In this episode of the Predictable Designs Podcast I speak with Charles Lin of TechDesign where we discuss supply chains and manufacturing in Asia.
We discuss everything from how to pick the best suppliers, understanding the supplier’s mindset, advantages of manufacturing in Taiwan, and we finish up with a discussion on the impacts of the Covid-19 pandemic on manufacturing.
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Charles Lin of TechDesign
John Teel: On today’s episode of the Predictable Designs podcast, I’ve got Charles Lin from TechDesign. TechDesign is a company based in Taiwan that helps startups develop new hardware products.
They have an interesting, slightly different approach to development and I thought their model would be interesting to be presented to listeners. I’ve invited Charles onto the podcast to talk about what they do and then we’re also going to get into some other topics, like suggestions on how to pick the right supplier.
Welcome to the show, Charles.
Charles Lin: Hey, nice to be here. Pleasure.
John: It’s great to have you here. We’ve obviously spoken a few times before so it’s nice to officially have you on the podcast. Let’s just jump right in. If you can, maybe just tell everyone a little bit about TechDesign.
I don’t want to say this isn’t going to be a sales interview, but I want people to know a little bit about TechDesign and then we can get into your model and how you get products developed, which I think is interesting and could be beneficial to a lot of listeners. If you could maybe briefly tell us about TechDesign and then what your model is, and how you guys get product development done.
Charles: Sure, happy to. I think the overall concept behind TechDesign is that there are more and more tools for hardware innovation out there now, , like development boards, 3D printers, crowdfunding, and great online content, like the Hardware Academy, et cetera, and thus, more and more of this innovation will come from individuals rather than large corporations.
What we want to do is make it easier for all these new innovators to actually realize, their products, to help them find the design and manufacturing partners that can help them to produce their products.
As much of the supply chain for electronics, as you know is in Asia, we wanted to make working with these suppliers more accessible for a hardware innovator. Our goal is really to take care of the supply chain aspects for you so that it frees you up to do the sales and marketing and funding and all the other customer-facing aspects of the business that are more central.
John: Got you. I definitely agree with your statement that I think innovation is coming from individuals and not large companies as much anymore. I would say it comes from both but I think that the future lies in innovation among individuals, so I definitely agree with you on that. TechDesign, first of all, do you only specifically focus on development, or do you also help set up manufacturing?
Charles: We do both. Pretty much anything involved in hardware development from concept through manufacturing, we have suppliers that can cater to whatever needs you have. Let me give you an example about how it works. A startup or a hardware innovator will just come to us and tell us about their idea, the functional requirements, the quantities, the time frame they have in mind, and what kind of suppliers, technology, and services they’re looking for.
Our team of hardware experts then look within our network of verified suppliers and find the best match for them based on the technology and services they’re looking for.
We have a network of over 500 suppliers, primarily based in China and Taiwan, and really a wide range of technologies and capable of doing, industrial design, circuit design, mechanical design, app development, manufacturing, really just anything related to hardware development.
Once we find that there’s a good match and there’s interest on both sides, we then put the two together and they can start talking, working directly.
John: Okay, got you. Just so there’s no confusion, listeners may be thinking, they think of developer being different from suppliers, but this is actually one of the strategies that I’ve mentioned getting into product development, is to find an existing manufacturer and then work with them to develop the product.
As you’re mentioning, most suppliers in Asia, at least from my experience, most of them will be interested in modifying an existing design or doing custom design if they think that’s going to turn into future orders for them.
Charles: Absolutely. Absolutely, and I’m glad you brought up the existing design concept because oftentimes, you don’t need a brand new design, but you can leverage an existing electronic design either, off the shelf as is or customize it slightly for your product.
In order to cater to that need, what we’ve also developed is a hardware solution library, and it basically takes a lot of our suppliers’ thousands of solutions and then puts them in one place so that you can find what you’re looking for, right? If you leverage the solution, it reduces your development costs, your time to market, et cetera.
Oftentimes we’ll have a startup come to us and say, “Hey, this is what we’re looking for, do you have a supplier like this?” Then we’ll say, “Well, hey, there’s this off the shelf solution that’s pretty close to what you’re looking for, maybe use that to do your prototype, or maybe you use that and then you find hey, I just want to customize two or three aspects for my local market, and then I can go from there.”
For people, if you have relatively smaller development budgets, that’s often the most feasible path to realize your product.
John: Absolutely. That’s why I’ve recommended in the past, but that was more you finding an individual supplier and having to reach out to them and negotiate that instead of going through a company like TechDesign. It’s definitely I think one of the more reasonable ways to get a product developed, at least especially, a very early minimum viable product without having tons of custom development.
