Hardware startups should consider local manufacturing

You're basically saying that laser cutting and CNC stitching - operations performed by robots based on files uploaded by computers - are done better in China than here.

That's like someone in China saying that we are better at standing. People on both sides of the ocean probably do just fine at both. ;)

On the face of it, I'm sure the up-front quote from a Chinese manufacturer is cheaper than something in the USA. Where costs skyrocket is when something goes wrong: the parts are wrong, the products aren't ready on time, something was done incorrectly, etc. If you don't have a manufacturer you can trust, one of those will happen, and is almost impossible to diagnose from the US.

Even if all of that works out, there are other things to consider: costs (and time) of shipping. Want it in a week? Well, get ready to pay. Even if you ship it air freight consolidated, it's still not cheap. If you want it on a boat, there's a good chunk of time to think about.

On top of THAT, there are all sorts of fun import tariffs and such to deal with (at least on the US side). Get ready to front money for an import bond, for starters! And there may already be some hidden costs of importing into the US: if you use some TI parts that have to be imported into China, you're going to be paying taxes twice.

A lot of those things are likely not looked at in the low quote from a Chinese manufacturer. They're costs that can/will show up later along the line.

It's a variation on the premature optimization theme.

They think they will be volume buyers so they outsource the development to the same place that will be doing the manufacturing (China, usually).

But they forget that the design is a very interactive process and that manufacturing is much less so if you just outsource at 'board level'.

The story earlier about 'one-wheel' was a pretty good example of how you should start up your manufacturing. I'm sure that once they hit the volumes where outsourcing makes sense they'll do so but by then they will have an excellent idea of how to set up a quality control pipeline around their product to make sure they will continue to deliver quality products.

It's because the market has become incredibly price-driven, especially the consumer electronics market.

People have seen the prices for Chinese-manufactured gizmos, and now there is an expectation that any new device will be priced similarly. Nobody takes into account that the device the hardware startup is building is innovative and likely much better (more complicated) than the existing gizmos, and that the hardware startup is nowhere near the volumes required to get low pricing. As a result, there is a pressure for lower prices, and lower priced electronics are only attainable in China (for the time being).

This is somewhat similar to what seems to be happening in the mobile app business: there is a race to the bottom and common expectation is that an app won't cost more than a couple of dollars.

I think the author of the article is right: at low volumes, when you do R&D and iterate, you won't even get the economies of scale that China can provide. The problem is that it isn't always possible to manufacture locally, because local manufacturers might not be ready for your low-volume, inexperienced business.

For example, say I order PCBs from China. Takes seemingly forever, but thats OK, I can hang out with family and play minecraft or post on HN. For a hobby that's fine, especially if I save $50. For a company thats economic suicide if you lose 4% of your annual combined salaries waiting for delivery of a prototype. Even financially, dropping your revenue per year might be more expensive than just paying an extra couple percent to the locals.

Another typical smalltimer way of thinking is I make a mistake on a PCB, who cares, its the rare PCB that can't be fixed with some cut-n-solder by hand. That solution doesn't work on a qty 5 figures production run. You'll get much better cooperation with locals, which is irrelevant if your time is free and quantities are single to double digit, but is crucial once you reach consumer kickstarter type scales. Maybe one way to phrase it is problems at the single digit quantity level are interesting anecdotes or minor customer service challenges, but problems at the 10K level are disasters, and problems don't happen at the 10M level because the cost of your onsite overseers stationed in China rounds down to zero per device.

Poor pricing decisions.

Most Kickstarters can't get people to fund "Thingit X" if it costs over $100.

Hell, I'd be hard pressed to put a Beaglebone+wacky I/O thingy+software in a case and shove it out at a profit at $100. And I think I know what I'm doing after a couple decades at this.

And, electronics is NEVER the problem for me. I can generally spin 50 turnkey boards in a week for around $5K unless there is something amazingly exotic about the board. That's just not that expensive relative to business costs.

The things that kill are always the mechanicals. Injection molds are $15K plus for a single mold--and there is always something wrong with the first mold. And you probably need at least 2.

And that's just the case. If you need to mount a display or battery or something that's even more molds.

So, I'm above $50K for injection molds without blinking for even a VERY simple product.

