jerry yang - hardware club manufacturing meetup april 22, 2015
TRANSCRIPT
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
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
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
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
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
“
”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
#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%
#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 is historically the richest region in Guandong Province, including Hongkong and Macau which had been "loaned" to UK and Portugal in the 19th Century
#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)
$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
#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
InjectionThermoforming
MANUACTURING MOLDING/TOOLINGPAINTING
METALSMTDIP
SOFTWARE INSTALLALTIONASSEMBLY/PACKAGING
CastingCoatingPlating
Chemical Etching
MANUACTURING MOLDING/TOOLINGPAINTING
METALSMTDIP
SOFTWARE INSTALLALTIONASSEMBLY/PACKAGING
Screen PrinterMountReflow
AOISPI
MANUACTURING MOLDING/TOOLINGPAINTING
METALSMTDIP
SOFTWARE INSTALLALTIONASSEMBLY/PACKAGING
Wave Solder
MANUACTURING MOLDING/TOOLINGPAINTING
METALSMTDIP
SOFTWARE INSTALLALTIONASSEMBLY/PACKAGING
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
#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
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