Crowdfunding Hardware

2013 was a busy year for the hardware industry, with many startups birthing a gamut of new innovations. The coming of age of wearables also spawned a craze for connected devices of all sorts last year, and also saw smartwatches emerging as the banner product of the year.

What will 2014 hold for the hardware space? We spoke to HWTrek’s founder and CEO Lucas Wang and the Logistica Asia team to find out more about what exciting new developments we can expect to unfold throughout this year.

One of the hottest topics of last year was the emergence of wearables, connected devices and the quantum self movement. “As many of these crowdfunding projects come to fruition, the first half of 2014 will certainly see a growth of wearable devices in consumer hands,” noted Amanda Wu, Senior Program Manager at Logistica Asia, a design for manufacturing (DFM) and retail service provider.

Smart clothing to take center stage

More exciting developments, however, will come later in the year as integration with clothing will start to see connected devices becoming truly wearable, predicted Jeffrey Cheng, Program Director at Logistica Asia.

While people may laugh at recent headlines such as Sony’s smart wig patent, or Microsoft’s smart bra, Mr Cheng noted that there is serious potential in this field of Internet-connected clothing. A possible application, he suggested, include smart clothing for firefighters that can read air quality and use infrared sensors to read the heat of rooms and surfaces.

This data could then be transmitted back to a control room for analysis, which can give real-time feedback to firefighters. This could help to reveal unseen dangers and could even read the temperature inside a room without opening the door – allowing firefighters to know whether it is safe to enter or if a different route should be taken.

Affirming Mr Cheng’s views, Lucas Wang, CEO at TMI and founder of HWTrek, said that 2014′s smart money will lie in smart clothing–which is expected to see more commercial applications this year, especially with trendy quantified-self garments linked to health and fitness–rather than last year’s accessories such as smartwatches.

To match consumer habits, these Internet-connected clothing would likely be replaceable garments with a life-span of around nine months and would be designed for applications that support cardio and muscular self-training, he said.

And despite its popularity among consumers, smartwatches will likely not live up to their game-changing hype as these devices have too many drawbacks–such as screen size or battery life–to effectively deliver the broad functionality that is meant to be provided, Mr Wang explained, adding that specialization and integration are key for 2014.

Insurance companies to tap smart devices for underwriting

As the growth of smart devices spreads across verticals, this year could also see wider adoption of connected devices by insurance companies, Mr Wang predicted, noting that some firms are already trialing devices such as the IntelliDrive and the Snapshot to capture driving data–distance driven, average speed and speed of acceleration/braking–for tailoring insurance premiums that more accurately reflect the risk to insure the driver.

This underwriting model would also likely be adopted by the health insurance sector, he added, explaining that such plans would work by offering lower insurance prices depending on your activity. For example, a discount could be offered based on the level of weekly exercise recorded.

Consumer electronics manufacturers to experiment with connected devices

Consumer electronics manufacturers affected by the decline of the PC industry–which saw its biggest drop in sales in 2013–will look toward the growing connected-devices market for business growth in 2014, said Mr Wang, predicting that small-sized manufacturers will be the engine driving this next generation of devices due to their flexibility.

Large-sized original design manufacturers (ODMs) with their multi-million unit production lines, however, will likely struggle, he added, noting that experimental early-stage partnerships could be a way for these large companies to adapt their business model to producing a range of new connected devices which may only sell several thousand units.

Large-sized manufacturers looking for long-term growth will use 2014 to devote small teams toward partnerships with several promising startups, Mr Wang predicted, adding that these teams will attempt to learn how to manage startups and create value from manufacturing these small-scale orders.

However, these experimental teams will likely disappear and the ODMs will return to their traditional business models if the startups do not offer significant potential or significant product shipment volume by the end of the year, Mr Wang said.

Crowdfunding hardware quality to matter

Over 2012-2013, a substantial number of hardware projects were funded successfully through crowdfunding. Many of these projects are now being rushed through the development stage and assembly lines in order to meet delivery deadlines, Mr Wang noted, cautioning that in the race to get these crowdfunded products into the hands of backers, quality is likely to be compromised.

“Many of these devices are being developed by talented and creative startup teams, and while they may have created some ingenious products, they don’t always translate to mass production quality,” he said. “Through 2014, we can expect to see rising dissatisfaction with consumers as many of these devices fall short of expectations. Backers, notably early pledgers, who had paid for a product while it was in development may find the gadget breaking six months after receiving it.”

Consequently, both pledgers and makers will begin to realize that bringing a high-quality product to market requires far more than financial backing, Mr Wang added.

More hardware accelerators to emerge

The rapid growth of hardware crowdfunding and the massive wave of connected devices entering the development phase will give rise to new hardware accelerators to service these projects, predicted Mr Cheng.

“Currently, many startups taking devices through development and manufacturing are far from their optimal path in regard to delivering a mass product,” he said. “Projects are likely to run overtime, over budget and fall short of quality expectations – all to be expected, as startups are likely to lack expertise in design for manufacturing, as well as supply chain and ODM connections.”

A host of new accelerators looking to plug this gap will spring up, hoping to find opportunity to guide the next big devices through these stages, Mr Cheng predicted, noting that while some of them may specialize in specific areas, such as healthcare gadgets, these hardware accelerators will largely target similar projects.

“The main difference which will determine their level of success will be the extent of their connections and the depth of the experience held by their project managers,” Mr Cheng added.

This story was written by Alex Parr, a freelance writer based in Taipei.

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