The real solution is to make sure your product is above $100 (preferably significantly) so you can actually 3D print the required plastics (which will be around $10 per part). Now, you can tune your plastic parts and you don't have the NRE of molds. After you have everything tuned and have some volume, THEN you can cut a mold. And, you may never cut a mold--you can print over a thousand parts at $10 per part for $10K. How many Kickstarters ever ship more that a thousand of anything?

Though would you pay a bit more for something made locally? I would and certainly makes an appeal for many. Now if only there was a way for TAX to fix this and make local production competative and for me the only way is to impose some green TAX factoring in all that extra travel. Though many components are not made local, so that may even cost out cheaper to make abroad still.

But the feel of buying something made locally or at least in your own country/continent does have a monetary premium that many would accept.

The ecosystem is there, not here.

If I handed you a bill of materials for a medium complexity product with, say, 250 components and asked you to source them in both the US and China you'd see exactly what I am talking about.

China is now setup with these "manufacturing cities" where everything you might need for a typical consumer product is in close proximity, easy to find and, yes, cost effective. Component manufacturers have huge presence in China in order to facilitate the process. In the US you are exposed to layers of separation and profit-making between you and the component maker. I should also mention that there are components you simply can't get here.

Oh, yes, there's the other reality: Your product is likely to use parts made in China. For the privilege of manufacturing in the US you get to pay the extra cost of shipping, warehousing, handling, supporting and managing the components in a US-based channel of distribution.

Then there's the issue of worker and business culture. Work in China and you'll quickly learn nearly everyone is willing to jump when you say jump. They simply want to get the job done. The US, in sharp contrast, can be surreal at times. For example, it isn't uncommon to send out RFQ's and get no response whatsoever. A couple of years ago I sent out 50 RFQ's to US machine shops for some metal parts. I got around five responses. In China shops would be tripping over each other to get you a quote.

This and other reasons is why it can be comical to hear politicians at all levels repeat the "get manufacturing jobs back" meme. It's ridiculous. This would require a cultural, legislative, labor law and ecosystem shift of such massive scale that it is just about impossible.

No, entrepreneurs don't go to China because it's cheaper. The go there because they need to get their work done efficiently and, yes, at a good price. And all the necessary conditions to meet these goals exist in China, not in Europe and certainly not in the US.

On the face of it, I'm sure the up-front quote from a Chinese manufacturer is cheaper than something in the USA. Where costs skyrocket is when something goes wrong: the parts are wrong, the products aren't ready on time, something was done incorrectly, etc. If you don't have a manufacturer you can trust, one of those will happen, and is almost impossible to diagnose from the US.

Even if all of that works out, there are other things to consider: costs (and time) of shipping. Want it in a week? Well, get ready to pay. Even if you ship it air freight consolidated, it's still not cheap. If you want it on a boat, there's a good chunk of time to think about.

On top of THAT, there are all sorts of fun import tariffs and such to deal with (at least on the US side). Get ready to front money for an import bond, for starters! And there may already be some hidden costs of importing into the US: if you use some TI parts that have to be imported into China, you're going to be paying taxes twice.

A lot of those things are likely not looked at in the low quote from a Chinese manufacturer. They're costs that can/will show up later along the line.

On the face of it, I'm sure the up-front quote from a Chinese manufacturer is cheaper than something in the USA. Where costs skyrocket is when something goes wrong: the parts are wrong, the products aren't ready on time, something was done incorrectly, etc. If you don't have a manufacturer you can trust, one of those will happen, and is almost impossible to diagnose from the US.

Even if all of that works out, there are other things to consider: costs (and time) of shipping. Want it in a week? Well, get ready to pay. Even if you ship it air freight consolidated, it's still not cheap. If you want it on a boat, there's a good chunk of time to think about.

On top of THAT, there are all sorts of fun import tariffs and such to deal with (at least on the US side). Get ready to front money for an import bond, for starters! And there may already be some hidden costs of importing into the US: if you use some TI parts that have to be imported into China, you're going to be paying taxes twice.

A lot of those things are likely not looked at in the low quote from a Chinese manufacturer. They're costs that can/will show up later along the line.

