When a first-world buyer decides to manufacture in Thailand rather than import finished goods off the shelf, tooling is the moment the relationship stops being transactional. A mould, jig or fixture is a capital asset sitting inside somebody else's factory, and the paperwork you sign in week one decides whether you can move production in year three.
- 30-60% Typical share of NPI budget spent on tooling
- 3-8 weeks Realistic tool transfer window inside Thailand
- 2-5 years Useful life of a well-maintained steel mould
Three ways tooling gets paid for
| Model | Who pays upfront | Who owns | Buyer risk |
|---|---|---|---|
| Buyer-funded tool | Buyer pays 100% on PO | Buyer, if the contract says so | Low, if title and location clauses exist |
| Amortised tool | Factory funds, recovers per unit | Usually factory until fully amortised | Medium — ownership is disputed at exit |
| Factory-owned tool | Factory pays | Factory | High — you cannot leave with the tool |
Amortisation looks attractive because it protects cash. It is also the most common reason buyers get stuck: the factory recovers cost per unit, volumes fall short, and the tool is never "paid off". If you use amortisation, write a fixed buy-out number and a date into the contract.
Clauses that actually protect you
- Title and vesting — title passes to the buyer on payment of the tooling invoice, not on completion of the first production run.
- Physical marking — every tool carries a plate with your company name and asset number, photographed and filed.
- Location and no-lien — the tool stays at the named plant, cannot be pledged as collateral, and cannot be sub-let to another buyer.
- Maintenance schedule — shots counted, preventive maintenance at fixed intervals, records available on request.
- Release on demand — the factory releases the tool within a stated number of days once open invoices are settled. Without this clause, a tool becomes a hostage in any commercial dispute.
These belong in your master supply agreement, not in an email. See supply agreement terms buyers must lock for the full clause set.
Tooling and the make-or-buy decision
Tooling cost is what makes manufacturing different from importing. If your annual volume divided by the tool cost yields more than a few percent of unit price, importing an existing catalogue product is often the better answer for year one. Run the numbers with the make-or-buy framework before you approve a tooling PO.
Tooling also interacts with minimum order quantity: a multi-cavity tool cuts cycle time but raises the MOQ needed to justify it. Our capacity and MOQ guide covers the trade-off.
Practical checklist before you release the tooling payment
- Tool drawings, steel grade and cavity count agreed in writing
- T1 sample, dimensional report and capability study accepted before final payment
- Spare wear parts quoted at the same time as the tool
- Tool insurance named in the factory's policy
- Photo of the asset plate filed with your quality records
Verify all of this during the on-site visit — the factory audit checklist includes a tool-room section.
Exit planning from day one
Assume you will one day move the tool. That single assumption produces better contracts. Keep a duplicate of the CAD, the steel certificate and the shot count. Ask each quarter for the tool's condition in your supplier scorecard review. When a transfer happens, a documented tool moves in weeks; an undocumented one becomes a re-tooling project costing you the original investment twice.
Frequently Asked Questions
Who legally owns a mould paid for by the buyer in Thailand?
Ownership follows the contract. Thai law recognises the buyer as owner where the supply agreement states that title passes on payment and the tool is identifiable. Without an explicit clause and asset marking, possession by the factory becomes a strong practical defence, so document both.
Can I move my tool to another Thai factory?
Yes, if the contract has a release clause and open invoices are settled. Plan three to eight weeks for removal, inspection, refurbishment and re-qualification at the new plant, plus a fresh first-article approval.
Should I amortise tooling into the unit price?
Only with a written buy-out figure and an end date. Amortisation preserves cash but blurs ownership, which is exactly what you do not want in a dispute.
How long does a Thai steel mould last?
A hardened steel tool run within its rated cycle typically delivers several hundred thousand shots over two to five years, provided preventive maintenance is logged and wear parts are replaced on schedule.
Does tooling cost include first-article samples?
Ask explicitly. Most Thai quotations include T1 samples but exclude dimensional reports, material certificates and any engineering change after approval. Price those separately in the tooling PO.