> why do small startups choose to manufacture in China to begin with?
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.
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.