It’s one thing to have an idea for a hardware product, and completely another to manufacture it at scale. There are a number of logistical issues to be taken into consideration before you go about manufacturing your hardware product. One of the most important considerations would be, where should you manufacture your product? This is one of the most important decisions to make when starting a hardware company, and one that will greatly affect your business.
While China is the world’s leader when it comes to hardware product manufacturing, several startups also prefer assembling their startup in the US or in Europe. While there are obvious cost benefits when manufacturing in China, there are also many advantages when manufacturing closer to your home base if you are located far from China. This article lays out the best locations in the world to manufacture your hardware product.
Before you think of manufacturing, make sure that you have a prototype ready, and you’ve tested it in the real world. If you want to reduce R&D costs for your hardware startup, consider using engineering simulation and virtual prototyping software to test your idea in a low-cost, virtual environment. While simulation software can be expensive for a startup on a tight budget, ANSYS offers a special Startup Program for eligible, hardware startups to gain access to their tools during their early stages in business.
Once you’ve tested your idea and built a prototype, it’s time to manufacture. For this list, we have considered the following factors that make these cities the best places to manufacture:
- Cost: For most hardware startups, cost is an important factor since they are just starting out. With budget constraints, places like China and Mexico top the list as the best solutions that fit the bill and at the same time offer decent quality. Some factors that can affect the cost are availability of cheap labor and raw materials, climate, government policies, etc.
- Feasibility and convenience: Places closer to home offer greater convenience in terms of monitoring the quality and production cycle. Proximity also reduces iteration times greatly. Some of these places may be more expensive, but it might be worth it to consider these. Contrarily, since they are closer to your market, your shipping costs go down.
Considering the above factors, we have come up with the best cities for hardware product manufacturing in the world.
Shenzhen: Shenzhen is famous as the electronics manufacturing hub of the world. Manufacturers here produce everything from smartwatches, to drones, to bike lights, etc. Startups usually flock to Shenzhen to get their prototypes built at scale, in an inexpensive manner. Several products such as laptops, mobiles, 3D printers, and robots are manufactured here.
A number of hardware companies choose this city because of its vibrant ecosystem of manufacturing. The presence of Chinese-American accelerator HAX Accelerator is credited for this. It has many successful Kickstarter campaigns to its credit, including photo printer Prynt. Shenzhen is also home to smartphone giant OnePlus.
Shanghai: Shanghai is a major financial, trade and economic centre in China. The city is home to a number of factories that develop commercial and consumer goods. The most popular types of products in Shanghai include automobiles, communication equipment, steel products, petrochemicals, and biomedicine. Over the past 25 years, there has been rapid industrial development in Shanghai.
Beijing: Beijing is another leading manufacturing centre in China. It focuses on electronics pharmaceuticals, IT, and bio-engineering. Its sister city, Tianjin, is also a manufacturing giant. It is a leader in manufacturing mobile phones, automobiles, alternative energy products, and aerospace and aviation products. Xiaomi is one of the tech giants located in this city.
Guangzhou: Guangzhou has seen a large influx of African traders since the 1990s, and there are a number of partnerships between these traders and Chinese manufacturers. The four major areas of manufacturing in Guangzhou are textiles, petrochemicals, automobile manufacturing, and electronics. It is an important automobile manufacturing hub, and has joint ventures with companies such as Toyota Motor Corp, Honda, and Guangzhou Automobile.
Guadalajara: Mexico is increasingly becoming a preferred alternative to manufacturing in China. Hardware startups in the US find that shipping products from Mexico is much easier than going halfway across the world to China.
Guadalajara in particular is a preferred destination for manufacturing hardware products. For one, it offers startups the opportunity to save time on travel and shipping costs. Additionally, it offers a low-wage, labor-intensive manufacturing environment. These are the reasons why New-York based company, GoTenna, manufactures in Guadalajara. However, it also has its downsides. Considering that the industry is not mature enough, there could be some quality issues.
Dallas: Dallas has a lot of potential for manufacturing, but it has gone under-utilized. In particular, it is popular with telecom companies, as there have been many improvements in this sector lately. Apart from the advantage of staying close to home for US based startups, it offers many other advantages, such as faster iteration times. There are a number of good contract manufacturers in the region, with Creation Technologies being one of them.
Kansas and New Hampshire: On a hardware startups Reddit thread, a number of hardware companies said they would opt to manufacture their hardware product in the US rather than going to China. Citing reasons like it’s better to be able to build locally and faster to get feedback from prospects and customers, they feel that they can actually show their prospects what they are building, as opposed to doing it in a factory in China. Another advantage they mentioned is saving time on travel and avoiding the language barrier.
For small batches (1K-5K units), it can be better to assemble your product locally. Two cities that were mentioned in this discussion are Kansas and New Hampshire. While it can be a bit costly to manufacture locally, for a small batch, the benefits outweigh the disadvantages.
Vancouver: Major cities in Canada such as Vancouver and Toronto have all the manufacturing know-how that hardware startups need such as injection molding, machine shops, cable assemblies, and PCBs. While it can be a bit expensive to manufacture your product here, it could be worthwhile if you’re manufacturing a small number of units. The key thing is to establish a good relationship with your suppliers.
Penang: Malaysia is another destination in Asia where hardware companies can manufacture their products, and it boasts a relatively mature manufacturing ecosystem with specialities that include audio visual, consumer electronics, and home appliance production. Penang is known as the “Silicon Valley of the East” with almost 3,000 manufacturing firms. The city is brimming with potential for B2B, hardware and IoT startups. Vitrox and Ameulus are examples of startups that have gone on to IPO from this region.
What to Keep in Mind When Selecting a Manufacturer for your Hardware Startup
Now that you know which are the major cities for hardware product manufacturing, here are some points to keep in mind before you select a manufacturer for your startup:
- Ask your network: It’s important to ask your network for recommendations on manufacturers. If there’s no one in your network, use online platforms and sites to get recommendations. Sites like Alibaba could help you compile an initial list of manufacturers.
- Take your time: Spend a good deal of time, at least a month, going over your list of manufacturers, and speaking to them. Try to speak to at least 10 manufacturers, and ask them for quotes. If you know any companies that have worked with them previously, speak to them and find out what the experience was like.
- Ask manufacturers for details: Be sure to ask your potential manufacturers a lot of questions. Ask them how each part would be made, what issues they might face, and what changes they could make to the design so it’s easier to manufacture. You should have a complete idea of the process before you zero in on a manufacturer.
- Quotations: Be cautious about the quotes they give you. If quotes look too good to be true, they might be. If the manufacturers are using sub-quality products, they may be able to come up with ridiculously low quotes. Always value quality over quantity. If you are a new hardware startup, you should look forward to creating rapport and trust with your customers by providing them good quality products.
In a nutshell, if you are a hardware startup looking to set up a manufacturing base, you should analyse what suits your needs most. While manufacturing locally may boost the local ecosystem, outsourcing and taking your manufacturing to any of the above hubs might be cheaper. These manufacturing hubs and cities may also provide higher quality goods since they have established themselves over the years and gained expertise.