What the IoT Startups should know When Selecting IoT Hardware Partners

I. General Background of IoT Hardware Landscape for Startups

Various inexpensive and convenient IoT modules (such as ESP32) and the increasing acceptance of IoT have provided more options for IoT software startups. However, how to find the right hardware partners, what is an appropriate price, how to collaborate with hardware partners, and what problems these startups may face? 

II. Case Analysis of IoT Hardware Partner Selection

We previously encountered a software company specializing in embedded development. They wanted to design a hardware product based on ESP32-WROOM-32E/32UE. They had already confirmed the corresponding connection method through module connection, and had also completed all the embedded code. They need  NextPCB to assist in completing the hardware design and deliver a working PCBA board. 
During this process, the most costly part is actually not the hardware manufacturing, but the engineering service. The hardware engineers of NextPCB need to confirm an output circuit diagram based on the product functions, main modules and wiring diagrams provided by the customers. After obtaining the customer's confirmation, they will output a layout diagram, then produce the first sample, burn in the firmware to test the functions, and then conduct the second debugging or confirmation based on the actual situation. 
The customers are not clear about what will be accomplished with the entire service. They think that $500 can solve all these problems, but in fact, $500 might only be the cost of manufacturing the PCBA. Once there is a part of the design service involved, the entire service fee could be more than ten times the cost of the hardware. 

III. Differences between local design houses and Chinese hardware companies 

In various local markets, many professional design houses carry out such design service. nowadays, many Chinese hardware companies also offer this service. Many local professional design houses provide this service mainly by charging service fees and by charging based on the engineers' time. Communication in the same time zone and the same language make it easier for customers. However, the customers may need to undertake the production work themselves. Moreover, these service fees cannot be refunded because these design houses merely sell the engineers' time. 
More Chinese hardware companies will offer such hardware services through bundled sales, charging a fixed design fee. However, during mass production, this fee will be deducted from the product cost. For some projects that require a larger scale, this approach is more convenient, equivalent to finding a stable partner for hardware design and production. Chinese companies hope to obtain manufacturing orders to achieve higher sales and profits, rather than simply selling the engineers' time. 

IV. Main Process of IoT Hardware Product Design 

The entire IoT product design will cover the following aspects 

• 1. The conceptual framework (function verification) of the product. Some software engineers will implement the functions by using pre-existing modules. Take companies like Espressif and Nordic as examples, these companies also provide many development boards for developers.
• 2. Output of the product's hardware circuit diagram (schematic).
• 3. Output of the product's layout.
• 4. First prototype, burning and testing the functions.
• 5. Confirm whether a second sample is needed, or continue with small batch verification. 

V. Choosing the Right IoT Hardware Service: OEM, ODM, or Layout + Manufacturing

1. Pure Manufacturing Service (OEM): If you are a startup company with your own hardware engineers, you might only need pure manufacturing services. Companies like NextPCB offer prototyping starting from one piece, and you can place orders directly online. For orders of 10 pieces or less, the assembly is free. They aim to attract more Design-in projects for mass production.
2. Pure ODM Service: If you only know what product you want to make but have no hardware design capabilities, what you need is ODM service. You just need to confirm the functions of the product, and the outsourcing team will deliver a functional prototype. This service is the most expensive because it involves a lot of communication among engineers. In this current society, the cost of services is much higher than the product itself.
3. Layout + Manufacturing: Some engineers are unwilling to spend time on layout and subsequent work. They will deliver the schematic to the manufacturing company and let the manufacturing company complete the subsequent hardware design and manufacturing work. The design fee for layout only needs to be charged by points, and manufacturing is charged according to the standard manufacturing fee. 

VI. Summary 

If you are a software startup company, you can determine the mode you want to choose based on your financial situation, project duration, and time.  If you have complete production files, you can also check the NextPCB Accelerator Campaign provided by NextPCB. They offer 2 PCBA units for free sponsorship, specifically for certain IoT models (such as the ESP32 C6 Wi-Fi / RAK3172 Lora / SIM7600 4G, etc.)  later they can also provide mass production services, It is very friendly to budget- limited startups that happen to  implement the same modules in their products.