Product manufacturing for the newbie, from prototype to production

or “How to make software wrapped in plastic”

In December 2012, the following was sent to an email discussion list I’m on:

Hardware is going to become as easy to do as software. The tools are dropping in price. Manufacturing is becoming cheaper. Techshop and makerspaces are your local prototype labs, but there aren’t (many) local factories that you could learn in.

There are necessary skills that can’t be learned via tutorials on the internet. If you wanted to make a physical product at scale how would you go about learning the necessary skills? I’m thinking that this might be a situation where you either learn by doing or someone who has. So either you spin out of an existing hardware company, hire an expensive consultant or you go to a hardware accelerator.

Would you go to a hardware accelerator or similar? Which one would you choose? Are there any that are really doing well?

At the time, I was still a student at MIT — but I had become completely fascinated by hardware startups the previous year. I’d built countless prototypes in the MIT Media Lab, spent a summer working as a designer at Nest, and during senior year spring break — while my friends were vacationing in Florida — I flew to Hong Kong to visit factories in Shenzhen and explore the new world of hardware manufacturing.

Here’s the response I wrote, based on my meetings, research, and adventures.

Why is hardware still hard?

Although prototyping has followed software in becoming much cheaper+faster, Design for Manufacturing (DFM) is still extremely time consuming and expensive for the newbie.

The formula of success right now is

1. Build a prototype or likely several
2. Raise money through Kickstarter or otherwise with solid order estimates
3. Immediately partner with an experienced product development and manufacturing team.

This third step is actually where the game is changing. It’s also where most people screw up.

Designing for mass manufacturing is essentially impossible to learn without actually building several products. The challenges of negotiating with suppliers, verifying components, orchestrating supply chain logistics, and maintaining quality standards will swiftly kill a cash-constrained startup. But there’s good news: unless you’re on the cutting edge of a specific technology (like Apple with displays or metalwork), the problems you encounter at scale have very likely been solved by others. So the task then becomes to find those individuals or companies and hire them quickly.

PCH International is probably the most well-known of these firms. They notably make Kindle, products for Jawbone, and all the accessories for those turtleneck aficionados in Cupertino. Because they often work with big players, they’re able to leverage large contract manufactures’ (CMs) quality standards and economies of scale for smaller production runs. Currently PCH is also aggressively going after hardware startups and recently launched PCH Accelerator, which is essentially a strategic investment group to fund partnerships with startups.

Another option is Dragon Innovation, who works with Pebble, Makerbot, Sifteo, Leap Motion, and others. They’re based in Boston and have recently partnered with the brand-new hardware accelerator/investor BOLT. They’re certainly less flashy than PCH, but still know how to deliver.

HAXLR8R (Shenzhen) and Lemnos Labs (San Francisco) are other startup “accelerators” — kind of like a hardware-flavor of YC. They seem to be more focused on the R&D stages (pre-Kickstarter) than production. For some personal anecdotes by others, see What startup accelerators exist for hardware companies?.

One way to think about contract manufacturing in China is with the “smile curve” popularized by Acer in the early 90s. It’s essentially a graph of a product’s extractable value as a function from creation to sale. On the left is brand, high-level design (IxD, ID, PD) and any specialized R&D. In the middle you have component sourcing, supply chain management, manufacturing, assembly, and shipping. And then on the right you have distribution, retail sales, marketing, and partnerships.

The large profits are on the sides of the graph, which is where you usually find western companies (like Apple). China manufacturing is in the middle, where the margins are tight and market economies of scale are huge. PCH and similar help to bridge the gap. In particular, their recent acquisition of Lime Lab is part of a larger move to provide turnkey solutions for holistic product development, including identity, branding, industrial and interaction design, marketing, packaging, assembly, and distribution/shipping. They’re following the money, and moving up the sides of that curve.

But manufacturing in China is about a lot more than cost.

When I came here, Shenzhen was a place to make cheap products.

Then it became a place to make products cheaply.

