NATHAN MERYASH CTO @ KEEN HOME INC

China ManufacturingA Process Overview for Manufacturing Hardware in China

Background

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And you thought your smartphone was made in a giant polished aluminum cube…

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Meeting factory here? Or here?

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Traditionally •Laws and contracts offer limited to no protection in China •Success with partners requires strategic incentives, leverage and “Guanxi” •Bait and switch common •Local government policy and enforcement varies based on self interests

Be careful of the word “yes”!

Reform •President Xi Jinping (March 2013) •Anti corruption reforms •Civilization of business practices in private sector

Is China Right for Your Project?

•Can make a case for selling over 100k units per year •Complexity is high and cost target is low •One of the following:

•Prior experience sourcing in China •Have identified a suitable intermediary for your needs (Examples: Dragon Innovation, HW Trek or Make Simply.)

Process Overview

Advanced Development

Market Research

Product Requirements

Request for Proposal Diligence Award

Engineering Validation Testing

Design Validation Testing

Pre Production

Mass Production

Joint Development

* Optional Market Validation Testing

Documentation Drives Everything!

•RFP - Request for Proposal

•PRD - Product Requirements Document (high level spec)

•Spec - Design Specification including test requirements

•Design Files - 3D CAD, Block Diagram, SCH, BOM, PCB

•PDS - Project Development Schedule

•Manufacturing Agreement

Shopping for a Supplier

CHINA HONG KONG TAIWAN

Start by Identifying a List of Potential Suppliers •Build up your Rolodex •Introductions and Referrals •Network with other hardware businesses

•Which manufacturers are they using? •What was their experience like?

Shopping for a Supplier

•CM / EMS, ODM or OEM white label? •Who are the current customers?

•Brands •Countries •Product categories

•R&D talent and who will they assign to you? •What do they outsource vs. do in house? •Facilities for production and testing? •Strength of financials and sourcing •Response time

CHINA HONG KONG TAIWAN

Request For Proposal (RFP)

•Non Disclosure Agreement •High Level Product requirements

•Include engineering files if applicable •Open BOM where manufacturer fills in

•Cost of each component •Proposed Labor, Overhead and Profit (LOP) •Fixed costs like tooling and NRE

•Market opportunity and volume projections •Proposed development model and division of responsibilities

EVT

Engineering Validation and Test (EVT)

•Leverage ODM for engineering not just manufacturing •Cycle includes:

•Design (2 - 4 weeks) •Build (2 - 4 weeks) •Test (2 - 3 weeks)

•Repeat cycle until product meets design goals •Uses rapid prototyping processes like 3D printing and CNC milling •Pre-test regulatory concerns to de-risk program •Cost of individual samples is high due to prototype processes

DVT PP MP

Design Validation and Test (DVT)

•Tools made for plastics •Near MP quality samples •Sample drops to near MP costs

•Fixtures made for assembly and test •Use of an assembly line starts •Accelerated Life Testing •Regulatory Testing (i.e. UL, FCC)

EVT DVT PP MP

Pre or Pilot Production (PP) and Mass Production (MP)

•Generally your first “revenuable” units •Limited quantities in case something goes wrong •Transition from spot buy of components to MP delivery schedules •Product design frozen, focus on manufacturing line design and efficiency •Once stable PP transitions into Mass Production (MP) •MP Efforts are focused on quality control and supply chain management

EVT DVT PP MP

Tips

•Don’t move your whole team to China •Sales and marketing still happens close to your customers •Selling units is key to landing a quality supplier

•Make sure your team isn’t only engineers •Keep creativity in house, use ODM for routine engineering •Hire or contract someone with supply chain management expertise •High quality product spends more time in testing than in design •Implement a part and serial number tracking system

FAQs

Will my product get knocked off if I go to China? •Maybe, but it may be less of a problem than you think. •US built product is more at risk - as it allows a China knockoff to undercut your cost! •Offshore manufacturers are at a market and brand disadvantage •Create a moving target: continue to innovate after launch

How often do I need to travel there? •Depends on product complexity and schedule •Use of an international third party for oversight? •Does the manufacturer have a presence in the US? •Joint development vs. white box solution

NATHAN@KEENHOME.IO

WWW.KEENHOME.IO

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Q&A

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