Hardware Club Manufacturing Meetup
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Slide deck of Jerry Yang from Hardware Club, from his presentation at Hardware Club's meetup on manufacturing at Usine IO in Paris on April 22, 2015.
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Hardware Club Manufacturing Meetup
- 1. HARDWARE STARTUPS manufacturing 101 lessons from the industry experts
- 2. jerry YANG @jmyang1976 I did not co-found in 1994
- 4. Electronic Manufacturing Services is the unambiguous term that describes the services provided by companies that design, test, manufacture, distribute and provide return & repair services for electronic components and assemblies for Original Equipment Manufacturers (OEMs). #EMS
- 5. Original Equipment Manufacturers is the most confusing term. Originally it means the big brands (HP, IBM, etc) that contract the EMS providers to manufacture for them. Over time in Asia it has become the synonym for the EMS providers (Foxconn, Pegatron, etc) as well. #OEM
- 6. Following the confusing Asian logic of calling EMS providers "OEMs", more advanced EMS providers that are able to design final products for OEM Clients (HP, IBM, etc) are called Original Design Manufacturer (ODM). #ODM
- 7. Contract Manufacturer is our preferred terminology as it describes exactly what the startups want from the manufacturers. Note that this does not prevent the confusing terms "OEM/ODM" to show up in your conversations with Asians. #CM
- 8. so I have my prototype working, my Kickstarter order in hand and money in the bank ...
- 9. MOST HARDWAREENTREPRENEURS ARE ONLY FAMILIAR WITH THINGS IN THEIR OWN COMFORT ZONE AND LACK GLOBAL VIEW, MAKING THEIRPROTOTYPESUNPRODUCIBLE “ ”FRÉDÉRIC WETS Industry and process expert, Usine IO Formerly with Scentys and L'Oréal
- 10. a search on ALIBABA returns 100 CMs. I'll just send them my RFQs ...
- 11. WE FIND THAT YOU ARE GONNA END UP WITH HUNDREDSOF FACTORIES THAT ARE LIKELY NOT QUALIFIED “ ”SCOTT MILLER Formerly VP of Engineering at iRobot Founder and CEO of Dragon Innovation General Partner of Bolt Partners * A video interview with Scott is included in SCHOOL
- 12. Okay okay. I'll fly to SHENZHEN myself ...
- 13. PEBBLE VISITED SHENZHEN SIX TIMES IN 2012 WITH ITS KICKSTARTER ORDER OF 70,000 WATCHES BUT NO CM TOOK THEM SERIOUSLY “ ”TERRY CHENG Former VP of Foxconn Group & CEO of Foxconn FIH Former senior executives at HP and Texas Instruments
- 14. but I have an engineer on my team that speaks MANDARIN ...
- 15. EVEN STARTUPS FROM TAIWAN, WHICH SHARE THE SAME LANGUAGE AND SIMILAR CULTURE WITHCHINA GET BURNED IN SHENZHENSOMETIMES “ ”JERRY YANG Formerly with Qualcomm, 13 years of semiconductor R&D experiences in Taiwan,Silicon Valley and Paris, 4 years as an entrepreneur with key clients from JAPAN, TAIWAN and CHINA
- 16. there are SO MANY CMs I can jump from one to another as I wish ...
- 17. “ ”BEN EINSTEIN Founder & General Partner at Bolt Partners Quoted from Medium post "Polygamy and Hardware" TOO OFTEN STARTUPS TREAT CMs LIKE SERVICE PROVIDERS: “JUST MAKE THE DAMN THING AND I’LL PAY YOU.” WRONG. CMs CONTROL THE PRICE, SCHEDULE, AND QUALITY OF YOURPRODUCT. THEY’RE INVESTING MASSIVE AMOUNTS OF TIME AND RISK IN THE HOPE THAT YOU’LL BE THE NEXT BIG PRODUCT.
- 18. #REALITYcheck in Shenzhen there are more than 1,000 IP-Cam contract manufactures, many of which make profit from component sourcing and supplierkickback in addition to manufacturingcontracts
- 19. “ white-label products with the same design appeared on TAOBAO.com before we even received our order ” “ manufactures refused to return the molds to us after we terminated our OEM contract with them ” #HORRORstories
- 20. Your relationship with Contract Manufactures is not about the contracts, but about the manufacturers (people). Having the most detailed contract with the wrong people is still gonna turn out to be a disaster. #key
- 21. #idealCM .TRUSTWORTHY .CAPABILITY & QUALITY .STARTUP-CLIENT EXPERIENCES .VALUE LONG-TERM RELATIONSHIP
- 23. #TAIWAN .HSINCHU SCIENCE AND INDUSTRIAL PARK founded in 1979 .1980's – Computer Manufacturing (EMS) (ACER, ASUS, QUANTA, FOXCONN etc) .1990's – Semiconductor Foundries (TSMC, UMC, etc) .2000's – TFT-LCD panel makers (INNOLUX, AUO, etc) Fabless IC Design Houses (MEDIATEK, MSTAR, NOVATEK, REALTEK, etc)
- 24. #EMS 1. Honhai (Foxconn) 2. Quanta 3. Pegatron (Asus) 4. Flextronics 5. Compal 6. Wistron (Acer) 7. Jabil 8. Inventec 75%
- 25. #Foundry 1. TSMC 2. GlobalFoundries 3. UMC 4. Samsung 5. SMIC 6. Powerchip 7. Vanguard 61%
- 26. #TFT-LCD 1. Samsung 2. LG Display 3. Innolux Corp 4. AUO 5. China Star 6. BOE 7. Sharp 36%
- 27. #ICdesign 1. Qualcomm 2. Broadcom 3. AMD 4. Mediatek 11. Novatek 13. MStar 16. Realtek 19. Himax 11%
- 28. #TAIWAN-CHINA • Most large EMS providers are Taiwanese, but have their factories in China • Most ICs and turn-key modules (BT, WiFi, etc) that HW startups use are from US and Taiwan • Turn-key solution was invented by Mediatek and popularized byMStar and Realtek, all Taiwanese IC design houses • Around 1.5-2M Taiwanese work and live in China, out of the total population of 23M
- 29. #CHINA .INDISPUTABLE PLACE FOR EMS .COMPLETE SUPPLY CHAIN .COMPLETE LOGISTICS .SUPPORTED BY THE UNIQUE TAIWAN-CHINA ECO-SYSTEM
- 30. #MYTHaboutCHINA .IT'S NOT ABOUT LOW-COST (more on this later) .LOW-COST ≠ LOW-QUALITY (eversaw an iPhone?)
