The American Manufacturing That’s Being Ignored

February 10, 2017 , in News

Tempo Automation and Umbo Quoted in The Information

By Reed Albergotti, published February 08, 2017, www.theinformation.com   

Excerpt reprinted here with author’s permission.

One of the hottest topics in the wake of the presidential election is about trying to move manufacturing back to the U.S. There’s been very little talk, however, about the electronics factories that are already here.

There’s a quiet revolution happening inside of factories that still dot the landscape in Silicon Valley, where flashy software companies overshadow them. Rather than make huge quantities of devices like the iPhone, they are focusing on “small-batch” electronics for the kinds of startups that grow out of crowdfunding sites like Kickstarter or raise small amounts of seed money.


THE TAKEAWAY
An explosion of small-batch electronics manufacturing in the U.S. could spawn a new generation of hardware companies, but the factories are seldom discussed in the greater context of the jobs debate.


U.S. electronics manufacturing has seen a resurgence in the last few years thanks to advances in technology like 3-D printing and the availability of cheap, miniature and customizable computers like Arduino and Raspberry Pi. Those have removed significant time and cost barriers to hardware, allowing a new crop of entrepreneurs to break into the field with very little capital.

U.S. factories also have changed, following an exodus of business to China over the past two decades. Factories in Silicon Valley and elsewhere got smaller, more nimble and more automated. Many focused on medical devices and products for the military, where low volumes and high flexibility are the norm.

As interest in building consumer electronics has ramped back up, the small-batch electronics factories that have stayed in business have found themselves well-positioned to work with small startups, which also require flexibility, low volume and close collaboration.

The services inside the U.S. that are available to hardware startups have gotten so good that some advisers are telling companies to wait until they are bigger before even considering a move to Chinese manufacturing. Andre Neumann-Loreck, founder of hardware consulting company Ops On Tap and former COO of Flip, the pocket video camera, said the ability to rapidly prototype and build in the U.S. has gotten so good, it’s economically feasible to stay domestic. “It’s still hardware, but it’s easier than it’s ever been,” he says.

Seeking Control

The explosion in small-batch electronics manufacturing has opened doors for entrepreneurs like Francisco Sàez, co-founder of San Francisco-based Umbo, which is making a small projection display that automatically puts things like the weather report on walls and ceilings. Mr. Sàez, who had previously worked in software, had been itching to create the product since 2011, but the barriers to entry were too high. About a year ago, he was able to make a first prototype using a 3-D printer and a Raspberry Pi computer he got for free at a conference. The $350 device will be made in the U.S., at least for the first year.

The Umbo
The Umbo

“We saw too many other failed hardware startups that went right off to China or Asia,” Mr. Sàez said, citing high travel costs and time zone differences as well as shipping difficulties and delays. “We would rather pay a little extra but have a little more control.”

Companies like Tempo Automation have sprung up to service startups like Umbo. Tempo sells low-cost, custom circuit boards that can be assembled in three days, a fraction of the time it used to take even a few years ago. That allows startups to cut down the time it takes to move from one version of a prototype to the next. “As the barriers to entry get lower, the time to market becomes paramount,” said Tempo CEO and co-founder Jeff McAlvay.

It’s unclear exactly how many U.S.-based hardware startups have opted to use domestic manufacturers. Startups are shy about their manufacturing process for competitive reasons. The amount of venture funding to hardware startups ramped up a few years ago, according to CB Insights, from 80 funding deals in 2013 to 268 by 2015.

The robust supply of small-batch manufacturers in the U.S. could end up seeding the next generation of tech companies and, ultimately, more jobs. But even owners of factories that have weathered offshoring and the Great Recession think their factories are at risk of being supplanted by overseas competitors.

There are more than 250,000 small factories in the U.S. (defined as employing fewer than 500 people), according to the National Association of Manufacturers, which doesn’t break out what percentage of them are devoted to electronics. The factories offer among the best jobs in the country, paying an average of $81,000.

Scarce Skills

One major problem, however, is that not enough Americans have the skills to do the jobs, which in some cases require education beyond high school or apprenticeships to learn a trade like that of a machinist. According to Deloitte Consulting and the Manufacturing Institute, 2 million U.S. factory jobs will go unfilled in the next decade, which could force more factories to relocate overseas, where there are more skilled laborers.

Of course, many U.S. hardware startups are opting to make their products far away from home and most at least consider it. Andy Hodge, a former Apple executive and hardware veteran who co-founded a new consumer electronics startup, said he is looking at both U.S.- and Asia-based manufacturers, but will base his decision solely on who he thinks will do the best job. The good news is that American startups have a choice, he said. Ten years ago, it would have been China all the way.

The full article may be accessed by subscription to www.theinformation.com.

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