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Be it Smartwatches or Smart Speakers, It's Never Been Easier To Make Gadgets. But Only the Big Players Have the Muscle To Survive. (theguardian.com)
Why would you go with the smaller brand, faced with those offerings from tech's behemoths? Or, at the previous displays, why not just buy the cheaper models? Charles Arthur, writing for The Guardian: That's the challenge for many consumer electronics firms. Not how to make things, or how to distribute them and get them in front of potential buyers. It's how to make a profit. Out of Fitbit, GoPro, Parrot and Sonos -- each operating in different parts of the consumer electronics business -- only the latter made an operating profit in the last financial quarter, and all four have made a cumulative operating loss so far this year. Making a profit in hardware has always been difficult. By contrast, in software, all the significant costs are in development; reproduction and distribution are trivial -- a digital copy is perfect, and the internet will transport 0s and 1s anywhere, effectively for free. If your product is free and ad-supported, you don't even need anti-piracy measures; you want people to copy it and use it. Software companies typically have gross margins of around 80%, and operating profits of 40% or so.
In hardware, though, the world now seems full of companies living by the Amazon founder Jeff Bezos's mantra that "your [profit] margin is my opportunity". Indeed, Amazon is one of the reasons why long-term profit is more elusive: it provides a means for small startups to distribute products without formal warehousing arrangements, and compete with bigger businesses at lower cost. That, together with the rise of a gigantic electronic manufacturing capability in the southern Chinese city of Shenzhen, about an hour's drive north of Hong Kong, has made the modern hardware business one where only those with huge reserves of capital and brand recognition can hope to thrive.
In hardware, though, the world now seems full of companies living by the Amazon founder Jeff Bezos's mantra that "your [profit] margin is my opportunity". Indeed, Amazon is one of the reasons why long-term profit is more elusive: it provides a means for small startups to distribute products without formal warehousing arrangements, and compete with bigger businesses at lower cost. That, together with the rise of a gigantic electronic manufacturing capability in the southern Chinese city of Shenzhen, about an hour's drive north of Hong Kong, has made the modern hardware business one where only those with huge reserves of capital and brand recognition can hope to thrive.
How soon before there is a widely exploited bug that can put smart speakers or other devices in a state where they catch fire or do other real damage to themselves and things around them?
If you google "halt and catch fire" you will see a history of devices that could, through software, be made to catch fire, move in unintended ways that would hurt other things or people, or simply wear themselves out sooner than intended. Think old-school monitors with flyback transformers, impact printers or anything else with moving parts, or even some variable-speed chips.
In a well-designed device that isn't a robot, the worst thing that SHOULD happen is that a safety fuse blows and the device turns off until it is manually reset. But if the device has moving parts or is intended to navigate around other devices, like a smart car or drone, widely exploiting a bug could do real damage worldwide.
If you have good useful hardware you will survive and beat the big tech companies. The problem is that these gadgets are just junk and rely on fads. Eventually you run out of people to sell to and your market is saturated. Only a small percentage of people want a drone, or a fitbit, an action camera, or a $60k+ electric vehicle (like Tesla found out), or a $1000+ phone (as Apple is finding out). There isn't an infinite market of consumers out there with excess money. Once the fad is over you have saturated your market.
It isn't so much about the device, it is about the Software service infrastructure behind it.
Companies are not doing the IBM Mistake which allowed Microsoft to Dominate the PC Market. They are being careful who they license too and have stricter guidelines on who and what can use their software and their section of the cloud.
Back in the late 1980's I could be a White Box PC maker and compete against the likes of Gateway and Dell. I would just need to get all the Case, Power supply, motherboard, CPU, Graphics board, IO Controller Board, Drives... And slap in a $60 MS DOS Install. I would be able to put them all together. Add 20% to my expenses and still be competitive in price with the big boys.