Now, for the work we do, it’s the only place to make certain products, because of the supply base, the logistics, and the workforce.

— Liam Casey (founder of PCH)

I’ve heard this reiterated by execs at several big companies: the actual cost of labor is negligible compared to their product margins. China wins today because your suppliers are usually just down the street.

Also interesting, conventional “rapid prototyping” like 3d-printing is almost nonexistent in Shenzhen, because making the actual part is usually just as quick/cheap. If that idea is hard to wrap your head around — check out this blog post about Huaqiangbei market to get a sense of what a public electronics mall in Shenzhen looks like. Shenzhen is by far one of the most mind-blowing places I’ve been. And these guys didn’t even to go the grey-market electronics shops…

For a detailed story with more context about manufacturing in China, check out James Fallow’s recent article for The Atlantic, Mr. China Comes to America. He also wrote a similar article in 2007 shortly after meeting Liam Casey: China Makes, The World Takes (2007). Fallow’s recent book China Airborne is also a good read.
If you want to manufacture a product with quantity in the dozens or a few hundred, then the unit economics are kind of weird. Local 3D printing is probably still cheaper than injection molding. PCB+assembly might make sense but is also somewhat expensive. You can hack pre-build enclosures from extruded aluminum or similar. For more on building at this scale, check out some of the links from MIT’s class on Design for DIY Manufacturing. And for the h4xor mechanical engineers in our midst, my friend Charles just published a very long Instructables guide with a bunch of tips and links to resources for building quickly for assembly.

What is different today?

It’s amazing how relevant this post still is, almost three years later. (I’ve even heard from several engineers who used it as a blueprint to ship their products!) Today, the fundamentals are the same, but there’s been a tremendous growth in the support network for building hardware products.

Design: Prototyping machines are faster and cheaper, and local product design firms like PunchThrough can hep quickly iterate and validate ideas. With the continued rise of makerspaces and Learn to Code initiatives, more people than ever are capable of creating prototypes and exploring new ideas. (including terrible ideas)

Funding: Whereas previously there was only Kickstarter, today’s makers have Indiegogo, Selfstarter, CrowdSupply, and countless others. And for later growth, many VCs like Formation 8 are raising huge funds dedicated to hardware. Consumers and investors now believe in hardware startups.

Manufacturing: Today’s manufacturing options have also grown. PCH has expanded it’s accelerator into the full-service Highway1 incubator. And smaller firms like Blue Clover Devices are excited to partner with US startups building next-generation products. When I visited Shenzhen years ago, I had to make fake business cards to get factory tours. Nowdays, the boss is happy to talk with a startup founder.

Photos from China:

Many of my friends didn’t believe the stories I told about the “grey” market electronics malls in China. Here are a few photos as proof!

These chips are the “A4” iPhone 4 CPU, which was released weeks before I took this photo. They were being sold for about $10 each from a soy sauce dish in the mall. They also had the latest dual-band GSM chips, Snapdragons, and more.

Pretty sweet summer job.

This is a testing rig for phone displays. The teenager using it would plug in a screen, check for dead pixels, test the touch digitizer, and if everything passed, wrap each part individually in bubble wrap. I wouldn’t be surprised if this is how online stores like iFixIt source replacement parts.

This is a franken-Kindle that also runs a modified Android OS. The software was pretty buggy, but apparently in China you can build anything. :)

Just like Zales, except instead of diamonds those are power MOSFETs. I also saw racks upon racks of capacitors, buttons, enclosures, and several kiosks which sold every imaginable kind of oscilloscope. This is like every circuit-lover’s dream.

I put some trucks on your truck.

Closing

Visiting Shenzhen had a huge effect on the way I perceive products, manufacturing, globalization, and culture. I considered moving there after college just to experience the growth and creativity. It’s hard to describe how electric it feels to be a maker in Shenzhen.

Instead, I was ultimately drawn toward something else that had been bothering me for years: email. But that’s the subject for another post.

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