…because you don’t have to sleep in a factory in China.
While HAXLR8R’s suggestion that hardware startups must prototype in China may prove to be very realistic for startups with a large number of pre-sales or who have wildly successful Kickstarter campaigns (like Pebble Watches), these are more the exception than the rule.
If you send your prototyping and design to China, it’s hard to maintain control that far away. It’s even more unrealistic to expect the vast majority of startups to up and move to China for a few weeks, or longer, in order to finalize their designs. Someone needs to be home to actually keep the rest of the business running – sales, marketing, business development, etc. Startup founders wear many hats and overseas prototyping is not always the best option for startups that need to keep a pulse on their business operations, particularly if they are small.
Even more than the geography factor, going directly from design to mass production can be incredibly risky. You may be mass-producing a product that no one wants or be left with tons of product on-hand that you must store and manage logistics for, costing even more money. And if you start right out of the gates with mass production, what happens when you need to change something in your design soon after launch?
What it really boils down to is that there may be a point in time that it makes sense to take your product overseas, but everyone starts at zero. And there is a lot of ground to cover between zero and mass production. A manufacturer that is simply interested in churn is not going to take into account cash-flow considerations that may be detrimental to your business. Most likely there are going to be multiple changes to your product, and that is very costly if you are already in mass production mode. It often makes sense to do as much as possible state-side with a manufacturer that can handle lower volumes but is still able to ramp up to higher production numbers.