NRE

NRE stands for Non-Recurring Engineering, a one-time cost incurred to develop a new product or customize an existing one. It covers activities necessary to bring a concept to a production-ready state and is separate from recurring manufacturing costs such as unit fabrication, materials, and ongoing support. NRE is common in electronics, automotive, medical devices, software, and other industries that require substantial upfront engineering effort for each new product or variant. Typical elements include system architecture, detailed design, prototyping, tooling and tooling setup, software development, integration, testing, validation, certification, and project management.

In contracts and accounting, NRE is often billed as a fixed payment or milestones and may be negotiated to be recoverable through future unit pricing or license fees. Ownership of resulting IP can be specified. From an accounting perspective, NRE may be capitalized as an asset if it creates probable future economic benefits and meets certain criteria; otherwise it is expensed in the period incurred. In practice, many firms amortize the cost over the expected product life or number of units produced. The amount and structure of NRE can influence supplier selection and project risk, and it is often separated from unit costs to make scalability and profitability more transparent.

Common drivers of NRE include product complexity, regulatory and safety requirements, customization for a customer, manufacturing process development, tooling and fixtures, and software architecture. To manage NRE, stakeholders typically define scope, milestones, exit criteria, and IP ownership up front, and monitor progress to avoid scope creep.