How to get started having your custom electronic product manufactured in China? It really depends on how custom you want the product to be:
- Toasters with your company logo. A toaster factory can very easily customize their existing product, it is quick to prototype and manufacture. Your added value will be in mounting a marketing and sales effort to prove that with your brand you can sell a ton of toasters. The factory guys do not understand the latest consumer trends in California, and are not into marketing or retail at all, so you both have a valid contribution to the partnership, and this quite likely could go well if you set up tight Quality Controls.
- Toasters fit for a particular size of bread, then it may be hard to protect the idea. The factory does all the work to make this custom toaster, and likely charges only a small design fee. This is because they count on making their money on selling the units. In this case, even a completely honest factory will feel entitled to start selling these toasters to others if your side does not come through with that steady 20K a month order volume that you promised them.
- Add WiFi connectivity to your product then the factory might be able to whip up a prototype of the connected product (or your own team could do it), but the factory would have a harder time with the app, in which every person in the family sets up his favorite toasting profile, and so you’re better protected.
Selecting the right factory for this is not easy, at the time of sale they all seem very accommodating, it is not until you run into some problems that you really get to know your partner. Best would be to get a referral from someone who has actually successfully worked with the factory. You can also contact Howell Wang, he and his team will do a factory audit for $700:
Whatever the level of the innovation, at the next trade show the factory is likely to show off their skills in making advanced toasters, and both their current and new buyers will see this interesting possibility, if not in their main booth display then in the meeting room backstage.
But in all fairness, anybody who is serious about the toaster business follows the news, and probably has already seen the great marketing success you are having with your connected toasters, and has already emailed their factory to ask how much more a wifi module would be…. Once a product is on the market, AND successful, imitation will come from everywhere, you cannot blame China for that. Not every innovation will be a market success, so potential competition will only make the effort of copying when the success is proven, so an important part of IP protection is to keep your sales figures secret, so be careful boasting about actual sales numbers in PR stories!
Some established companies are now using Kickstarter to create buzz around their product. But the disadvantage of this route is that a fantastic sales success there will be known to the world before product development has even finished. So for simple products, a China factory may be quicker to start selling than the company which came up with the original idea.
If however the idea is a lot of work to design and manufacture, then you will see that even for a product which gathered $13 million 2.5 years later there is still no real competition on the marketThe simple reason is that getting a product to market is not easy, especially if you have never done it before.
It’s rather sad but in the longer term, any successful device will be copied, so if you’re not a super-star engineer like Dyson to begin with, there is little chance you will out-engineer the factories in China. Manufacturing engineering may not be the field where you want to build your competitive advantage on.
Apple delegates all their manufacturing to Taiwanese firms Foxconn, Quanta and Pegatron. Nest’s famously expensive team of engineers had their device completely re-engineered in Taiwan before it went into production. Going this route seems to make much more sense: see the custom device as an Enabler, for which you build the brand, the sales and the surrounding ecosystem (community, network effects, SW tools)
So main message is: there is no free ride. An idea in itself is not worth much at all, it really is the amount of work your company puts in it. If you are loath to invest much of your own time and money into developing the prototype then you may be able to talk a factory into doing all the work, and you can then see the market reaction with little investment. But there is the big drawback of what has now become “shared ownership” of the design. More things to watch out for: “China ODM Factory Electronic Design: 7 pitfalls to avoid“
Of course, if your company is serious about getting started with a Custom Electronic Product, reliably designed & manufactured in China, we are set up like no other to take care of your whole program!