
Hardware startups should consider local manufacturing - twald
https://medium.com/@senic/made-locally-5f495a822d44
======
iandanforth
I'll add one word of caution, I've looked into getting a product made that had
a textile component and a separate product that had a leather component.

Precision, automated stitching is either totally absent or completely
unaffordable in the US. There are great shops India and China that can do
laser cutting and CNC stitching super cheaply and if you want to make an
inexpensive product to tight tolerances this is exactly what you want.

Unfortunately much of the consumer level textile industry has completely left
the US. Same with leather. You can find boutique manufacturers, luxury
manufacturers, and aerospace type companies, but the sweet spot of high
quality and a good price just doesn't exist here. (I actually hope I'm wrong
about that but I did _a lot_ of searching before abandoning a couple
projects.)

~~~
justizin
Read your own comment.

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. ;)

~~~
bsder
> 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.

Not done better. They're not done here _AT ALL_.

That's a big difference.

~~~
justizin
That's a bold claim. Laser cutting and CNC stitching are not done "here" which
I guess is outside China, at all, by anyone?

~~~
bsder
In the US, pretty much.

There are boutiques that cater to the very high-end crowd, but they're few and
far between.

If you want units of 100's, that just isn't going to happen. It's simple
economics--if you want 100K units, you have more than enough incentive to go
to China. If you want 100's of units, you're either too small and will go
bankrupt or you will change over to China next round because you have the
volume. So, you don't get future work, and you tie up one of my machines.

It's very hard to explain to people that the economics of automation dictate
that a machine should either be operated nearly 100% or 0%. 100% is the
obvious production mode. 0% is the non-obvious one. You want 0% because you
need to be ready for when you get the 100% order. The opportunity cost of not
getting the 100% order due to lack of capacity, machine needing maintenance,
etc. far exceeds the profit you would make on that order for 100 units.

------
amckenna
I have backed a half dozen Kickstarters and Indigogos that were hardware based
(consumer electronics) and chose to manufacture in China. Seeing the time and
money they spend in order to fly someone over to China to troubleshoot and
issue with manufacturing or testing has left me wondering - why do small
startups choose to manufacture in China to begin with?

> Is it because they assume that despite the initial cost over local
> manufacturing the investment will be worth it if their product takes off?

> Is it because everyone else seems to do it?

> Or maybe because there aren't any good local places to have electronics
> manufactured? This I would find a little hard to believe given the
> concentration of hardware startups in SF, NYC, SEA, which have local
> hardware manufacturers.

~~~
JonFish85
My guess would be that it starts with the assumption that "China is cheaper",
and that makes for an easy story to tell to investors "we're making XYZ in
China!". The second you say "we're making it in Texas", it opens you up to
questions of "isn't that expensive?"

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.

~~~
IndianAstronaut
> there are all sorts of fun import tariffs and such to deal with (at least on
> the US side)

Hopefully some free trade agreements help eliminate blockages like this in the
future.

~~~
JetSpiegel
As if China had any difficulty in selling their products already. Cutting
taxes even more to benefit Apple et al, why?

~~~
AllenKids
Because Chinese people are still poor and you white saviors are good
Samaritans doing God's work lifting us?

------
kcorbitt
> If you’re based in Germany, there is a 7 hour time difference to east Asia,
> if you’re based in California, it is 16 hours.

No, in California, it's 8 hours (in the other direction). It doesn't make
sense to talk about more than 12 hours of time offset except if you really
care about aligning the calendar day instead of just the hour of the day.

~~~
nandemo
Around weekends, it does matter. E.g., when it's Friday afternoon in
California, it's already Saturday in East Asia.

------
tlb
I agree that manufacturing in-house is great for hardware startups. I've seen
it work for several. The insight they gain into the details of design, and the
speed they can iterate at, more than make up for higher local labor costs.

~~~
twald
hey, author here. we're thinking about sharing stories about hardware startups
that decided for the local manufacturing route including price differences,
manufacturing tips, gm contacts, etc. If somebody is interested or wants to
get involved, please send me an email: tobias@senic.com

~~~
Gurkenmaster
I'm not from [http://schiit.com/](http://schiit.com/) but they also went with
local manufacturing route and their prices are quite competitive.

------
jtoberon
In the NYC area, there's [http://www.refactory.co/](http://www.refactory.co/).
I used to work with these guys, and they know their stuff.

They argue in favor of both designing and manufacturing locally. A quote from
their blog: "If you kind of just prototype something and bring it to China
expecting that then thousands of these things can be made easily without
understanding the processes and materiality of manufacturing, that is gonna be
a big problem for you. What works is when the design process is iterated
alongside the manufacturing process."

------
sabalaba
Those costs in China are too high. I've lived in Shenzhen for under $70 USD /
week in a hostel. If you eat out every meal for 100 RMB, you're not even going
to be spending $350 a week for meals. While I agree that if you can do it
locally, do it locally, but those numbers for the cost of living and travel in
China are inaccurate.

