Jerry Yang - Hardware Club Manufacturing Meetup April 22, 2015

HARDWARE STARTUPSmanufacturing 101

lessons from the industry experts

jerryYANG@jmyang1976

I did not co-found

in 1994

first of allGLOSSARY

Electronic Manufacturing Services is the unambiguous term that describes the services

provided by companies that design, test, manufacture, distribute and provide

return & repair services for electronic components and assemblies for Original Equipment Manufacturers (OEMs).

#EMS

Original Equipment Manufacturers is the most confusing term. Originally it means the big brands (HP, IBM, etc) that contract the EMS

providers to manufacture for them. Over time in Asia it has become the synonym for the EMS

providers (Foxconn, Pegatron, etc) as well.

#OEM

Following the confusing Asian logic of calling EMS providers "OEMs", more advanced

EMS providers that are able to design finalproducts for OEM Clients (HP, IBM, etc) are

called Original Design Manufacturer (ODM).

#ODM

Contract Manufacturer is our preferredterminology as it describes exactly

what the startups want from the manufacturers.Note that this does not prevent

the confusing terms "OEM/ODM" to show up in your conversations with Asians.

#CM

so I have my prototype working, my Kickstarter order in hand

and money in the bank ...

MOST HARDWARE ENTREPRENEURSARE ONLY FAMILIAR WITH THINGS IN THEIR OWN

COMFORT ZONE AND LACK GLOBAL VIEW, MAKING THEIR PROTOTYPES UNPRODUCIBLE

“

”FRÉDÉRIC WETS

Industry and process expert, Usine IOFormerly with Scentys and L'Oréal

a search on ALIBABAreturns 100 CMs. I'll just send them my RFQs ...

WE FIND THAT YOU ARE GONNAEND UP WITH HUNDREDS OF FACTORIESTHAT ARE LIKELY NOT QUALIFIED

“

”SCOTT MILLER

Formerly VP of Engineering at iRobotFounder and CEO of Dragon Innovation

General Partner of Bolt Partners* A video interview with Scott is included in SCHOOL

Okay okay. I'll fly to SHENZHEN myself ...

PEBBLE VISITED SHENZHENSIX TIMES IN 2012 WITH ITS KICKSTARTER

ORDER OF 70,000 WATCHES BUTNO CM TOOK THEM SERIOUSLY

“

”TERRY CHENG

Former VP of Foxconn Group & CEO of Foxconn FIHFormer senior executives at HP and Texas Instruments

but I have an engineer on my team that speaksMANDARIN ...

EVEN STARTUPS FROM TAIWAN,WHICH SHARE THE SAME LANGUAGE AND

SIMILAR CULTURE WITH CHINAGET BURNED IN SHENZHEN SOMETIMES

“

”JERRY YANG

Formerly with Qualcomm, 13 years of semiconductor R&D experiences in Taiwan, Silicon Valley and Paris, 4 years as an entrepreneur with key clients

from JAPAN, TAIWAN and CHINA

there are SO MANY CMsI can jump from one to another

as I wish ...

“

”BEN EINSTEINFounder & General Partner at Bolt Partners

Quoted from Medium post "Polygamy and Hardware"

TOO OFTEN STARTUPS TREAT CMs LIKE SERVICE PROVIDERS: “JUST MAKE THE DAMN THING AND I’LL PAY YOU.” WRONG. CMs CONTROL THE PRICE, SCHEDULE, AND QUALITY OF YOUR PRODUCT. THEY’RE INVESTING MASSIVE AMOUNTS OF TIME AND RISK IN THE HOPE THAT YOU’LL BE THE NEXT BIG PRODUCT.

#REALITYcheckin Shenzhen there are more than

1,000 IP-Cam contract manufactures, many of which make profit from

component sourcing and supplier kickback in addition to manufacturing contracts

“ white-label products with the same design appeared on

TAOBAO.com before we even received our order ”

“ manufactures refused to return the molds to us after we terminated our OEM contract with them ”

#HORRORstories

Your relationship with Contract Manufacturesis not about the contracts, but about the

manufacturers (people). Having the most detailed contract with the wrong people is still

gonna turn out to be a disaster.

#key

#idealCM.TRUSTWORTHY.CAPABILITY & QUALITY.STARTUP-CLIENT EXPERIENCES.VALUE LONG-TERM RELATIONSHIP

HI-TECH ECO-SYSTEMTAIWAN-CHINA

#TAIWAN.HSINCHU SCIENCE AND INDUSTRIAL PARK founded in 1979.1980's – Computer Manufacturing (EMS)

(ACER, ASUS, QUANTA, FOXCONN etc).1990's – Semiconductor Foundries

(TSMC, UMC, etc)

.2000's – TFT-LCD panel makers(INNOLUX, AUO, etc)Fabless IC Design Houses (MEDIATEK, MSTAR, NOVATEK, REALTEK, etc)

#EMS1. Honhai (Foxconn)2. Quanta3. Pegatron (Asus)4. Flextronics5. Compal6. Wistron (Acer)7. Jabil8. Inventec

75%

#Foundry1. TSMC2. GlobalFoundries3. UMC4. Samsung5. SMIC6. Powerchip7. Vanguard

61%

#TFT-LCD1. Samsung2. LG Display3. Innolux Corp4. AUO5. China Star6. BOE7. Sharp

36%

#ICdesign1. Qualcomm2. Broadcom3. AMD4. Mediatek11. Novatek13. MStar16. Realtek19. Himax

11%

#TAIWAN-CHINA• Most large EMS providers are Taiwanese, but have

their factories in China• Most ICs and turn-key modules (BT, WiFi, etc) that HW

startups use are from US and Taiwan• Turn-key solution was invented by Mediatek and

popularized by MStar and Realtek, all Taiwanese IC design houses

• Around 1.5-2M Taiwanese work and live in China, out of the total population of 23M

#CHINA.INDISPUTABLE PLACE FOR EMS.COMPLETE SUPPLY CHAIN.COMPLETE LOGISTICS.SUPPORTED BY THE UNIQUE TAIWAN-CHINA ECO-SYSTEM

#MYTHaboutCHINA.IT'S NOT ABOUT LOW-COST(more on this later)

.LOW-COST ≠ LOW-QUALITY(ever saw an iPhone?)

