Perspectives

There was a great post on VentureBeat about how Hardware is dead. The thesis being that since there are so many Chinese manufactures of cheap tablets out there,  the margins are squeezed razor thin, and there is no way a startup can compete on price / scale based on hardware alone.

The fact that Shenzhen can make android tablets for $35 is no doubt amazing. But, there’s a problem here with just analyzing the hardware. The author is using the price of the technology, specifically how much it cost to manufacture, to make assumptions about the viability of the product.

That is just plain wrong. If that’s the case, then I declare software dead, since it costs $0 to manufacture software.

If you want to compare on cost, the real metric to look at should be: how much does it cost to design the product? The truth is, the cost to design is the same whether you’re in Shenzhen or Silicon Valley. If you can design an awesome product that everyone loves, you can also outsource it to Shenzhen so they can make it for $35 a pop.

As manufacturing processes get cheaper, the margins you’re making should be equivalent to the cost of designing the product. If the manufacturers in Shenzhen take the easy route and use reference designs from the chip makers, it makes sense that they’ll have no margin, they didn’t spend any money on designing the actual product!

There you have it, hardware is not dead. Focus on the product, and get back to work.

Discuss this on Hacker News here.