On the face of it, I'm sure the up-front quote from a Chinese manufacturer is cheaper than something in the USA. Where costs skyrocket is when something goes wrong: the parts are wrong, the products aren't ready on time, something was done incorrectly, etc. If you don't have a manufacturer you can trust, one of those will happen, and is almost impossible to diagnose from the US.

Even if all of that works out, there are other things to consider: costs (and time) of shipping. Want it in a week? Well, get ready to pay. Even if you ship it air freight consolidated, it's still not cheap. If you want it on a boat, there's a good chunk of time to think about.

On top of THAT, there are all sorts of fun import tariffs and such to deal with (at least on the US side). Get ready to front money for an import bond, for starters! And there may already be some hidden costs of importing into the US: if you use some TI parts that have to be imported into China, you're going to be paying taxes twice.

A lot of those things are likely not looked at in the low quote from a Chinese manufacturer. They're costs that can/will show up later along the line.

On the face of it, I'm sure the up-front quote from a Chinese manufacturer is cheaper than something in the USA. Where costs skyrocket is when something goes wrong: the parts are wrong, the products aren't ready on time, something was done incorrectly, etc. If you don't have a manufacturer you can trust, one of those will happen, and is almost impossible to diagnose from the US.

Even if all of that works out, there are other things to consider: costs (and time) of shipping. Want it in a week? Well, get ready to pay. Even if you ship it air freight consolidated, it's still not cheap. If you want it on a boat, there's a good chunk of time to think about.

On top of THAT, there are all sorts of fun import tariffs and such to deal with (at least on the US side). Get ready to front money for an import bond, for starters! And there may already be some hidden costs of importing into the US: if you use some TI parts that have to be imported into China, you're going to be paying taxes twice.

A lot of those things are likely not looked at in the low quote from a Chinese manufacturer. They're costs that can/will show up later along the line.

On the face of it, I'm sure the up-front quote from a Chinese manufacturer is cheaper than something in the USA. Where costs skyrocket is when something goes wrong: the parts are wrong, the products aren't ready on time, something was done incorrectly, etc. If you don't have a manufacturer you can trust, one of those will happen, and is almost impossible to diagnose from the US.

Even if all of that works out, there are other things to consider: costs (and time) of shipping. Want it in a week? Well, get ready to pay. Even if you ship it air freight consolidated, it's still not cheap. If you want it on a boat, there's a good chunk of time to think about.

On top of THAT, there are all sorts of fun import tariffs and such to deal with (at least on the US side). Get ready to front money for an import bond, for starters! And there may already be some hidden costs of importing into the US: if you use some TI parts that have to be imported into China, you're going to be paying taxes twice.

A lot of those things are likely not looked at in the low quote from a Chinese manufacturer. They're costs that can/will show up later along the line.

On the face of it, I'm sure the up-front quote from a Chinese manufacturer is cheaper than something in the USA. Where costs skyrocket is when something goes wrong: the parts are wrong, the products aren't ready on time, something was done incorrectly, etc. If you don't have a manufacturer you can trust, one of those will happen, and is almost impossible to diagnose from the US.

Even if all of that works out, there are other things to consider: costs (and time) of shipping. Want it in a week? Well, get ready to pay. Even if you ship it air freight consolidated, it's still not cheap. If you want it on a boat, there's a good chunk of time to think about.

On top of THAT, there are all sorts of fun import tariffs and such to deal with (at least on the US side). Get ready to front money for an import bond, for starters! And there may already be some hidden costs of importing into the US: if you use some TI parts that have to be imported into China, you're going to be paying taxes twice.

A lot of those things are likely not looked at in the low quote from a Chinese manufacturer. They're costs that can/will show up later along the line.

On the face of it, I'm sure the up-front quote from a Chinese manufacturer is cheaper than something in the USA. Where costs skyrocket is when something goes wrong: the parts are wrong, the products aren't ready on time, something was done incorrectly, etc. If you don't have a manufacturer you can trust, one of those will happen, and is almost impossible to diagnose from the US.

Even if all of that works out, there are other things to consider: costs (and time) of shipping. Want it in a week? Well, get ready to pay. Even if you ship it air freight consolidated, it's still not cheap. If you want it on a boat, there's a good chunk of time to think about.