~~~
hawkice
For context: 100RMB is about $16, so you better really be enjoying those meals
you're eating 3 times a day, because wowzers that's upscale.

~~~
sabalaba
Exactly, and they were suggesting that it would be $200 USD _more_ than that
per week!

------
shanecleveland
What exists to help entrepreneurs find/pair up with manufacturers
locally/domestically? Opportunity there?

I work for a US manufacturer (non-tech related), and we frequently get
inquiries from folks about making their products. We are primarily focused on
producing our own products, but it is nice to fill gaps in production and
explore new partnerships. But we don't actively pursue this, and I have no
idea how they find us. WOM and random online databases, is my guess.

~~~
aslewofmice
thomasnet.com was decent for finding leads, but we weren't able to find a
suitable manufacturer to get past prototype

~~~
shanecleveland
Interesting. I see that our company is listed in there. That's not voluntary
on our part, which may result in a lot of unsuccessful leads.

------
Animats
Local manufacturing only works if you're in a place where there's a lot of
manufacturing, or your product doesn't really require much manufacturing
capability. You many need to be in a place where there's someone down the
street with a 20 ton press. If you need a 20 ton press, you need to be in a
place where at least three shops have one.

If you're making things which are basically PC boards, manufacturing is not
too hard. Making boards and soldering parts onto them has a well developed
workflow. There are lots of board houses and board-assembly services. If you
design for what a pick and place machine can do easily, things usually go
well. Hint: production is surface mount today. This is a pain for people who
are used to prototyping with through-hole parts.

Kickstarter-class startups seem to have excessive problems with making cases
and panels. Tooling for injection-moulded plastic is difficult and expensive.
Once you get it right, the parts just fly out of the machines at a few cents
per part. The production process is just getting warmed up on a run of 10,000
parts, and few Kickstarters get there. Basic truth about manufacturing: most
of the processes are really cheap if you're making enough items, and far more
expensive for short runs.

~~~
jacquesm
20 Ton presses are $200:

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

------
seddona
On the electronics side we
([https://circuithub.com/](https://circuithub.com/)) have spent a lot of time
on automation to bring US manufacturing costs inline with China.

I definitely agree with the premise of the OP, local manufacturing has a lot
of benefits.

------
allworknoplay
Local manufacturing is the only way to go if you're developing a reasonably
complicated product and don't have a team that's super experienced with
international manufacturing. I was the technical co-founder of Brightbox
(brightboxcharge.com, us founders are no longer affiliated), we were based in
NYC and could never have done the prototyping and iteration required if we
couldn't clap eyes on hardware constantly.

There's plenty of great manufacturing in the US. Since I'm a software guy, we
had one company build us a prototype and handle industrial design (Tomorrow
Lab, [http://tomorrow-lab.com/;](http://tomorrow-lab.com/;) Pepin is a friend)
and found an integrated mechanical engineering and manufacturing firm just
over the river in NJ (Tech Products, techproductsco.com; Bob is an awesome
human being) for the final product and first few real runs.

Having an actual partner we could meet with all the time, understand clearly,
and iterate with was incredibly valuable for us. Plus obviously there are
important technical integrations (I was writing all the software myself while
the ME and EE was happening) and multiple suppliers, and if you're in charge
of managing a few bespoke engineers who sometimes don't see eye to eye, you'd
better be able to work with them all carefully and personally.

------
terramars
Totally agree with this. Have a friend who had a successful kickstarter and
decided to go with China - he shipped a year late after spending most of his
time in Shenzen and going through multiple suppliers. In the interim, they
lost the first mover advantage and there are now multiple similar products on
the market. If you're not already well established and making a massive amount
of something, it's a really bad idea to outsource.

------
x0x0
If you haven't heard of Schiit, it's a fascinating story of a small company
that builds high end and low end headphone amps/dacs, for much less money than
competitors. In CA.