- 31. #REALITYcheck for HW startupsthe only meaningfulplace for contract manufacturing is Pearl River Delta region,comprising mainly SHENZHEN, DONGGUAN and to a lesser degree HUIZHOU
- 32. #PearlRiverDelta
- 33. #PearlRiverDelta is historically the richest region in Guandong Province, including Hongkong and Macau which had been "loaned" to UK and Portugal in the 19th Century
- 35. #CANTON The Cantonese speak Cantonese, not Mandarin.Today GuandongProvince has 106M people, most of which speak Cantonese. #CHINATOWN Most of the Chinatowns aroundthe world were built by Cantonese immigrants. The Chinese Food that most westerners know is actually Cantonese.
- 36. Why not go in-land? I heard thatlabor in SHENZHEN is getting more expensive. Isn't it true that Foxconn has factoriesall over the mainland China?
- 37. #FOXCONN .Owned byHONHAI Group .Founded byTERRY GUO .REV2014 = $115B .GM2014 = .NM2014 = .MKTCAP = 7% 4% $45B
- 38. #WHYnot In-land EMS companies might have lower labor costs, but they usually take much larger orders and naturally have longer lead time till FOB #WHY SHENZHEN has a huge amount of small CMs with a very dynamic and flexible supply chain. It also benefits from the tax codes of Special Economic Zones (SEZs)
- 39. #PearlRiverDelta is without a doubt still the top choice for HW startups
- 40. $10B+ FOXCONN, QUANTA, PEGATRON, FLEXTRONICS, COMPAL, WISTRON, JABIL, INVENTEC $0.5-3B Overall capability and qualityof services as good as the elephants, justwith lower volumes. $15-50M Expert EMS firmsin Shenzhen & Dongguan founded bypeople formerly with the elephants & the lions
- 43. #Testing and #QualityAssurance are in fact inserted throughout the #Manufacturing process, based on discussions with the engineering team of the CMs
- 44. Kickstarter order sizes usually not big enough for ordering even from agents. Better let the CMs source components for you. COMPONENT SOURCING
- 50. MANUACTURING MOLDING/TOOLING PAINTING METAL SMT DIP SOFTWARE INSTALLALTION ASSEMBLY/PACKAGING Metal/Plastic cases Display screens Buttons/Keyboards Cables/Batteries
- 51. TESTING IN-CIRCUIT TESTING FUNCTION TESTING FINISHED GOODS TESTING RELIABILITY TESTING IN-CIRCUIT & FUNCTION TESTINGARE DONE THROUGHOUTDIFFERENTSTAGESOF MANUFACTURING
- 52. TESTING During design phase, implement DFT (Design for Testing) & POST (Power-onSelf-Test) to minimize/eliminate the needs of INSTRUMENTS for final testing
- 53. QUALITY ASSURANCE LCR multimeter Gauge meter X-ray tester Hi-temp chamber Vibration tester Spectrometer Color analyzer Load tester STATISTICAL PROCESS CONTROL
- 54. what about CMs in EASTERN EUROPE?
- 55. #REALITYcheck Rationale for manufacturingin CHINA is not only aboutLOW-COST. CHINA has the most complete SUPPLY CHAIN that will eventually scale you up to a $1B company
- 56. If you are a LIFE-STYLE entrepreneur with limited ambition, EASTERN EUROPEAN EMS might be a decent choice
- 57. But if you dream of being the next UNICORN, you have to learn the CHINESE game sooner than later
- 58. more GLOSSARY
- 59. Design for XXX Design for Cost (DFC) Design for Manufacturing (DFM) Design for Testing (DFT) Design for Assembly (DFA) #DFx
- 60. Request for Quotation is the official request form you send out to the multiple CMs that you selected out of all CM candidates, which you believe could manufacture your products with the quality and in the time/cost structure you want ... #RFQ
- 61. Minimum Order Quantity is the minimum quantity required by a CM for an order. The CM needs this MOQ for the fixed cost (setup cost, transaction cost, etc) to be spreaded out. MOQ varies from 1k~10k somewhat based on unit price (BOMcost). #MOQ
- 62. Freight On Board is literally the status where the CMs send your finished goods on-board of the sea freights for shipping. The CMs usually quote its production time (e.g. 180 days) as between the release of your final design database and FOB. #FOB
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- 64. brought to you by follow @hardware_club