On top of THAT, there are all sorts of fun import tariffs and such to deal with (at least on the US side). Get ready to front money for an import bond, for starters! And there may already be some hidden costs of importing into the US: if you use some TI parts that have to be imported into China, you're going to be paying taxes twice.

A lot of those things are likely not looked at in the low quote from a Chinese manufacturer. They're costs that can/will show up later along the line.

On the face of it, I'm sure the up-front quote from a Chinese manufacturer is cheaper than something in the USA. Where costs skyrocket is when something goes wrong: the parts are wrong, the products aren't ready on time, something was done incorrectly, etc. If you don't have a manufacturer you can trust, one of those will happen, and is almost impossible to diagnose from the US.

Even if all of that works out, there are other things to consider: costs (and time) of shipping. Want it in a week? Well, get ready to pay. Even if you ship it air freight consolidated, it's still not cheap. If you want it on a boat, there's a good chunk of time to think about.

On top of THAT, there are all sorts of fun import tariffs and such to deal with (at least on the US side). Get ready to front money for an import bond, for starters! And there may already be some hidden costs of importing into the US: if you use some TI parts that have to be imported into China, you're going to be paying taxes twice.

A lot of those things are likely not looked at in the low quote from a Chinese manufacturer. They're costs that can/will show up later along the line.

It's because the market has become incredibly price-driven, especially the consumer electronics market.

People have seen the prices for Chinese-manufactured gizmos, and now there is an expectation that any new device will be priced similarly. Nobody takes into account that the device the hardware startup is building is innovative and likely much better (more complicated) than the existing gizmos, and that the hardware startup is nowhere near the volumes required to get low pricing. As a result, there is a pressure for lower prices, and lower priced electronics are only attainable in China (for the time being).

This is somewhat similar to what seems to be happening in the mobile app business: there is a race to the bottom and common expectation is that an app won't cost more than a couple of dollars.

I think the author of the article is right: at low volumes, when you do R&D and iterate, you won't even get the economies of scale that China can provide. The problem is that it isn't always possible to manufacture locally, because local manufacturers might not be ready for your low-volume, inexperienced business.

It's because the market has become incredibly price-driven, especially the consumer electronics market.

People have seen the prices for Chinese-manufactured gizmos, and now there is an expectation that any new device will be priced similarly. Nobody takes into account that the device the hardware startup is building is innovative and likely much better (more complicated) than the existing gizmos, and that the hardware startup is nowhere near the volumes required to get low pricing. As a result, there is a pressure for lower prices, and lower priced electronics are only attainable in China (for the time being).

This is somewhat similar to what seems to be happening in the mobile app business: there is a race to the bottom and common expectation is that an app won't cost more than a couple of dollars.

I think the author of the article is right: at low volumes, when you do R&D and iterate, you won't even get the economies of scale that China can provide. The problem is that it isn't always possible to manufacture locally, because local manufacturers might not be ready for your low-volume, inexperienced business.

It's because the market has become incredibly price-driven, especially the consumer electronics market.

People have seen the prices for Chinese-manufactured gizmos, and now there is an expectation that any new device will be priced similarly. Nobody takes into account that the device the hardware startup is building is innovative and likely much better (more complicated) than the existing gizmos, and that the hardware startup is nowhere near the volumes required to get low pricing. As a result, there is a pressure for lower prices, and lower priced electronics are only attainable in China (for the time being).

This is somewhat similar to what seems to be happening in the mobile app business: there is a race to the bottom and common expectation is that an app won't cost more than a couple of dollars.

I think the author of the article is right: at low volumes, when you do R&D and iterate, you won't even get the economies of scale that China can provide. The problem is that it isn't always possible to manufacture locally, because local manufacturers might not be ready for your low-volume, inexperienced business.

Though would you pay a bit more for something made locally? I would and certainly makes an appeal for many. Now if only there was a way for TAX to fix this and make local production competative and for me the only way is to impose some green TAX factoring in all that extra travel. Though many components are not made local, so that may even cost out cheaper to make abroad still.

But the feel of buying something made locally or at least in your own country/continent does have a monetary premium that many would accept.

