I had a call recently with the team at a well known home appliance brand, discussing opportunities here in Vietnam. These folks have deep experience in China, but given the current environment are interested in exploring other options as well. From my perspective, the short conversation didn’t go very well. Reflecting on this, I believe the issue was that we had not defined the core reason why this company was interested in leaving China.
Conversations around moving away from Chinese manufacturing center on three issues:
1. Tax and Cost. Companies that are in the crosshairs of the trade war are interested in reducing their tariff bill when importing into the United States. Along with this there is an interest in further reducing cost by taking advantage of lower labor costs in countries other than China.
2. Robustness. Companies want to make sure that their products and underlying supply chains will be resilient to future shocks - geopolitical conflicts, natural disasters, market turbulence, etc.
3....
Bad ideas are bad. When executed, they can waste years of life and piles of capital. Even when not executed, time is spent fleshing out and discussing concepts with fatal flaws. Therefore, I think we should all do our best to reduce bad ideas. This is my contribution.
Before getting started with the hardware-specific list, I believe there are a “general three” problems which affect all new businesses, whether or not hardware related. These would be does the product solve an actual problem, is the price right, and can the product be delivered with a reasonable amount of effort or investment (yes, I’m sure there are valuable minerals on the Moon, and I’m sure you won’t be the one to dig them up). These apply to hardware businesses as much as any other.
Ok, without further ado, let’s review five common issues with hardware product concepts:
1. Swiss Army Knife (two or more products combined into one)
I present to you:
The TreadPress! A combination...
Over the course of this last year we’ve engaged with many folks on projects I would term “Pandemic-Tech”: products inspired by the direct and indirect consequences of the COVID-19 pandemic. These concepts cover things like PPE, disinfection, and in-hospital equipment, to work-from-home related products.
I think it’s easy to see how the pandemic has led to focus around hardware and physical products. As far as recent global crises go, the effects of the pandemic have been uniquely tactile - masks on faces, toilet paper and flour missing from shelves, ships queuing at ports. And with an increase in at home time, it’s clear how many people would turn their attention to improving the world around them.
Last year our primary CNC shop partner converted themselves into a facemask-machine manufacturing operation. Welcome to the Pandemic Economy.
So perhaps the billion-dollar question: which of these products will succeed in the market? No offense to anyone trying to innovate right now, but it seems clear that...
Thanh joined us this week in Vietnam! He is our first technical team member in the country. He’s already doing a great job diving in on projects and working with local suppliers. Having new energy in Vietnam has given me a chance to reflect on lessons learned working in the country in the last few years.
Here’s the secret… Vietnam is not always that much cheaper than China. Sometimes it’s more expensive.
Why? I’ll introduce what I call the Mercedes Theory of Entrepreneurship: Everyone in the world gets into business with the goal of owning a Mercedes. Ok, maybe not a Mercedes, could be a Lexus or a Volvo or a Land Cruiser. Even lightly used would be ok, as long as the interior still looks nice. Not a Maserati, just enough to have made it to the good life. And the good life doesn’t just require a car of course. Good food. A nice house. Physical, medical, and financial security....
Gordon McCambridgeJanuary 5, 2021Shenzhen, Guangdong, ChinaI was reviewing New Year’s resolutions with a friend recently. I realized this year I really wanted to have one, and I’ve settled on trying to write more. I enjoy writing. I find it reflective and therapeutic, a chance to condense and distill thoughts. Writing more could be a good opportunity to share what is going on with us/me, particularly as we continue to be unable to see each other in person. And it might give folks more reason to visit our website! So here goes…
So perhaps question one - why haven’t I done this before? Many of you have had kind words over the years for the few things I have written, and encouraged me to do more. But I don’t know… there have been moments when the experience was a little too intense to start breaking down in real time. I also had the sense that I needed to play a few more...
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View this post on Instagram A post shared by Gordon McCambridge (@gordonmccambridge)
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Gordon McCambridgeDecember 16, 2020Shenzhen, Guangdong, China
Hello Everyone,
Apologies for the gap between our newsletters. It has been a busy year. In place of our normal format, I was thinking I could use this opportunity to send an end-of-year message. It has definitely been a strange one, though on the whole I feel fortunate. Thanks to you all and the nature of the pandemic, hardware and manufacturing seems to have been a relatively resilient part of the global economy. China has also been a good place to be, and I continue to feel grateful to both the government and the people for their collective covid response. A downside has definitely been our inability to see each other in person. However, I do think this year has given many of us time to reflect.
I could not have foreseen this journey when I moved to Shenzhen. At that time I more sensed that between the opportunities available in China and my own interest and...
Over the last year we’ve built relationships with companies in Brazil, Russia (well, Ukraine, but close enough), India, and South Africa, while living in China - completing the BRICS countries. To me this has been a tangible sign of which parts of the world are actively developing hardware products and engaging in manufacturing. However, these partners have uniquely different needs from our US customers, more interested in the robustness and variety of component supply in China, rather than simply lower labor costs.
The Rough Streets of Curitiba, Brazil
Our BRICS customers have a couple common themes to their businesses. Often these hardware companies were begun in response to a specific domestic need, but then quickly expanded to become exporting themselves, whether to other countries in their region, or countries with a common linguistic and colonial past (India to Nigeria and Bangladesh, Brazil to Angola and Mozambique, Ukraine to the rest of the former USSR). They most often begin manufacturing domestically, often smaller...
The Hong Kong - Zhuhai - Macau Bridge (HKZMB) opened to traffic last fall. The bridge has been under construction through my whole time in Shenzhen, but I had not yet been on it. So my girlfriend Elaine and I decided to use our weekend trip to have a mini-adventure and take a ride across the new bridge.
Shenzhen to HKG
SZ -> HKG Van. I let her ride in the front.
First off, we had to get to the start of the bridge from Shenzhen. A little internet digging showed that we needed to go to the HKZMB Hong Kong Port Bus Terminal (really rolls off the tongue, doesn’t it), which happens to be right next to the Hong Kong airport. I had seen signs at HKG for bus transport to Macau. Plus, there is transport from many points in Shenzhen direct to HKIA. Putting this all together, Elaine and I figured the airport was our first stop.
With border crossings the ride...
Costs are rising in China. $600 - $800 per month is now a standard wage for factory labor. This is twice the going wage in Vietnam, and similar to the minimum wage of Portugal. Salaries for engineers and other professionals also match those of other high-middle income countries. Rents in Shenzhen are similar to those of a medium-sized US city.
However, something that remains affordable in China is the expertise of firms. Therefore, instead of looking to only leverage the labor and equipment of factories, we have been increasingly looking for projects that place a large emphasis on our partner’s knowledge and ability to innovate. Some examples:
A previously developed robot gave us confidence this factory could deliver
We partnered with a Shantou toy factory to design and prototype a small robot. Total cost to our client for electrical + mechanical design work was $7.5K, vs. a $100K quote from a US design firm. Initial prototype completed in two months. Now moving towards...
