Latest / Hardware Startups with Fexingo: Devices, Robotics, and Manufacturing Tech Companies / Why Hardware Startups Are Betting on Modular Design
Transcript
- Lucas: You know that feeling when you drop your phone and the screen cracks — and the repair costs almost as much as a new device? That frustration is actually the product of a design philosophy called 'integrated design,' where every component is glued, soldered, or sealed in. Luna: Right, and that philosophy dominates consumer electronics. But there's a growing counter-movement: modular design. And some hardware startups are betting their entire business model on it. Lucas: Yeah, and I want to anchor this in one specific company: Framework. They make a laptop where you can swap out the CPU, the RAM, the battery, the screen, even the USB ports. It's designed to be disassembled with a standard screwdriver in under five minutes. Luna: Framework is probably the highest-profile example. But what's interesting to me is that they're not just a niche sustainability play — they've actually shipped hundreds of thousands of units. They're proving there's a real market for this. Lucas: Exactly. And the numbers back it up. Framework says their modular design reduces material waste by about 40 percent compared to a traditional laptop over a five-year period, because you're replacing only the outdated part, not the whole machine. Luna: Forty percent — that's significant. And I've seen surveys that suggest about 70 percent of laptop buyers now cite repairability as a factor in their purchase decision. That's up from maybe 30 percent five years ago. Lucas: Consumer sentiment is shifting, but the real question for a hardware startup is: does modularity help or hurt your business? Because it's not just a feel-good design choice — it has real operational implications. Luna: Let's talk about those implications. What's the trade-off on the engineering side? Lucas: The upfront engineering cost is higher — significantly. Designing a modular product means you need to standardize interfaces, manage tolerances across interchangeable parts, and test many more configurations. Framework reportedly spent over two years just on the connector design for their expansion cards. Luna: That's a long time for a startup. Most hardware startups fail because they run out of time or money before they get to market. So modularity seems to add risk. Lucas: It does add risk. But it also creates a different kind of moat. Once a customer buys a modular laptop, they're locked into the ecosystem — they can't easily switch to another brand because they've invested in spare parts and modules. That recurring revenue from upgrades and accessories can be very sticky. Luna: So it's a trade-off between upfront cost and long-term customer retention. For a startup with deep pockets or patient investors, that might work. But what about the supply chain? Modular means more SKUs, more inventory complexity. Lucas: Yeah, that's the second big challenge. A traditional laptop has maybe 50 to 100 unique parts. A modular laptop might have 200 to 300 because each module is a separate SKU. That multiplies your supply chain risk — you need to forecast demand for each module independently. Luna: And if you misforecast, you're stuck with inventory of one module while another is backordered. That's a nightmare for cash flow. Lucas: Exactly. Framework mitigates this by using a pre-order model — they build to demand, not to forecast. That's a classic hardware startup tactic, but it only works if you have a community that trusts you enough to wait. Luna: So modularity forces you to be more direct to consumer, more community-driven. That's a different kind of business than selling through Best Buy. Lucas: Right. And it's not just laptops. We're seeing modular design pop up in e-bikes — companies like Cowboy and VanMoof offer swappable batteries and motors. In smartphones, Fairphone has been doing modular for years, though they're still niche. Luna: Fairphone is interesting because they've actually influenced regulation. The EU's right-to-repair legislation was partly informed by their model. So modular design can be a regulatory hedge as well. Lucas: That's a great point. If you're a hardware startup designing a product today, you have to assume that repairability regulations are coming. The EU already mandates that phone batteries be user-replaceable by 2027. Modular design gets you ahead of that curve. Luna: But let's be realistic — modular design isn't right for every product. A smartwatch probably can't be modular without being too bulky. And for many startups, the added engineering cost just isn't worth it. Lucas: No, it's not a universal solution. I think the key is to look at categories where the upgrade cycle is long — laptops, monitors, e-bikes, home appliances — and where the total cost of ownership matters to the customer. In those cases, modularity can be a real differentiator. Luna: And there's a secondary benefit: if you design for repairability, you also design for easier assembly. Some startups find that modular design reduces their manufacturing defects because you can test each module independently before final assembly. Lucas: That's something I hadn't thought about. Lower defect rates mean less waste, fewer returns — that's a direct cost saving. So the upfront engineering investment can pay for itself over time. Luna: I want to bring up a specific data point. Framework published a life-cycle analysis showing that over four years, their modular laptop generates about 30 percent less carbon emissions than a comparable non-modular laptop. For a startup pitching to institutional investors with ESG mandates, that matters. Lucas: It absolutely matters. And it's not just about carbon — it's about e-waste. Globally, we generate over 50 million tons of e-waste per year, and only about 20 percent is recycled. Modular design directly addresses that problem. Luna: So the question for a hardware startup founder is: can you afford to go modular? And I think the answer depends on your category, your funding, and your go to market strategy. Lucas: Right. If you're building a low-cost IoT sensor that you want to sell for ten dollars, modularity is probably overkill. But if you're building a thousand-dollar device that customers will use every day for years, it's worth considering. Luna: And there's a middle ground. You don't have to make every component modular. Some startups do a hybrid approach — they make the battery and storage replaceable, but keep the mainboard sealed. That captures most of the sustainability benefit without the full engineering burden. Lucas: That's smart. I think the takeaway for this episode is that modular design is not a binary choice — it's a spectrum. And the startups that are winning with it are the ones that are intentional about where they draw that line. Luna: Before we wrap, I want to circle back to something you said earlier about customer lock-in. If you build a modular product, you're essentially creating a platform. And platforms can be very defensible if you get the ecosystem right. Lucas: That's the dream — a hardware platform that generates recurring revenue from upgrades and accessories. But it only works if you nail the design and build a community that believes in the vision. And that's hard. Luna: Speaking of community, this feels like a good moment to mention that conversations like this one are possible because of listeners who support the show. If you find these deep dives useful for what you're building or running, you can help keep Hardware Startups with Fexingo ad-free and independent. Lucas: Yeah, it's at buy me a coffee dot com slash fexingo. No pressure at all — but that support goes directly into research, editing, and hosting costs. It's how we keep the show focused on substance rather than sponsors. Luna: And we really appreciate it. Now, back to the future of modular hardware — I think one area we haven't touched on is how modular design could change the second-hand market. Lucas: Oh, that's a great point. If you can swap out a worn battery and upgrade the CPU, a five-year-old modular laptop can still perform like a new one. That could dramatically extend product lifetimes and create a thriving resale market. Luna: And for a startup, that resale market could be a revenue stream — certified refurbished modules, trade-in programs, that kind of thing. Framework already offers a 'Factory Seconds' store for blemished parts. Lucas: So modular design isn't just a product philosophy — it's a business model. And I think we'll see more startups adopt it as the regulatory and consumer pressures mount. The question is who executes it well enough to scale. Luna: Well, we'll be watching. For Hardware Startups with Fexingo, I'm Luna. Lucas: And I'm Lucas. Thanks for listening.