Because from my experience of suppliers, if they sell something similar to what you want, then the cost that they’re going to charge you to produce a custom version of that is going to be an order of magnitude cheaper than if you would have tried to do it from the ground up.
Charles: Absolutely. Absolutely
John: It sounds like the companies that you work with, they’re all more manufacturers, suppliers that also have engineering departments, but they’re not. Are any of the places you work with strictly development firms, or is it all manufacturers that are doing some in-house development?
Charles: We have development firms, as well. I guess, here we call them IDHs, independent design houses, but essentially, if you have an idea and you need industrial design, and then you want just one firm to take for you all the way and work with manufacturers, we also have those kinds of suppliers or firms in our network as well.
John: Do you tend to go with those more for designs where you can’t find a supplier that makes something similar that can be easily modified or is it just vary on a case by case basis?
Charles: It depends on the need of the startup, If they’re looking for industrial design, something new or maybe putting multiple pieces together, like, “Hey, I want to create a smart piece of clothing with electronics inside.” Then maybe you have to marry together a wearable fabric company with an IoT wireless technology company. The design firms will be able to bring those suppliers together and collaborate on the overall design.
Whereas if it’s more like, “Okay, I know exactly I want this, wearable technology,” and we happen to have a wearable manufacturer who’s done something similar, then maybe just working directly with that wearable manufacturer. It’s really depending on their-
John: Okay, got it. Other than matching up a startup with a supplier or manufacturer or design house, where does TechDesign come in other than that match-up? Do you perform any love of project management or? What other services do you guys provide on top of just the matchup?
Charles: Sure. Our goal, of course, is just to help startups and innovators get through the process, So I think some other services we provide, like project management, as you mentioned, let’s say you’ve already signed a contract with a manufacturer, but you’re here with in the US and the supplier is all the way over in Taiwan or China and you want someone on the ground that supports you, so we’ll do that. Make sure everything runs smoothly, make sure any potential issues are addressed as soon as possible so that kind of support. I think, a lot of the work before you sign the contract, we can help with there as well.
A large part of the value add I think, is really around the facilitation of the communication between the suppliers and the startups. I’m sure you’ve heard lots of stories or experienced them where it’s hard to get quick and clear feedback from suppliers given there’s a time lag and language barrier, et cetera.So us being on the ground, being able to clarify things immediately, in a local language really helps the whole process move more efficiently.
John: Absolutely. Trying to manage every single detail from halfway around the world, it’s never going to be a very efficient process, so I think if you can have someone that’s more local do some of that lower-level project management, then I definitely can see huge benefits from that.
Charles: Yes. I used to work at Dell in supply chain and whenever we had a supply shortage, the first thing we’d do is send people directly to the factory, and just being there on-site changed things very quickly.They can’t ignore you. They can’t make up excuses about why they can’t produce your stuff, et cetera. I think just being there instantly got the supply chain moving.
John: No, absolutely. I’m curious, what type of payments, how do you guys deal with payment? Is it upfront payments? Is it just a commission based on once you, the product is in manufacturing? How is your payment structure set up?
Charles: Yes, there’s upfront no payment, and actually there’s no payment required to us from the startups or the hardware innovators.If you come to us and we help you find a supplier or help you find solutions, all of that is free to the startups. At no point, do we say, “Hey, you need to give us money,” we’ll present the options to you and then you can basically decide, “Hey, I want to go with this supplier or, with that solution,” et cetera. Ultimately, we receive our money from the suppliers on the back end.
John: Okay. Got you. Okay, interesting. From what I get, I think that the main benefit to your model especially for startups is that it’s going to be a really low cost option because you’re not doing in most cases development from the ground up, but what other, do you see other benefits, specifically for startups or for even not startups, using this model versus a more traditional where they hire a design firm or freelancers or do the design in-house?
Charles: Sure. Yes. As you mentioned, right, a lower-cost way directly to work with suppliers, you don’t need to spend time or money traveling around to trade shows or auditing factories. I think we’ll do that for you. The verification of suppliers is something that we find is key. We spend time doing the due diligence upfront, of suppliers so that the startups don’t have to. We’ll visit the supplier in their factory, meet their engineering team, check their samples. All of that due diligence ahead of time means that you won’t be ending up working with just a reseller of another company’s products and not the original manufacturer.
You’ll also, I think when we do the whole facilitation of the process, that’s another value add, I think a lot innovators, they may be experts in software or have a great business idea or intuition, but not as experienced in hardware development.
On our end, we feel like we really understand how our suppliers like to operate, what they’re looking for, how they’re thinking, and kind of help translate what the needs of the innovator are to the supplier.