One of the two founders wrote an online book about it here:

[http://www.head-fi.org/t/701900/schiit-happened-the-story-
of...](http://www.head-fi.org/t/701900/schiit-happened-the-story-of-the-
worlds-most-improbable-start-up)

~~~
makomk
There's the minor issue of them not actually testing their designs perform as
expected, at least one amp damaging some people's headphones as a result, and
them denying the issue existed: [http://nwavguy.blogspot.com/2011/07/banned-
at-head-fi.html](http://nwavguy.blogspot.com/2011/07/banned-at-head-fi.html)
Though that's not really a problem with manufacturing in the US, it's more of
a general audiophile industry problem.

------
organsnyder
I know some people that started a company that makes GPS receivers for avionic
use (any pilot will likely be able to name them). I heard them explain their
rationale for manufacturing in China, and IIRC it wasn't related to cost—in
fact, they said that cost was comparable to domestic production. Rather, the
main advantage was the ability to source components, such as the Apple-
specific connectors they have to use. Of course, there are difficulties
inherent to working with a manufacturer that's half a world away
(miscommunications, timezones, travel, etc.), but they determined that it was
still the best way to manufacture their product.

China especially has manufacturing centers where just about any component can
be sourced within a few hours, rather than waiting for parts to be shipped
from around the country (if not the world).

China has a huge edge in electronics manufacturing, and it's not because of
cost (anymore). If we ever hope to compete, we'll likely need to promote such
a domestic manufacturing ecosystem via extra-market means.

------
soggypenny
We ([https://supplybetter.com](https://supplybetter.com)) get asked the China
vs. US question all the time and my answer is usually "your mileage may vary".
It's a great post by the Flow team, but where to source your manufacturing
supply chain is highly dependent on the type of product being built. For
instance, the product and vendor certifications required for aerospace,
defense, and medical industries are a much larger influencer of where to setup
a supply chain than in the consumer hardware space. If you're developing a
high-end consumer office product like the Flow team, then it probably makes
sense to do the majority of the development domestically. The Bay Area is a
great place to prototype hardware, and there's a large fraction of potential
beta testers and software talent for them to tap. But like I said, YMMV.

------
kosma
As usual, the answers are not simple. At our last hardware startup we ended up
manufacturing the mechanical parts (injection moulded case, springs, etc.) in
China via our industrial design company but did PCBs, assembly and packaging
locally in Poland. We simply didn't have enough prior experience to design a
foolproof assembly process (which involved flashing, testing on GSM/GPS
repeaters, etc.). We are considering moving the to production to China, but
only once we solve any critical hardware bugs, smooth out the wrinkles in the
flashing/testing process and reach sufficient quantities. With small orders of
100s of units and unexpected disasters like resistors tombstoning due to small
errors in solder paste stencils, a five minute call to the manufacturing plant
beats cross-timezone, cross-language and cross-culture debugging every single
time.

------
teamhappy
I've been thinking about this just the other day. The context then was locally
grown weed in the US and the implications of that for farmers in South
America. Wouldn't we be better off distributing the "workload" evenly across
the planet?

~~~
davidw
Probably not:
[http://en.wikipedia.org/wiki/Comparative_advantage#Ricardo.2...](http://en.wikipedia.org/wiki/Comparative_advantage#Ricardo.27s_example)

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!

------
thruflo
As a founder of [https://www.opendesk.cc](https://www.opendesk.cc) I think
_all_ startups should consider local manufacturing -- when they're fitting out
their work space.

</tenuous plug>

------
fest
I read the story how "Schiit happened" the other day and the last part of
chapter 8 also touched this subject: [http://www.head-fi.org/t/701900/schiit-
happened-the-story-of...](http://www.head-fi.org/t/701900/schiit-happened-the-
story-of-the-worlds-most-improbable-start-up/495#post_10375915)

------
Animats
Local manufacturing only works if you're in a place where there's a lot of
manufacturing, or your product doesn't really require much manufacturing
capability. You many need to be in a place where there's someone down the
street with a 20 ton press. If you need a 20 ton press, you need to be in a
place where at least three shops have one.

If you're making things which are basically PC boards, manufacturing is not
too hard. Making boards and soldering parts onto them has a well developed
workflow. There are lots of board houses and board-assembly services. If you
design for what a pick and place machine can do easily, things usually go
well. Hint: production is surface mount today. This is a pain for people who
are used to prototyping with through-hole parts.

