I get to talk to a lot of folks who use Octopart at points all along the electronic product development life cycle. Over the past few weeks, I’ve been to MakerCon, chatted with some local contract manufacturers, and met with some of our distributor and manufacturer partners. From these conversations it’s clear that some changes we’ve known about for a while are accelerating, and some new things are happening too.
1) New people are getting into hardware
If you hang out around enough hardware startups, hackerspaces, and meetups, you’ll notice that more and more people without a formal background in electrical engineering are getting interested in electronics, and some of those people are starting companies. There’s nothing new here ‒ it dates back to the emergence of Arduino in 2005. But this trend is rapidly accelerating due to the presence of robotics and Arduinos in K-12 education. There is an iceberg here and it’s starting to emerge.
2) The technology available today is staggering and prices keep dropping
You can buy development boards with pretty much any combination of Linux, WiFi, BLE, GSM, and sensors for less than the price of a large pizza in Manhattan. And the form factors are getting tiny. Just crack open an Apple Watch to see into the future.
3) Internet communities are opening up knowledge
Communities on the internet for electronic hardware development have reached a level of maturity where it’s possible to learn everything you need without stepping foot in a classroom any ponying up large sums of money for a credential.
4) Crowdfunding is maturing
The limitations of crowdfunding hardware devices are becoming widely understood. At best, raising a few hundred thousand dollars may be enough to make significant progress in developing a new hardware and get the attention of investors to help push a nascent company forward. At worst it’s enough money for an inexperienced team to make avoidable mistakes on tooling, design, or component selection that can easily cause a project to fail.
5) Hardware accelerators are accelerating
Hardware accelerators like Dragon Innovation, Lemnos Labs, and Hax noticed trend #4 early on and have successfully mitigated many near disasters for many hardware startups. They’ve jumpstarted a positive feedback loop yielding larger and larger campaigns, validating the the funding model, and drawing the attention of large contract manufacturers and large supply chain players.
6) Large CMs are starting hardware accelerators
PCH was the first high volume, low margin large contract manufacturer to take note of the opportunity to enter a high margin business by taking equity stakes in hardware startups through their accelerator, Highway1. They realized they could add real value by helping these companies avoid the common pitfalls that inexperienced hardware teams inevitably make. Other large CMs have followed: Flextronics has LabIX, Foxconn has Innocon, and Jabil has an initiative too.
7) Small CMs are finding a new niche
The existing ecosystem of US based small volume CMs have awakened to the opportunity presented by local hardware startups with an idea, a design, and a bank account brimming with an investor check or a Kickstarter deposit. These CMs are well suited to transition into IoT / connected devices from their core business of small volume medical and military devices. In addition, there are new entrants too that are solely focused on this space like Seeed Studio and ReFactory.
8) Manufacturing and assembly is moving to the desktop
Just as desktop 3D printers brought mechanical prototyping to a wide audience in the late ‘00s, desktop electronics manufacturing is now bringing a new set of capabilities to electronic hardware designers. On the PCB manufacturing side, Cartesian, Voltera, and Othermill are providing inexpensive desktop machines to fabricate PCBs. For component assembly, FirePickDelta is going to be shipping their machine shortly, and the Hangzhou Dengxin machine is already being used by Seeed Studio in their lean manufacturing setup. Combining these tools with the Common Parts Library creates opportunities for super fast prototype turnaround times (< 1 day).
9) Manufacturing and assembly is becoming service
A quickly growing segment of manufacturing is the “one click manufacturing” space. Players such as CircuitHub and Tempo Automation are perfecting the software flow that allows a hardware designer to upload their PCB layout and Bill of Materials and immediately get a quote on assembled PCBs delivered in as fast as 3 days. These services leverage the Octopart API for up-to-date component pricing and availability information, along with deals struck with their manufacturing partners.
10) Large supply chain players are getting the memo
Large distributors and component manufacturers are taking note of these changes and are making moves. Arrow, the second largest electronic component distributor in the world has partnered with Dragon Innovation as a supply chain partner. Other large distributors are stepping up their efforts to service hardware startups and the maker community. Component manufacturers are perking up too. An increasing number of large semiconductor manufacturers are selling small volumes direct to startups and bypassing distribution, a practice that used to be rare.
What do all of these trends have in common? They are all ecosystem shifts that are in opposition to the way large consumer electronics companies like Apple and Samsung operate. Can hardware startups take on the large incumbent players? If these trends continue to grow, then yes, they can and they will.