Our suppliers find this useful as well.We help them to screen through projects and bring the meat of what the innovator’s looking for to them. Something that they can work on and understand from the beginning and something that’s, they know will be worthy of their time. One of the biggest risks for suppliers is dealing with startups because there’s a lot of effort involved and potentially more uncertainty.
John: Yes, absolutely. That’s one of the things that I provide as well. I work with various firms and such and I know a lot of firms, they don’t specifically even like dealing with startups just because they’ll get contacted with unrealistic expectations, no realistic expectation of cost, really no knowledge of the process of developing a product and getting it manufactured.
A lot of them will instead send those people my way to Predictable Designs to get educated on what it really takes to get the product to market and then that just makes it more efficient for those firms.
I’ll have people email me and just ask, “Can you recommend someone?” I’m like, well, I don’t really just openly recommend other firms because that’s part of the service I like to provide is I like to work with you first and get you up to speed and then help you connect you up with that supplier or firm or whatever at that point once you’ve got a little bit more education about the process.
It’s similar to some extent so I can definitely see that what you guys offer being a big benefit to both the supplier/manufacturer and the startups that you’re working with.
Charles: Yes, absolutely. I think a lot of people out there with a lot of great ideas, just have to help them through the process and make sure that they’re moving along the right way. If you go too early to a supplier, it’s not going to work out so well so I think the education you provide is definitely very valuable.
John: Yes. If you’ve got a Yahoo email address and no business set up, and you just got this vague idea for a product, that’s probably not the time to reach out for suppliers and try to make some type of connection at that point. You need to do a little bit more upfront work than that.
Charles: Very true. Very true. You asked one other question. I didn’t quite get to-
John: Okay, yes.
Charles: Do we only work with startups or potentially others? I think our business model is particularly attractive for startups, but we will cater to hardware innovators from all sorts. It could be SMEs or large enterprises. Maybe they have a software service provider who wants that a hardware component to their business, or a large industrial that wants to implement an IoT solution in their own factories for all those things we can also help.
John: Got you. Got you. There may be a few of those in my audience. It’s mostly going to be startups and solo entrepreneurs and small companies, even though I teach things from the standpoint of a hardware startup, there’s also just lots of small companies that I work with that are established companies so that they have the business side, but they’re said they’re developing a new product. They’ve never developed a new product before they’ve just been selling existing products.
John: Yes, something similar. Okay. I know that we also wanted to touch on, you’ve got various tips on how to pick a supplier, and this is something that I did a podcast on a couple of months ago. I had a couple, the experts in the academy on the podcast, and we talked about ways of assessing suppliers.
We touched on this some in the past, but it’s something that you can’t talk about too often. I don’t think because it’s such a critical decision that you have to make picking the right supplier. Let’s maybe, can we take a look at some of these recommendations that you have for picking the right supplier? We can just run through the list that you’ve put together.
Charles: Absolutely. First off I think the most important thing and something I’ve heard you touch on as well, is picking the right scale of supplier. I think we’ve all heard of Foxconn and Pegatron, these types of top tier, full-suite, industry-leading suppliers that serve like Apple and Dell and, et cetera. Well, their business is really built on driving economies of scale.
While these OEMs can certainly meet your needs, they might not provide the best service, because their KPIs are really centered around filling their capacity which startups probably won’t do. It would be hard even to get them interested in your business. Then, if you do, your project probably gets deprioritized if any of the big customers are have issues.
What we found is a smaller scale supplier where your business, or at least the future potential of your business is meaningful to them, will provide you with much better attention and responsiveness such suppliers will be more willing to invest their time and resources in your project as they have a larger vested interest. [crosstalk]
John: Yes, definitely. I definitely have to agree with that one. You don’t want to be the little fish in a big pond, otherwise, you just get completely ignored once anything of higher priority comes up. Okay.
Charles: Second one, which seems fairly obvious, but pick suppliers with the requisite technology and experience. Find a supplier that has products or past projects with a technology that’s similar to the one that you’re looking to create, they’ll know, ahead of time what the potential design issues are. They can even leverage their previous work to deliver what you want more quickly and potentially lower costs.
John: I just want to clarify that, find a manufacturer that makes products with similar technology, but it doesn’t have to be the exact same product or the exact same market. As long as they have the manufacturing process set up to manufacture that type of product, that’s really what I think is the most important and not that they produce a product in the same category as your product.
Charles: Sure, sure, sure. Obviously the closer you can get to what you’re looking for, the better and we’ll look at that when we help to match you, right, but I think in general, what you said is correct.
Charles: Third one, I think one that is sometimes overlooked is really pick a supplier that shows interest in you as well. Just as you wouldn’t want to be in a relationship with someone that doesn’t love you, you don’t want to partner with a supplier that isn’t interested in you, no matter how perfect they may seem. Their enthusiasm in your project will translate directly into how much attention and support they provide you throughout the project.