Kickstarter-class startups seem to have excessive problems with making cases
and panels. Tooling for injection-moulded plastic is difficult and expensive.
Once you get it right, the parts just fly out of the machines at a few cents
per part. The production process is just getting warmed up on a run of 10,000
parts, and few Kickstarters get there. Basic truth about manufacturing: most
of the processes are really cheap if you're making enough items, and far more
expensive for short runs.

------
Animats
Local manufacturing only works if you're in a place where there's a lot of
manufacturing, or your product doesn't really require much manufacturing
capability. You many need to be in a place where there's someone down the
street with a 20 ton press. If you need a 20 ton press, you need to be in a
place where at least three shops have one.

If you're making things which are basically PC boards, manufacturing is not
too hard. Making boards and soldering parts onto them has a well developed
workflow. There are lots of board houses and board-assembly services. If you
design for what a pick and place machine can do easily, things usually go
well. Hint: production is surface mount today. This is a pain for people who
are used to prototyping with through-hole parts.

Kickstarter-class startups seem to have excessive problems with making cases
and panels. Tooling for injection-moulded plastic is difficult and expensive.
Once you get it right, the parts just fly out of the machines at a few cents
per part. The production process is just getting warmed up on a run of 10,000
parts, and few Kickstarters get there. Basic truth about manufacturing: most
of the processes are really cheap if you're making enough items, and far more
expensive for short runs.

------
Animats
Local manufacturing only works if you're in a place where there's a lot of
manufacturing, or your product doesn't really require much manufacturing
capability. You many need to be in a place where there's someone down the
street with a 20 ton press. If you need a 20 ton press, you need to be in a
place where at least three shops have one.

If you're making things which are basically PC boards, manufacturing is not
too hard. Making boards and soldering parts onto them has a well developed
workflow. There are lots of board houses and board-assembly services. If you
design for what a pick and place machine can do easily, things usually go
well. Hint: production is surface mount today. This is a pain for people who
are used to prototyping with through-hole parts.

Kickstarter-class startups seem to have excessive problems with making cases
and panels. Tooling for injection-moulded plastic is difficult and expensive.
Once you get it right, the parts just fly out of the machines at a few cents
per part. The production process is just getting warmed up on a run of 10,000
parts, and few Kickstarters get there. Basic truth about manufacturing: most
of the processes are really cheap if you're making enough items, and far more
expensive for short runs.

------
dmritard96
For some it will make sense. Try iterating on your board designs in CA - I
mean like testing your pcb antennas, component swap out etc during development
and spend weeks waiting around for you pcbs. Being in shenzhen you can get 1
or 2 day turn around... Even if you don't manufacture there, development is
pretty awesome

------
organsnyder
I know some people that started a company that makes GPS receivers for avionic
use (any pilot will likely be able to name them). I heard them explain their
rationale for manufacturing in China, and IIRC it wasn't related to cost—in
fact, they said that cost was comparable to domestic production. Rather, the
main advantage was the ability to source components, such as the Apple-
specific connectors they have to use. Of course, there are difficulties
inherent to working with a manufacturer that's half a world away
(miscommunications, timezones, travel, etc.), but they determined that it was
still the best way to manufacture their product.

China especially has manufacturing centers where just about any component can
be sourced within a few hours, rather than waiting for parts to be shipped
from around the country (if not the world).

China has a huge edge in electronics manufacturing, and it's not because of
cost (anymore). If we ever hope to compete, we'll likely need to promote such
a domestic manufacturing ecosystem via extra-market means.

------
organsnyder
I know some people that started a company that makes GPS receivers for avionic
use (any pilot will likely be able to name them). I heard them explain their
rationale for manufacturing in China, and IIRC it wasn't related to cost—in
fact, they said that cost was comparable to domestic production. Rather, the
main advantage was the ability to source components, such as the Apple-
specific connectors they have to use. Of course, there are difficulties
inherent to working with a manufacturer that's half a world away
(miscommunications, timezones, travel, etc.), but they determined that it was
still the best way to manufacture their product.

China especially has manufacturing centers where just about any component can
be sourced within a few hours, rather than waiting for parts to be shipped
from around the country (if not the world).

China has a huge edge in electronics manufacturing, and it's not because of
cost (anymore). If we ever hope to compete, we'll likely need to promote such
a domestic manufacturing ecosystem via extra-market means.