Though would you pay a bit more for something made locally? I would and certainly makes an appeal for many. Now if only there was a way for TAX to fix this and make local production competative and for me the only way is to impose some green TAX factoring in all that extra travel. Though many components are not made local, so that may even cost out cheaper to make abroad still.

But the feel of buying something made locally or at least in your own country/continent does have a monetary premium that many would accept.

Though would you pay a bit more for something made locally? I would and certainly makes an appeal for many. Now if only there was a way for TAX to fix this and make local production competative and for me the only way is to impose some green TAX factoring in all that extra travel. Though many components are not made local, so that may even cost out cheaper to make abroad still.

But the feel of buying something made locally or at least in your own country/continent does have a monetary premium that many would accept.

Though would you pay a bit more for something made locally? I would and certainly makes an appeal for many. Now if only there was a way for TAX to fix this and make local production competative and for me the only way is to impose some green TAX factoring in all that extra travel. Though many components are not made local, so that may even cost out cheaper to make abroad still.

But the feel of buying something made locally or at least in your own country/continent does have a monetary premium that many would accept.

Though would you pay a bit more for something made locally? I would and certainly makes an appeal for many. Now if only there was a way for TAX to fix this and make local production competative and for me the only way is to impose some green TAX factoring in all that extra travel. Though many components are not made local, so that may even cost out cheaper to make abroad still.

But the feel of buying something made locally or at least in your own country/continent does have a monetary premium that many would accept.

Though would you pay a bit more for something made locally? I would and certainly makes an appeal for many. Now if only there was a way for TAX to fix this and make local production competative and for me the only way is to impose some green TAX factoring in all that extra travel. Though many components are not made local, so that may even cost out cheaper to make abroad still.

But the feel of buying something made locally or at least in your own country/continent does have a monetary premium that many would accept.

Though would you pay a bit more for something made locally? I would and certainly makes an appeal for many. Now if only there was a way for TAX to fix this and make local production competative and for me the only way is to impose some green TAX factoring in all that extra travel. Though many components are not made local, so that may even cost out cheaper to make abroad still.

But the feel of buying something made locally or at least in your own country/continent does have a monetary premium that many would accept.

It's a variation on the premature optimization theme.

They think they will be volume buyers so they outsource the development to the same place that will be doing the manufacturing (China, usually).

But they forget that the design is a very interactive process and that manufacturing is much less so if you just outsource at 'board level'.

The story earlier about 'one-wheel' was a pretty good example of how you should start up your manufacturing. I'm sure that once they hit the volumes where outsourcing makes sense they'll do so but by then they will have an excellent idea of how to set up a quality control pipeline around their product to make sure they will continue to deliver quality products.

It's a variation on the premature optimization theme.

They think they will be volume buyers so they outsource the development to the same place that will be doing the manufacturing (China, usually).

But they forget that the design is a very interactive process and that manufacturing is much less so if you just outsource at 'board level'.

The story earlier about 'one-wheel' was a pretty good example of how you should start up your manufacturing. I'm sure that once they hit the volumes where outsourcing makes sense they'll do so but by then they will have an excellent idea of how to set up a quality control pipeline around their product to make sure they will continue to deliver quality products.

It's a variation on the premature optimization theme.

They think they will be volume buyers so they outsource the development to the same place that will be doing the manufacturing (China, usually).

But they forget that the design is a very interactive process and that manufacturing is much less so if you just outsource at 'board level'.

The story earlier about 'one-wheel' was a pretty good example of how you should start up your manufacturing. I'm sure that once they hit the volumes where outsourcing makes sense they'll do so but by then they will have an excellent idea of how to set up a quality control pipeline around their product to make sure they will continue to deliver quality products.

It's a variation on the premature optimization theme.

They think they will be volume buyers so they outsource the development to the same place that will be doing the manufacturing (China, usually).

But they forget that the design is a very interactive process and that manufacturing is much less so if you just outsource at 'board level'.

The story earlier about 'one-wheel' was a pretty good example of how you should start up your manufacturing. I'm sure that once they hit the volumes where outsourcing makes sense they'll do so but by then they will have an excellent idea of how to set up a quality control pipeline around their product to make sure they will continue to deliver quality products.

It's a variation on the premature optimization theme.

They think they will be volume buyers so they outsource the development to the same place that will be doing the manufacturing (China, usually).