A supplier could even be willing to invest in your project if they find your technology aligns with the direction they’re headed, or they see a lot of potential in your product. They could provide a better price for that but similarly, if they aren’t as interested, they might give you a higher price, because then they’ll say, well, this isn’t exactly what we want to do and give you a worse price. Really pay attention to how eagerly the supplier is responding to your inquiries, how much research and attention to detail they’ve done on your project.
John: I definitely agree with that one as well. For my own product for the manufacturer, I had just reached out to various manufacturers and one had come back and essentially said that we get pitched products constantly all the time by entrepreneurs and we ignore 99% of them, but we feel your product really has a lot of potential. That was the initial, when we connected up, they were already really interested in the product. They even at the time I lived in Alaska, their general manager came to Alaska to meet with me while he also got a vacation out of it so I think it was a tax writeoff, but all of this turning into such great terms.
They gave me payment terms which are really rare of net-90 days. That solved all my cash flow problems because it allowed me to get paid by the retailers I was selling to, which typically paying 30 to 45 days.
I was able to collect all that money before I had to pay the manufacturer, which was essentially them giving me a loan on a consistent basis. That was huge and then they also funded all of my injection molds, which is little over $100,000 where they amortized that cost and spread that out. I believe it was a dollar extra per unit I had to pay on the first 100,000 units.
I would have never gotten those types of payment terms or their willingness to actually invest in the product if they hadn’t started the conversation, they didn’t, if they hadn’t started by loving the product. Then also being impressed with me.
I think for a lot of startups, it’s really the founders that are more important than the product to a lot of people. Investors, for instance, always, they’re usually more interested in the founders than they are the product so I totally agree. You need to find a company that believes in your product and believes in you, and then that’s just going to open up more possibilities, I think, going forward.
Charles: I don’t want to go on too much of a tangent, but I think that the point you mentioned there about them being impressed with you. I think that’s really important.I think we often think of “Hey, we’re the customer, they need to do whatever we say where the customer, right?”
I think it’s really more like a partnership mindset.When you go to a supplier the more you can impress them, the better impression you make. I think the more they’ll want to work with you. It’s really a two-way thing.
John: Yes, because you’re not really a customer until you’re in manufacturing and producing products on a consistent basis. As you know they don’t make any money. They’re just spending money on all this initial upfront stuff of sending you samples and giving you quotes and doing design changes. That’s not where they make their money, they make the money when the product’s successful and they’re cranking out a bunch of them.
John: Okay. What’s your next tip?
Charles: Find suppliers that you find it easy to communicate and work with. Again seems obvious, but I think people may think, okay, suppliers’ credentials are the most important, but picking someone that you work well with is even more important, right? If every time you’re communicating it becomes this arduous back and forth, you’ll quickly become frustrated and your project will probably fall behind schedule. Just like in life, you may find some suppliers easier to work with, so trust your gut those experiences.
John: Absolutely. You have to communicate with them for so many details, so often, and for so long, so you definitely want to make sure that you’re able to communicate with them. If you find everything you’re saying is getting mixed up and there’s confusion, then that’s just going to be a recipe for disaster later on. Try to, I totally agree, you need to try to spot that early on and go with those that communicate well.
Charles: Fifth one, properly audit your suppliers. I think in the past, I might’ve said, “Hey, go visit the suppliers, audit their factory and meet them face to face.” I think this helps convey the commitment you’re making towards the business as well, which I think is important, but I think in a world right now with Coronavirus, that the alternative is to get a trusted referral from other people that have worked with them that can audit the suppliers on your behalf. You can also ask for a live video session or a virtual factory tour, maybe that helps you get a better feel for suppliers.
John: Even without the coronavirus, a lot of startups, they don’t have the skills or the expertise to really audit a factory. They can go see it and see that it’s a real factory and it’s reputable and they’re producing product, but it’s not something I think a lot of entrepreneurs are going to have the skills to really be able to audit a factory properly. Is that something that TechDesign does?
I assume the companies that are in your network that you’ve partnered with, have you already done audits of all of these manufacturers or do you do them on a per-project basis, or is that not something that you guys do?
Charles: Well, as I mentioned, the supplier verification part is one thing that we do. We’ll go visit the supplier in their factory. We’ll talk with their engineering team, we’ll check over their samples, look at their ISOs, and whatnot. We do do that. If there’s something very detailed and specific that you’re looking for, maybe we haven’t audited every aspect, but we generally ensure that they’re a well-functioning business, right.
