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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.
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.
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..
I said the growth was slowing and eventually the market is saturated. Obviously no market with any growth is 100% saturated, but the massive growth is over. In particular Tesla and Apple are finding that out the hard way. There are only a limited number of people in those markets. I know you are a young technocrat and Apple/Tesla fanboy, but you are too inexperienced to know that the valuation of these companies are based on massive growth not "earns reports". Once the growth slows, they have a harder time borrowing money against their valuations. Many companies learned this the hard way - the tech industry is littered with them.