But they forget that the design is a very interactive process and that manufacturing is much less so if you just outsource at 'board level'.

The story earlier about 'one-wheel' was a pretty good example of how you should start up your manufacturing. I'm sure that once they hit the volumes where outsourcing makes sense they'll do so but by then they will have an excellent idea of how to set up a quality control pipeline around their product to make sure they will continue to deliver quality products.

It's a variation on the premature optimization theme.

They think they will be volume buyers so they outsource the development to the same place that will be doing the manufacturing (China, usually).

But they forget that the design is a very interactive process and that manufacturing is much less so if you just outsource at 'board level'.

The story earlier about 'one-wheel' was a pretty good example of how you should start up your manufacturing. I'm sure that once they hit the volumes where outsourcing makes sense they'll do so but by then they will have an excellent idea of how to set up a quality control pipeline around their product to make sure they will continue to deliver quality products.

It's a variation on the premature optimization theme.

They think they will be volume buyers so they outsource the development to the same place that will be doing the manufacturing (China, usually).

But they forget that the design is a very interactive process and that manufacturing is much less so if you just outsource at 'board level'.

The story earlier about 'one-wheel' was a pretty good example of how you should start up your manufacturing. I'm sure that once they hit the volumes where outsourcing makes sense they'll do so but by then they will have an excellent idea of how to set up a quality control pipeline around their product to make sure they will continue to deliver quality products.

It's a variation on the premature optimization theme.

They think they will be volume buyers so they outsource the development to the same place that will be doing the manufacturing (China, usually).

But they forget that the design is a very interactive process and that manufacturing is much less so if you just outsource at 'board level'.

The story earlier about 'one-wheel' was a pretty good example of how you should start up your manufacturing. I'm sure that once they hit the volumes where outsourcing makes sense they'll do so but by then they will have an excellent idea of how to set up a quality control pipeline around their product to make sure they will continue to deliver quality products.

It's a variation on the premature optimization theme.

They think they will be volume buyers so they outsource the development to the same place that will be doing the manufacturing (China, usually).

But they forget that the design is a very interactive process and that manufacturing is much less so if you just outsource at 'board level'.

The story earlier about 'one-wheel' was a pretty good example of how you should start up your manufacturing. I'm sure that once they hit the volumes where outsourcing makes sense they'll do so but by then they will have an excellent idea of how to set up a quality control pipeline around their product to make sure they will continue to deliver quality products.

It's a variation on the premature optimization theme.

They think they will be volume buyers so they outsource the development to the same place that will be doing the manufacturing (China, usually).

But they forget that the design is a very interactive process and that manufacturing is much less so if you just outsource at 'board level'.

The story earlier about 'one-wheel' was a pretty good example of how you should start up your manufacturing. I'm sure that once they hit the volumes where outsourcing makes sense they'll do so but by then they will have an excellent idea of how to set up a quality control pipeline around their product to make sure they will continue to deliver quality products.

It's a variation on the premature optimization theme.

They think they will be volume buyers so they outsource the development to the same place that will be doing the manufacturing (China, usually).

But they forget that the design is a very interactive process and that manufacturing is much less so if you just outsource at 'board level'.

The story earlier about 'one-wheel' was a pretty good example of how you should start up your manufacturing. I'm sure that once they hit the volumes where outsourcing makes sense they'll do so but by then they will have an excellent idea of how to set up a quality control pipeline around their product to make sure they will continue to deliver quality products.

http://www.harborfreight.com/20-ton-shop-press-32879.html

Agreed on the injection moulding, that's expensive (and rightly so). But a simple press is not going to be a showstopper on any budget.

If you're going to do sheetmetal manufacturing there are a ton of companies waiting to get your business just about anywhere up to a reasonable volume. Manufacturing hasn't completely moved out (yet).

Small series, prototypes, even your first batch of some product can usually (definitely not always) be manufactured locally in just about any country.

To take your pot example, there are places where it grows well, and places where it's not so easy to grow. It's better for everyone if it's grown in the easy places, and traded for goods that are more easily produced in the 'not so easy' places.

That's the theory, at least. Naturally, that specific example also has a lot of legal issues surrounding it!