John: Got you. I’m sure there’s little things you may have to audit or check on on a per-project basis but the main point is you’ve done a more generalized audit at the factory.
Charles: Exactly. We’ve looked over their equipment list, make sure we know what kind of services they can provide. What they’re saying they can do is something that can actually do,
John: That’s such a huge benefit because there are thousands, tens of thousands. I don’t know, hundreds of thousands of suppliers in China that it’s pretty overwhelming to even try to find one. Then so many of them say, they’re the manufacturer, but you really find out they’re just a middle person, they’re not the actual, they’re not the one actually making the product. It’s difficult to know what you’ve got without an audit like you guys have done. I think that’s a benefit.
Charles: Exactly and I think that’s why this whole concept makes sense to us, right, because as I mentioned, it’s really not the big ODMs that you know about that you want to find. It’s the smaller sized ones, but then the smaller sized ones are the ones that are actually hard to find and hard to know if they’re trustworthy or not. It’s in this smaller, mid-tier size level that we think that this matching really needs some facilitation.
John: That seems like that’s so critical, obviously, as you’ve highlighted, you don’t want to the manufacturer that so big that you’re going to be ignored, but you also obviously don’t want a brand new manufacturer who you’re their sole or their largest customer.
It’s somewhere in between that seems like a sweet spot and I know with my manufacturer at the time, they weren’t at full capacity and that also forces them to be a little more open to taking risks or looking into new projects if they’re not at full capacity. Is the capacity of the factory something that you guys take into account when you’re matching up suppliers?
Charles: Sure. I think typically, startups aren’t at a large enough scale or their quantities, at least that we’ve seen aren’t enough that it tips over and says, well, I don’t have enough capacity, but certainly, if it’s a big project, then we would look into the capacity of a factory and make sure that there’s enough there.
John: Not so much that I don’t think they would be worried about being able to handle the capacity of the entrepreneur’s product, it’s more if their factories were running at 100% capacity, then they don’t need new products to manufacture.
They’re not going to be very accommodating versus if they have this factory and they’re only at 30% capacity and they’ve got all this manufacturing capacity just sitting there, then that can really play to your advantage that they’ll, from my experience, they’re going to be a lot more willing to negotiate and work with you in that case.
Charles: Absolutely. I think that’s part of the facilitation process at the beginning. You may remember I mentioned that we check for interest on both sides, and sometimes we’ll pitch a project to the supplier. It could be they’re not interested or it could be, “Hey, we’re full at the moment. We’ve got our hands full with the work we have, so we’re not interested.”
John: Got you, so their capacity is taken into account based on their interest level.
John: Yes. Okay, got you. Okay, that makes sense.
Charles: Recently, we had a number of projects that were in the healthcare area for obvious reasons. A lot of those manufacturers were just like, “Hey, we’re, so busy producing and shipping stuff right now that we can’t really take on new projects.” You’ll get some of that sometimes as well.
John: Yes. Okay, that makes sense. Okay, what are we on? We’re, I think, number, maybe, six?
Charles: Six. Yes, the last one. Again, fairly straight-forward, but find suppliers with familiarity shipping products to your target market. If they have that experience in the country you’re planning to sell, they’ll understand what certifications and regulations, et cetera, to keep in mind. That’s always a plus.
John: Yes, I think that’s a really good one, I like that one. I think that’s definitely important because it’s something that probably you need expertise in, is the certifications for where you’re selling. If your manufacturer has been selling products into the US and that’s where you want to go with your product, then, obviously, they’re familiar with FCC, and IEC, and UL, and all the different certifications required.
John: Although, I suspect most manufacturers are going to probably know those for the US that they may not if you’re selling strictly to New Zealand, for instance, or something like that, a smaller country.
Charles: Exactly, yes.
John: Okay. Well, great. Okay. Those were the six tips for how to pick a supplier. I think those are really good. Next, we wanted to talk about why it’s important to understand the supplier’s mindset. Can you maybe touch on that, why is that important and what do we need to consider when looking at that?
Charles: Sure. I think we alluded to it earlier, but it’s really this partnership mindset, I think, that you have to have in mind because the supplier also has a finite amount of resources that they need to deploy wisely to maximize their business. Suppliers are constantly considering, “Hey, is this startup worth the resources that I’d have to invest into it?” Because startups, by definition, carry more uncertainties than an established business. Concerns about funding, the business direction, whether or not it achieves what it plans.
You’re more likely, in some sense, when working with startups, to have interruptions due to those aspects. You could be more likely to have to spend time explaining details and aligning on details because they’re just unfamiliar with the development process. This extra risk, in some sense, suppliers need to evaluate before they engage with startups. I have a few, I guess, red flags, I think, that suppliers will look for and something that startups can be aware of, because if a supplier sees these kinds of red flags, then it might turn them away from your business.
