulds, equipment, 10–18%.
- Packaging and certification amortisation — 5–10%.
- Factory margin — 8–15% for a healthy supplier, and you should want them healthy.
Why MOQ exists
Three real reasons: material minimum order quantities from component suppliers, line changeover time (often 4–8 hours), and yield learning — the first few hundred units always have a higher defect rate. MOQ is not a negotiating trick; it is the volume at which those three costs stop being losses.
Tooling: what you are really paying for
A hair dryer typically needs 5–9 moulds: housing halves, air inlet/outlet, nozzle, button set, and often a battery cover. In China, a small-to-medium mould runs roughly $1,500–$6,000 each depending on size, cavity count and steel grade. A full set for a new design commonly lands between $8,000 and $25,000.
Two things to confirm in the quote: whether tooling is one-time (you own it) or amortised into the unit price, and whether the mould is single or multi-cavity — multi-cavity costs more upfront and cuts unit cost at volume.
The honest arithmetic
If a mould set costs $15,000 and your volume is 5,000 units, tooling adds $3.00 to every unit. At 50,000 units it adds $0.30. This is why factories ask about annual volume before they quote: the same product is genuinely worth different money at different quantities, and a supplier who says otherwise is guessing.
What to do about it: put your real 12-month forecast on the table. Overstating volume to get a better price and then ordering a tenth of it is the fastest way to lose the price — and the supplier's attention.