Today. I can make the device. However I will need to negotiate with Amazon, Google, Microsoft, Apple to see If I can access their cloud to use the service. Being that I want to make money off making a product competing against their own, it will not be cheap, and I wouldn't be able to make profit off of it.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
As I get older the shiny tech edge gets not only less attractive but off putting. I don't want/need light bulbs with WiFi, I don't want my thermostat connected to the internet. Why does anyone need a washer, dry or refrigerator connected to anything but power and water? Why not get cameras all over the house, so people all over the world can watch you and your family. This extends to everything. Hey, buy a car only highly specialized and expensive people can work on! Rebuy all the media you already own, because we have a new format that isn't any better, just different! Hey we no longer have a working web page, download our app that has less functionality but might spy on you, it'll be a big surprise. Its just more to worry about, more to deal with, and I'm an electrical controls engineer! I would imagine most new tech is only used to a small fraction of its capability, because most people don't care or want to put the effort in. The move complex/connected something is, the less reliable, and harder to understand the ramifications and risks of owner ship..
The other main problem with hardware vs. software is the business model.
In hardware to make your revenue goals you need to sell X units per year. Let's say your goal is $1M and your product sells for $10k; you need to sell 100 units to make your goal. The problem is next year, you start all over. Now you want to double revenue to $2M; how do you do that? DO you double investment in your sales channels to double number of units? To generate rapid growth, perhaps you need to discount the unit to get there. That affects your margins significantly, so to keep your margins up you may need to sell 250 units.
In software, many systems are SaaS now. So you have $1M sales target and your license fee costs $10k. You need to sign up 100 customers. OK. Next year you want to double revenue. The beauty of SaaS is that you start at $1M; your customers sign up for another service fee. So to double revenue, you do the same thing as last year, and since your marginal cost is virtually nothing, all that revenue goes straight to operating margins. I've seen people try to push HaaS models, but this hasn't panned out the way that SaaS has because there's a ton of liability and maintenance issues when it comes to physical objects. If someone uses your software for 2 years then cancels, you delete it and move on. But if someone buys your $10,000 piece of hardware for say a $4,000/year "service" then cancels after 2 years, you're out $2,000 and you're left with a used piece of equipment that is not worth $10k anymore.
In hardware, you've got a ton of issues to manage that are pure overhead costs. In hardware, to deliver within a few days means you need to pre-build your inventory; that hits your cash balances and that capital has a cost. Warehousing and distribution today Amazon can handle if your product is small enough, but that just transfers the cost from your employees to a service fee with Amazon. Plus how much do you build? Did you build too much, putting your bank account in jeopardy as it's not turning into sales quickly enough? Did you build too little and risk stocking out, generating bad perceptions in the marketplace? And how are you building components; at what volume and when? That directly affects costs with your suppliers and thus your own gross margins. Production planning is critical to controlling your finances in hardware, you need a group both forecasting sales as accurately as possible and a group managing the production chain to minimize costs and manage cash; that's more overhead cost.
*speaking from experience*
Only a small percentage of people want a drone, or a fitbit, an action camera, or a $60k+ electric vehicle (like Tesla found out), or a $1000+ phone (as Apple is finding out)
Wow you are absolute pants at understanding markets.
All of those things have growing markets with a lot of demand.
Fads do indeed have issues with market saturation- but those ain't it, which is why all of those items are in markets with healthy growth (even if some companies may struggle within the space, like Fitbit itself which has a lot of oxygen sucked away by heart-monitoring Apple Watches).
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Before that, at least you only had a single device, to put all the useless crap onto, because they were apps on a full computer.
Now everybody wants you to buy a whole device, just for one single function. E.g. ... *gasp* ... telling time. ... Like our ancestors did.
Apps were already bad enough. There's an app for everything, because there *has* to be, because everybody makes one trick ponies. Wanna blog, *but only 140 characters*? Twitter! Like a normal blog canâ(TM)t do that... And then, because they all expect exclusivity, they have to re-implement the wheel again and again.
Why have all messengers work with each other, when you can have a thousand, all with their own implementation for everything.
But desktop applications already started that nonsense. Why can't you just use Word's tools for writing in Photoshop? Or vice versa? Why can't Windows software share a common update system? Why can't I use any arbitrary library as a button, a selection context menu function, or as a shortcut, in any program on rhings with a compatible data type?
