Hardware startups should consider local manufacturing

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.

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.

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.