How's that any different from pretty much any easily-copied business? How do Nike or Levi's survive, when pretty much any basement shop in China can undercut them on shoes and jeans?
The answer is your brand must must mean something. Be the domain expert. Be the one people turn to with questions. When the clones arrive, you are already ahead. That's easier said than done, and execution is everything and so on and so on. But there's not a vast difference between the open hardware space and other manufacturing businesses.
Nike and Levi's are bad examples. They use brands as illusions of superiority. Money in this case is not spent on R&D but spent on marketing.
Also how can you be the domain expert if you open source everything you know? The millions you spend on R&D are given away and allow others to arrive at the same knowledge for $0. How does that work out for a company from a competitive standpoint? You are basically shooting yourself in the foot in terms of staying ahead and being a domain expert.
The answer is your brand must must mean something. Be the domain expert. Be the one people turn to with questions. When the clones arrive, you are already ahead. That's easier said than done, and execution is everything and so on and so on. But there's not a vast difference between the open hardware space and other manufacturing businesses.