#REALITYcheckfor HW startups the only meaningful place

for contract manufacturing is Pearl River Delta region, comprising

mainly SHENZHEN, DONGGUANand to a lesser degree HUIZHOU

#PearlRiverDelta

#PearlRiverDelta is historically the richest region in Guandong Province, including Hongkong and Macau which had been "loaned" to UK and Portugal in the 19th Century

GUANDONG廣東/⼲⼴广东CANTON

#CANTONThe Cantonese speak Cantonese, not Mandarin. Today

Guandong Province has 106M people, most of which speak Cantonese.

#CHINATOWNMost of the Chinatowns around the world were built by Cantonese immigrants. The Chinese Food that most westerners know is actually Cantonese.

Why not go in-land? I heard that labor in SHENZHEN is getting

more expensive.Isn't it true that Foxconn has factories all

over the mainland China?

#FOXCONN.Owned by HONHAI Group.Founded by TERRY GUO.REV2014 = $115B.GM2014 =.NM2014 =.MKTCAP =

7%4%$45B

#WHYnotIn-land EMS companies might have lower labor costs,

but they usually take much larger orders and naturally have longer lead time till FOB

#WHYSHENZHEN has a huge amount of small CMs with a very dynamic and flexible supply chain. It also benefits from the tax codes of Special Economic Zones (SEZs)

#PearlRiverDelta is without a doubt still the top choice for HW startups

$10B+FOXCONN, QUANTA,

PEGATRON, FLEXTRONICS,

COMPAL, WISTRON, JABIL, INVENTEC

$0.5-3BOverall capability and

quality of services as good as the elephants, just with

lower volumes.

$15-50MExpert EMS firms in

Shenzhen & Dongguan founded by people formerly

with the elephants & the lions

MANUFACTURE製造/制造

IS NOT JUST

COMPONENT SOURCING

MANUFACTURING

TESTINGQUALITY

ASSURANCE

SHIPPINGPOST-SALES SERVICES

#Testing and #QualityAssuranceare in fact inserted throughout the

#Manufacturing process, based on discussions with the

engineering team of the CMs

Kickstarter order sizes usually not big enough for ordering even from agents.

Better let the CMs source components for you.

COMPONENT SOURCING

MANUACTURING MOLDING/TOOLINGPAINTING

METALSMTDIP

SOFTWARE INSTALLALTIONASSEMBLY/PACKAGING


METALSMTDIP


InjectionThermoforming


METALSMTDIP


CastingCoatingPlating

Chemical Etching


METALSMTDIP


Screen PrinterMountReflow

AOISPI


METALSMTDIP


Wave Solder


METALSMTDIP


Metal/Plastic casesDisplay screens

Buttons/KeyboardsCables/Batteries

TESTING

IN-CIRCUIT TESTINGFUNCTION TESTING

FINISHED GOODS TESTINGRELIABILITY TESTING

IN-CIRCUIT & FUNCTION TESTING ARE DONE THROUGHOUT DIFFERENT STAGES OF MANUFACTURING

TESTING

During design phase, implementDFT (Design for Testing)

& POST (Power-on Self-Test)

to minimize/eliminate the needs of INSTRUMENTS for final testing

QUALITY ASSURANCE LCR multimeter

Gauge meterX-ray tester

Hi-temp chamberVibration tester

SpectrometerColor analyzer

Load tester

STATISTICALPROCESSCONTROL

what about CMsin EASTERN EUROPE?

#REALITYcheckRationale for manufacturing in CHINA

is not only about LOW-COST.CHINA has the most complete

SUPPLY CHAIN that will eventually scale you up to a $1B company

If you are a LIFE-STYLE entrepreneur with limited ambition,

EASTERN EUROPEAN EMS might be a decent choice

But if you dream of being the next UNICORN,

you have to learn the CHINESE game sooner than later

moreGLOSSARY

Design for XXXDesign for Cost (DFC)

Design for Manufacturing (DFM)Design for Testing (DFT)

Design for Assembly (DFA)

#DFx

Request for Quotation is the official request form you send out to

the multiple CMs that you selected out of all CM candidates, which you believe

could manufacture your products with the quality and in the time/cost structure

you want ...

#RFQ

Minimum Order Quantity is the minimumquantity required by a CM for an order. The CM

needs this MOQ for the fixed cost (setup cost, transaction cost, etc) to be spreaded out.

MOQ varies from 1k~10k somewhat based on unit price (BOM cost).

#MOQ

Freight On Board is literally the status where the CMs send your

finished goods on-board of the sea freightsfor shipping. The CMs usually quote its

production time (e.g. 180 days) as between the release of your final design database and FOB.

#FOB

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Jerry Yang - Hardware Club Manufacturing Meetup April 22, 2015

Engineering

Transcript of Jerry Yang - Hardware Club Manufacturing Meetup April 22, 2015