For even the most confident of hardware startup founders, heading to China for the first time can be stressful. Just about any company ready to move into mass production must eventually make this journey, of course. That’s why there are so many agencies and consultants that help people find suppliers and avoid getting ripped off.
Mike Bellamy is a founder of one such organization called PassageMaker. He has more than 20 years of experience in China and a long history of educating people about the process of finding the right supplier, including at Global Sources trade shows.
Though Bellamy can talk for hours on the topic, his advice largely boils down to a few important points when a startup is looking for its first Chinese manufacturer: Do research and spend time talking to suppliers, don’t go cheap on intellectual property protection and don’t go cheap on product engineering. These things can people people avoid 90 percent of the problems associated with sourcing in China, according to Bellamy.
Though money is often tight for small startups, these early investments are important. Many people coming to China for the first time are worried about getting ripped off, but Bellamy says due diligence on suppliers can allay these fears.
Though some people worry about getting scammed, that is less of a concern than winding up with a supplier that doesn’t meet a startup’s needs. Resources like Global Sources exist to help people avoid scammers, which are not likely to pay for multi-starred, verified listings. However, finding a supplier takes more than simply asking if a manufacturer can make a product. They’ll all say yes.
With enough time and money, any number of factories can make sophisticated electronics. The questions a startup should really ask is whether a manufacturer has made anything like this before, whether they can show what they’ve made and if they have any customers who willing to talk about their experience sourcing from this supplier.
Online research will help people get an idea of the costs involved in making a particular product at specific volumes. It can also help people narrow down a list to a few good suppliers. Only by talking to these suppliers, though, will someone really be able to determine whether it’s a good fit.
Another important way to not have problems with a Chinese supplier is to not cut corners on intellectual property and engineering.
In the case of IP, having it registered in the foreign country will not protect it in China. Though the US is one of the few countries to protect the “first to invent” rather than the “first to file,” this has led some companies to have a false sense of security when they moved into China.
When manufacturing in China, not only are company’s trademarks vulnerable, but patents could be, too. Paying the fee to file for patent and trademark protection in China is worth the expense, especially if a company ever has to defend its IP claims in court.
In the case of engineering, some companies without in-house engineering make the mistake of relying on the supplier for some aspect of the process. To that, Bellamy has just one thing to say: Don’t do it.
“If you’ve got some new technology, it’s proprietary, you own the IP, then you really need to know every phase of production,” he said.
If a startup doesn’t have all the necessary engineering talent, Bellamy recommends hiring a third-party engineering firm. These companies will find the most efficient way of making a product from the materials to the wiring and everything else involved. This will keep a manufacturer from simply using methods or materials it finds most convenient.
“If you have to spend money, it should be spent at the engineering and prototyping phase,” Bellamy said. “Having clear specifications is money well-spent.”
The last bit of advice from Bellamy concerns protecting these investments. Generally this comes from having a good, bilingual contract that both parties can agree to. While a startup will have to invest getting one written up in China, the good news is that doing so is very affordable these days.
Once upon a time, people worried about contracts not being enforceable in China, but that’s no longer the case. Now “they mean something,” as Bellamy put it, and the cost is now a few hundred dollars rather than thousands.
This last bit of investment is to give a startup peace of mind when it comes to China. The serious startup will be making these investments in research, IP protection and engineering. Crafting an enforceable contract will ensure these early investments don’t go to waste.
To hear all of Bellamy’s thoughts on this topic, watch the full video here:
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