------
organsnyder
I know some people that started a company that makes GPS receivers for avionic
use (any pilot will likely be able to name them). I heard them explain their
rationale for manufacturing in China, and IIRC it wasn't related to cost—in
fact, they said that cost was comparable to domestic production. Rather, the
main advantage was the ability to source components, such as the Apple-
specific connectors they have to use. Of course, there are difficulties
inherent to working with a manufacturer that's half a world away
(miscommunications, timezones, travel, etc.), but they determined that it was
still the best way to manufacture their product.

China especially has manufacturing centers where just about any component can
be sourced within a few hours, rather than waiting for parts to be shipped
from around the country (if not the world).

China has a huge edge in electronics manufacturing, and it's not because of
cost (anymore). If we ever hope to compete, we'll likely need to promote such
a domestic manufacturing ecosystem via extra-market means.

------
jtoberon
In NYC, there's [http://www.refactory.co/](http://www.refactory.co/). I used
to work with these guys, and they're great.

------
jtoberon
In NYC, there's [http://www.refactory.co/](http://www.refactory.co/). I used
to work with these guys, and they're great.

------
jtoberon
In NYC, there's [http://www.refactory.co/](http://www.refactory.co/). I used
to work with these guys, and they're great.

------
kweks
A lot depends on the product you are manufacturing, and the relationship you
have with the manufacturer.

Business in China operates via 'Guanxi' [
[http://en.wikipedia.org/wiki/Guanxi](http://en.wikipedia.org/wiki/Guanxi) ] -
which losely translates to a heirachy of: family first, then friends, then
people from the same town, then of the same province, then of the same
country, and then, the lowly gweilo / white devil.

If you don't have previous contacts or a solid history in China, you fall
right to the bottom of the stack - meaning you'll have a bad price, bad
negotiation point, low priority in the factory, and ripe for being
'disappointed' with your experience.

Likewise, many people who outsource manufacturing to China hop on alibaba,
find a manufacturer with a low per item cost, and think they've cracked
East/West trading. Not so. There are many, many hidden gotchyas involved -
ranging from child labor, poor conditions, the 'factory' you chose isn't even
the manufacturer, to hiden nasties in pricing / shipping, etc.

There is a large misconception that products from China are junk. This is
partly true. Some products from China are junk - simply because the Chinese
can and will manufacture according to the resale price specified by the buyer
- that is to say, you. When you buy a $1 item from WalMart, and you know its
price 'should be' $5, you contribute actively to this problem. Want to see a
great product made in China? Look at your Apple device.

If you're contemplating doing business or manufacturing in China, there's a
few basic things to do to avoid common pitfalls: 1\. Visit your factory. Fly
over, arrange meetings with 4 - 5 similar factories, and inspect them all. If
something seems suspicious, return unannounced to see the reality. This is
really, really important. Meeting clients and relations are very, very
important in China. 2\. Understand / learn how Chinese do business. If you
don't have local contacts, consider finding a local broker to do the hard work
on your behalf, and negotiate Chinese/Chinese (See Guanxi above). Due
diligence here is important. 3\. Plan for 12-month development cycles. If
you're in a big factory, you're competing with their big clients. Most
manufacturers plan in 24-month development cycles, so plan at least in 12
month cycles. This is just common sense. 4\. Factor in shipment prices /
shipment terms. Learn the difference between EXW / FOB / etc. These make huge
diffrences to your bottom line. Remember for production runs to have shipping
insurance / liability insurance. 5\. Don't fall into legal issues: ensure you
know what and how your goods are manufactured. Making toys / figurines? Make
sure your factory is certified to make them, or be able to live with the
consequences. 6\. Be realistic about your MOQ. If you're looking for 5 items,
don't look to China - you'll only waste your time and the factory's time.

Like any decision in business, you need to consider what works best for your
business.

Source: 30+ years of manufacturing hardware [locks, tools, etc], toys
[figurines, plush, etc], and electronics [PCBs, injection moulded cases etc]
in China.

~~~
CamperBob2
Good points, and another one worth mentioning: watch out for the case where
the single unit or small quantity of sample product you order when evaluating
a new supplier turns out to be of much, much better quality than the bulk
order you eventually place.

~~~
kweks
Very good point; typically if you inspect the factories and only work with
ISO9001 factories, you can ask to see their random selection / testing
procedures that are in place. And, as you say, asking to see the policy is one
thing, asking to see the records of the last random test they made is another
:D

------
reformdesigns
Great points - thanks Tobias!