John: Okay, that sounds good. What are some of those?
Charles: First, if your technical specifications and requirements aren’t clear. I think that’s part of the benefit of The Hardware Academy, to get specific and knowledgeable about that. If you are vague, the supplier will feel like the startup doesn’t really understand the technology and will have to really invest a lot of time to clarify, explain, align all those details, and there’s more likelihood for misalignments later on. As much as you can, be very clear up front exactly what you’re looking for.
John: Yes, of course. Okay.
Charles: Secondly, if your market research or your business plan is not very robust, I think, again, this will suggest to the supplier that you may not be as competent, or maybe your product might not be successful. Really, making a positive impression about, “Hey, this is what we’re intending to do. This is the market behind the idea,” I think all of that helps.
John: Yes, I think that is so important, and that’s something I’m always encouraging startups, because so many of them, they want to jump right into development, they think that’s the first step, “I got to get to the prototype,” and that’s not really where you should start.
Companies that know about startups know that you need to do market research and you need to have a plan, this isn’t really something you can just wing it. Yes, I think that’s a good one, you need to do your upfront work and show that you’re serious and that you are going to do what it takes to get the product to market, and make it a success.
Charles: Yes, absolutely.
John: Okay, what’s the next one?
Charles: The next one, if a startup comes in and they want everything in the world, they have all the functions all baked into one product- and it’s actually kind of unrealistic, I think- then the supplierwill say, “Hey, they’re not really focused. They need to focus on what are the major features they’re trying to solve.” I think this is another red flag that will make suppliers hesitate.
John: Absolutely. That’s been an area where I’ve been really emphasizing a lot lately just because I have seen the benefits of it, especially new people coming into The Hardware Academy, is I’m really encouraging people to share your product concept, all the details, and let’s work together, and see if there’s a way to simplify it. There are so many cases where– One project that was presented in the academy recently, we made all these recommendations, and I think we probably cut the development cost maybe down by $50,000 by the time he got to market.
Instead of producing two individual products, he was only going to have to manufacture one. Just some very– not basic simplifications, but understanding the full, big picture, what are the impacts of all of these little features down the road.
It’s really easy just to throw every feature that you can into the product, but that’s, obviously, usually, not a good recipe and you’re going to bog yourself down, and never make it to market. I emphasize and I stress that you need to simplify that product as much as possible.
There’s so many ways to do that without necessarily changing the end functionality of the product, like the case that I mentioned where we lowered his costs drastically. To the consumer, it was pretty much the same product.
There was one really cool feature that wasn’t necessary that we eliminated, and that’s what had all that impact. Or another one was a video product that he wanted 1080p, high-def video, and then we explained, “Well, it’s going to probably drastically lower your development costs and everything if you just go down to the 720p HD video for lots of technical reasons.”
The point is, these simplifications if you can do them early on, are going to be hugely beneficial, and, like you’re saying, this is something that suppliers look for to understand if the product is reasonable. If you think you’re going to develop a product that’s going to, I don’t know, go land on the moon or something, that’s obviously not a feasible product that you’re going to be able to do with any type of limited budget. Simplify, simplify, simplify. I definitely agree.
Charles: Very good, very good. Last one here. If a startup’s product isn’t clearly differentiated or maybe they’re using a technology that’s a bit outdated, I think that’s also a red flag, and probably a problem with the product. Suppliers often know what the latest designs, the technology in their space are.
If they’re seeing a product with not a lot of differentiating factor, then they’re going to have a hard time seeing how it will be successful, particularly if they see the technology moving in a different direction from what the startup is. This can also be part of the good part in some way, of speaking directly to suppliers because they’ll often know what’s happening.
John: Okay. I think those are good things to keep in mind. All of those are really good points. They’re going to be, I think, really important. Unless you had another point on that, I wanted to touch on– Because you guys are based in Taipei, right, Taiwan?
John: I wanted to talk about manufacturing in Taiwan and the advantages of that. Let’s talk about the advantages of manufacturing in Taiwan and what Taiwan has to offer.
Charles: Sure. I think we have suppliers both in Taiwan and China. We ourselves are based in Taiwan. I feel, I don’t know if this is correct or not, but Taiwan is largely overlooked when people think about electronics manufacturing. I think the first thought is always China. I do think there’s a lot of positive sides to Taiwan that are worth [crosstalk] as far as–
John: Yes, and I do too, and I think a lot of people do, just instantlyassociate China. Unless you’re someone that’s really got a lot of manufacturing experience with electronics, then you may not jump to China and you may think of Taiwan.
