The inevitable 'competition from lower cost manufacturers' is a likely fear among many hackers today, but one extremely good point that Chris makes is to complement hardware with software. Scaling with hardware can seem tough, especially with competition from lower cost manufacturers, but incorporating software gives companies an edge AND hopefully the ability to scale.
But playing devils advocate, it may be tough for startups to find the resources to have a hybrid hardware/software company from the beginning. It just seems like a daunting idea to start a hardware company. BUT, with crowdfunding having become so popular, startups may be able to raise enough money through initial sales from their hardware that they are able to put that money towards creating unique software.
Sorry for all the back and forth, just was thinking/writing out loud!
Hardware is nearly always complemented with software, since pretty well all "hardware" projects include a significant software component by default.
For example, I design and build radio systems in my day job. You'd think an 800MHz 100W radio transceiver would be "hardware". In actual fact, even that sort of system is largely driven by software. Most of the signal processing is done on a DSP. The "hardware" is essentially a DAC/ADC, a mixer, a gain element and a filter, and even then the control is handled by a computer. For VHF frequencies and below, even the mixer is disappearing.
These days, nearly every electronic device fits the following model:
As a grad student working with communication systems i can verify that. In fact, most communication and signal processing systems involve pretty sophisticated algorithms, and these are almost always implemented in software. In fact, the performance differentiator in these products boils down to the quality and implementation of the signal processing algorithms, and that is where most of the research effort at university labs is directed at.
An exception with respect to some communication systems would be ones operating at extremely high frequencies, where it would be impractical to process signals in software due to memory constraints (higher operating frequencies -> more samples per second). In these cases, the mixing/modulation functions get implemented in hardware.
There's a presumption that all hardware consumers are simply looking for a cheaper thing that does what they already have. Cheaper isn't always better when it comes to products that aren't meant for "everyone," even b2c product markets can easily be stratified.
I wouldn't say "complement hardware with software," (although in many cases, it is a good idea - but let's be honest software, like hardware, can be copied and sold at a lower margin) - but instead "complement your hardware with a thorough understanding of where you want to be in your market." You may find that there's less money trying to capture and keep customers who want the cheapest product than to find a good spot somewhere in the middle or top-end of a market.
I see a lot of poor thinking in some products, where cost is nearly the primary focus - where the hardware product is something to be thrown away when the next model comes out, because it is stripped to its barest essentials. That's a difficult position to hold - it's much better to think about where your product will need to be in a few years, and make sure that it can grow (add-ons, upgrades, etc.) without needing to be replaced. Not much different than software in that sense.
I'm not sure how one starts a hardware company these days without being a software developer (there's usually more firmware work than electronics...) - but I see it happen all of the time, people don't really care how good the firmware/software is, as long as it works, it would seem.
I think as time goes along, the hardware/software combo will become more natural.
I can see it now where start up founders with successful exits from todays start ups who grew up assembling machines and writing software will want to build something that could improve the lives of many people outside of open gaming consoles (which is still pretty cool).
But playing devils advocate, it may be tough for startups to find the resources to have a hybrid hardware/software company from the beginning. It just seems like a daunting idea to start a hardware company. BUT, with crowdfunding having become so popular, startups may be able to raise enough money through initial sales from their hardware that they are able to put that money towards creating unique software.
Sorry for all the back and forth, just was thinking/writing out loud!