Unix had already solved it. Small tools, that do one thing and do it right, AND ARE COMBINABLE, e.g. with shell script glue.
We just would have to give it the ability to handle media formats, and not just text. And use those formats for UI too.
We've only been moving backwards since then. I get why some people hate "progress". Because it is *regress*, as it only makes things *worse*.
All because some thieves (yes, thieves) started to (illegimately) treat software like a product because they were greedy and anti-social fucks.
The huge megacorps can afford the lawyers. If you can't you are a slave.
Corporatism != Free Market
This sounds quite similar to the Shoe Event Horizon storyline from The Hitchhiker's Guide to the Galaxy.
It's quite possible that in the (very near) future, the only companies on the planet that will be able to manufacture anything will be the ones that also have software services associated to their own hardware. We're already almost at that point with Amazon, Apple, Google and Microsoft.
#DeleteFacebook
But it isn't impossible either. I'm not going to share "how" here though.
The big guys aren't very afraid of each other, they are more afraid of "2 guys in a garage."
Emby shares are where its at now (reddit), you get what netflix has without the DRM. I have it running on a raspberry pi, where it was impossible to get Netflix, causing me to seek out an alternative.
Peanut slave ? Lawyer-ed up ?? As an expression of discontent , those slashed brake-lines on GOOGLE buses tend-to-differ.
Trump's tariffs will change that equation and make smaller factories profitable again.
The summary leaves out an important part:
" Fitbit is struggling to move away from fitness bands – simple devices that record steps and calories burnt – where low-cost Chinese products are swamping the market. "
The companies are ALSO competing against cheap Chinese competitors. So, the little guy can still have a device built on the cheap, it's just that there are a lot of other people doing the same thing.
LOL.
Even if you're the most popular app maker on the App Store, you're at the mercy of Apple. Google has a lot of sway over Android, but they can only push things slightly faster than the lowest common denominator, which makes it harder to roll out things like AR compared to Apple. Fitbit is basically screwed long term because they don't have access to the OS integration that Apple Watch and Wear OS have, or the data that the big guys have as a result of having their OS in everyone's pockets.
Software might be easier, but there's nothing stopping Apple and Google from cloning your product and eating your lunch, other than the usual big company inertia/dysfunction.
I think the problem is the products themselves, also development is harder than people give credit for. I mean sure there's a lot of standards based me-too products out there. But there's very little innovation. One of the things Steve Jobs was able to do was bring an entire new shape/form factor to market that was almost completely new, or at least so different to what was available for a reasonable price that it seemed completely new. I think start up companies just completely lack the resources to pull that off. Razer is the only company I can think of that recently started putting out new products with original designs. Even they have had to slowly build to that point, first with keyboards/mice which quite frankly are pretty average things. Then using that money to break into the high end laptop space, and finally starting to develop new tech like the Razer core e-GPU chassis, which sure there were some kit bashed ones people had put together but the Core brought it together into a product and made it sexy. I'd like to see someone make a home media server that has a ton of storage, a really sexy case. E.g something that doesn't look like an Apple TV square box. Designed for silence and to look good. I can't imagine anyone designing/building anything like I have in mind. There's just no interest/money to develop a new product from scratch and those with the money to do it definitely don't have the expertise or skillset to pull it off. There just aren't many companies around today that can integrate hardware with software properly.
"SMART" is becoming toxic as more and more people wake up to the fact they are buying useless poorly made insecure creepy stalker gadgets that degrade or stop working at the exclusive whim of the manufacturer.
People will eventually be burned or get wise to the depth to which other people are stalking and annoying them.
As public awareness increases the idea one can make continuous profit from the continued existence of consumer hardware will become less and less aligned with reality.
I guess crapple couldnâ(TM)t extort enough to put this garbage in.
So here we are, posting this a full THIRTY MINUTES (California time, where these companies are located) into the first business day of the year, and we're complaining that all four of them have had an operating loss so far this year...
Well duh.. nobody has had time to book in accounts receivable yet. You guys are too demanding.