Charles: Electronics is a huge industry in Taiwan. I think it’s roughly a third of our industrial output is in electronics and information technology. We export like $140 billion a year, which is something like over 5% of the global total of electronics industries exports, which puts us about number six in the world. We have a lot of great companies that you probably heard of like ODMs, like Foxconn, Pegatron, and then TCMC, a leading semiconductor manufacturer.
Then we also have a lot of niche companies, I think that people haven’t heard of that are really market leaders in their particular segments. For example, there’s a company called AFC or Asiatic Fiber Corporation and they specialize in high-function fiber materials. Then another one called UnlimiterHear and they have really leading edge in terms of hearing technology, and they have tons of, 95 worldwide patents, et cetera. There’s just a lot of smaller type technology leaders that you haven’t even heard of producing great electronics in Taiwan.
Some other interesting stats I thought I’d throw out there, in terms of the number of patents per capita, Taiwan has the highest in the world. Roughly a quarter of the college degrees are for engineering every year. Just a ton of engineering talent in Taiwan and a lot of the major tech companies are opening R&D centers in Taiwan to take advantage of this. Googles, and Apples and Dell, all have a lot of R&D here.
John: That’s why I assume in Taiwan, I know I always hear about South Korea being like number one as far as Internet speeds, I’m curious if Taiwan’s in that in that list. I suspect that they’re pretty high up there.
Charles: I don’t have that exact stats, but I’ve never had any issues with my Internet speeds. I think it is pretty good. Then interestingly, just the other day IMD releases a world competitiveness ranking, and Taiwan came in number 11. US was number 10. It’s just not often thought of but is it is kind of world-leading in a lot of aspects.
John: Yes, I think that’s some good points. I know, especially with the US-China trade wars, I’ve read a lot about various companies and I’ve talked to people that are involved in it that are migrating some of their manufacturing or at least maybe the end-level manufacturing from China to Taiwan in an effort to bypass some of the tariffs that the US has placed on imports from China. Do you have any input on that? Is that something you can talk a bit about?
Charles: Yes, yes. Certainly, with a trade war, if you’re having to pay 25% extra tax, that can significantly increase your costs. If you move a portion of your production, and it will vary by the product, but we did have a customer who moved their manufacturing, the assembly part to Taiwan and it made business sense for them, specifically for their US market products.
We helped them transition, find a supplier, a manufacturer in Taiwan, and do the assembly for them here and it saved them a bunch of money. I think they’re now considering moving more parts of the supply chain to Taiwan as well. Certainly, that is a strategy to avoid tariffs if you can move here, at least the very end or some part of it to Taiwan.
John: Although, for listeners of this, especially if you’re early on in the process, this probably isn’t a real critical point because I’m hopeful that these tariffs are only temporary, but I don’t know, but I’m hopeful that– It’s hard to imagine a 25% tariff can really last long term, but we’ll see.
Charles: Yes. I mean, I don’t want to speculate on politics…
John: Yes, yes. Anyone can speculate or even talk about politics, but–
Charles: I think certainly, it’s an option. Taiwan, we are very export-oriented.. We have had a good relationship with the US, so it is certainly an option if you want to potentially mitigate any of those kinds of risks in the future.
John: Got you. One last thing I want to touch on before we go is I’m curious about how the COVID-19 pandemic, how that has impacted manufacturing in Taiwan. Obviously, when it first hit China, there was a huge impact because no one could get boards or inventory or anything from China.
That’s obviously settled down, I think at least for now, hopefully, there’s not a second wave coming for them, although probably. I’m curious, what are the impacts right now on the COVID-19, and you see this being long term effects as far as from electronics manufacturing?
Charles: Sure. If I think about the activities the startup often engages in in hardware development, particularly if you’re looking for a manufacturer yourself, I think attending trade shows, this was often a way that you’d meet suppliers and explore opportunities of working together. The factory visits, where after you’d developed your shortlist of suppliers, you’d go and visit their facility, et cetera.
Doing pilot run inspections before mass production, just being on-site to make sure everything was good and inspecting the golden sample. That was all standard procedure.
Doing development deep dives. If you really need to get into critical areas of technology or engineering to clarify that, and even just troubleshooting. If there was a major development setback, being on-site was often the quickest way to solve those issues. I feel like a lot of those activities currently aren’t entirely feasible, and so, I think there’s, just as the world has learned to work more virtually, I think some of these activities, you could shift online.
As I mentioned before, you can get referrals or even let companies like TechDesign, help you find suppliers or hiring local resources to help manage the projects on the ground for you, to do the pilot run inspections or troubleshooting, et cetera.
