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What Drives Cost of Ownership?

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Cost of ownership (COO) is one of the key factors that decides the viability of any capital equipment purchase, and the need to lower total factory cost of ownership is often what guides many business decisions. So, what drives a lower COO, and how can you achieve that without sacrificing on system performance? Let’s look at the main factors.

What is Cost of Ownership?

Cost of ownership is defined as “the purchase price of an asset plus the costs of operation.” Assessing cost of ownership involves looking past the short-term acquisition price and examining the total cost to operate that piece of equipment for the long-term. Will there be maintenance costs, including upgrades or enhancements, associated? How much does it cost to run that equipment, in terms of power usage or other consumables, such as targets?

What does your manufacturing process need to look like from start to finish in order to deliver a quality, competitive product? A very high cost of ownership can dilute the profit margin of the revenue you’re bringing in, which is why you need to figure out ways to reduce long-term costs, even if it means investing more up front. There is no one simple answer for lowering COO, but there are four main factors that go into it that you should understand.

Top 4 Factors Driving Cost of Ownership for PVD Equipment

Examining these factors together and weighing them against each other is the ideal way to optimize your solution for a lower cost of ownership:

  • Capital cost: The cost of your capital equipment is generally one of the biggest inputs to cost of ownership; you might shy away from spending more money on a more robust tool, but if it gives you more capability, improves factory output, and doesn’t need constant maintenance, it could be worth it in terms of long-term cost of ownership.
  • Materials cost: To manufacture anything, you need to purchase the raw materials first. In thin film deposition, this generally refers to the targets for the coatings you are depositing. Some coating materials, like gold, are costly and will drive up cost of ownership. For these materials, utilization rate and transfer efficiency will be key to minimizing your cost. For inexpensive materials like aluminum, this will likely not be the largest contributor to COO.
  • Parts cost: Finished parts (the substrates and wafers you’re coating) that end up scrapped will inherently raise your cost of ownership. If the parts you’re using are very valuable, then yield becomes the main driver of COO, helping you avoid scrapped parts and gain a better ROI in the process.
  • Labor cost: Labor also contributes to cost of ownership, and varies significantly across the globe. In high labor-cost countries, high levels of expensive automation are justifiable on labor savings alone. In low labor-cost countries, it is a smaller component of COO so substituting labor for automation may make sense, as long as yield targets are met. On the other hand, highly automated tools may require more maintenance, so preventive maintenance cycles and system reliability will also factor in here.

Optimizing Cost of Ownership

There are some other operations costs to consider, such as utilities, but they are not typically a major contributor to COO in physical vapor deposition. All four of the above inputs will always be present in your total COO, but the ratios will differ, and one or two will be the main drivers. For example, if you’re using expensive consumables or parts, a higher COO may be acceptable as you should be able to charge a premium for your product, allowing you to recover other costs. If you need a sophisticated configuration that can handle multilayer coatings and a complex process, you’ll have to prioritize your capital expenditure and invest in equipment that can meet those requirements.

To lower your total COO, you need to strike the right balance between these four factors. If you try and cut too much spend, your overall factory production and ROI may suffer. But if you’re not mindful of where your dollars are going and what your main priorities are, you also run the risk of raising your cost of ownership more than needed, draining ROI. Lowering your total COO without sacrificing ROI means investing in reliable, well-designed equipment backed by dependable manufacturer’s support, the right materials and parts, and sufficient labor so you can deliver on quality and performance.