I think all of those are new ways of doing hardware development and potentially even better ways going forward. Having someone constantly there, fluent in both languages, helping facilitate, speed up the communication, limiting our own travel, that’s potentially more efficient and good for the environment as well.
John: Yes, absolutely. Yes, I definitely agree. Regardless of COVID, I think referrals are always highly beneficial if you can get them, whether that’s for the developer, manufacturer, supplier, whoever, it’s always best to get referrals, otherwise, you’re just guessing or trying to pick someone when you don’t have necessarily the prior experience to be able to judge them. I always highly encourage you to seek out referrals from other people that have had success with that company. I think that’s good advice.
John: Did you have something else you wanted to say?
Charles: Yes, I didn’t quite address your question around the supply chain, how it’s been operating in the wake of COVID-19.
John: Okay. Yes.
Charles: Just quickly, I think when it first happened, as you know, manufacturers in China did shut down for a time, but I think pretty much all of them are back working and pretty much at full capacity at this point. In Taiwan specifically, we never had a shutdown, to begin with. We’ve done a very good job of containing things. It’s been business as usual, so suppliers are certainly ready to engage.
There were some suppliers that have shifted to do health and medical products, and some of the suppliers in the healthcare segment, as I mentioned are more swamped shipping orders rather than developing new products, but overall, I think the supply chain is ready for business.
John: I believe hasn’t Taiwan, they’re seeming to do better with the virus from what I recall seeing than a lot of other countries, is that correct?
Charles: Yes. Overall, we’ve had less than 450 cases.
John: Oh my gosh.
Charles: 7 deaths total.
John: I think we had– My wife was telling me just in Arizona, I think yesterday is like almost 2500 new cases in one day. Not especially proud of that stat being in Arizona. I’ve done my share. All I can say is I’ve done my share. I’ve been in quarantine, so.
Charles: We’ve not had any domestic transmission in 65 days, and only 55 total domestic transmission cases overall. The vast majority of those were just people coming back to Taiwan that had been infected in another country. I think everyone here is very good about following the rules, wearing masks, we wear masks at work, et cetera, but we’ve never had kind of shut down in terms of business or lockdown in that aspect.
John: Yes, the countries where it’s more, I guess culturally acceptable or expected to wear a mask, that’s definitely been beneficial.
Charles: Yes, yes.
John: Compared to the US where we’re probably the most anti-wearing a mask. I think that’s been a benefit to Taiwan. That’s good to know that hopefully if there are other waves hitting other countries then Taiwan has already proven that they’re going to probably be one of the better countries at dealing with it so the impacts on manufacturing are less.
Charles: Yes, absolutely. Hopefully, we get through this soon, but Taiwan is certainly, I feel pretty confident that we’ll stay open and ready to keep helping start-ups.
John: Yes. I think so. I think they seem to be doing well. It seems like a pretty safe place to have manufacturing done. Charles, is there anything else you wanted to touch on before I say goodbye?
Charles: No, I think those are a lot of the topics I wanted to discuss and I think we’ve covered them all. Thank you.
John: I think this is really good. We hit on a wide variety of topics. This has been a really helpful call. I appreciate you sharing all the various tips and also telling us about TechDesign and your approach to development. Anyone that’s especially finance limited, I could see this definitely being a beneficial path to getting the product developed. Even if you’re not in a severely financially limited I’m always a big proponent of minimize your risk as much as possible and get that product to market as fast and cheap as you can. Whatever method that takes to make that happen is usually going to be the best one I think.
Obviously the website is TechDesign.com. I’ll go ahead and say that. Is there any other information you want to provide as far as reaching out to you or anything like that or should they go through, is there a contact form on TechDesign or should they reach out to you personally?
Charles: Yes, I think either way works. If you go onto TechDesign.com and then go to the Hardware Development and Projects section you can go ahead and submit a project request and then we’ll start working with you right away. If you alternatively want to reach out to me directly I’ll leave my contact information. Always happy to talk to new people. We’d love to hear from you.
John: That’s great. Also, I’ve invited Charles to come into the Academy as one of the experts in there on supply chain management and such so you can also reach out to him. If you’re a member you can reach out to him inside the Academy. Charles, thank you so much for doing this again. I appreciate you getting up early. I know it’s early there. Thank you so much for doing this and I’ll talk to you soon.
Charles: Thank you, John. It’s a pleasure.
John: All right, have a good day.
Charles: All right. Bye-bye.
Other content you may like:
- Critical Tips for Working with Overseas Suppliers
- Comparison of Product Development Models and Risks
- The Importance of Finding Advisors for Your Hardware Startup
- How long does it take to develop a new product and get it to market?
- Episode #4 – The Advantages and Challenges of Manufacturing in China with Case Engelen of Titoma