Latest / Hardware Startups with Fexingo: Devices, Robotics, and Manufacturing Tech Companies / Modular Design for Supply Chain Resilience in Hardware Startups
Transcript
- Lucas: So I was talking to a hardware founder last month — let’s call him Sam — and his startup makes smart building sensors. He told me that in 2024, a single Wi-Fi chip went from a six-week lead time to over 40 weeks overnight. His whole product was designed around that one chip. Luna: Ouch. Did he have a plan B? Lucas: Not initially. He spent three months redesigning a daughterboard so he could swap in a different radio module. That experience turned him into a convert for modular design. And it got me thinking: how many hardware startups bake in that kind of flexibility from day one? Luna: I’ve seen a few that do — especially in IoT. They basically build a base board with a standard connector and then snap on different communication modules: Wi-Fi, Zigbee, Thread, even cellular. Lucas: Exactly. And that’s the core idea of modular design applied to supply chain resilience. Instead of one rigid PCB with every component soldered down, you split the product into functional sub-assemblies that can be swapped without a full redesign. The radio module is the classic example, but you can also modularize power supplies, sensors, even the main processor. Luna: Right. But there’s a cost penalty. You’re adding connectors, extra PCB area, and often a mechanical enclosure that’s more complex. I’ve heard numbers like 10 to 15 percent higher BOM cost. Lucas: It’s real. In a study I saw from a contract manufacturer, modular designs for small IoT devices added between 8 and 12 percent to the unit cost at low volumes. But that same manufacturer told me that when a chip shortage hit, their modular clients recovered production in about six weeks — compared to 16 weeks for non-modular designs. Luna: So the question is: can a pre-revenue startup afford that extra 10 percent? Lucas: It depends on their margin structure and their risk appetite. Sam, the founder I mentioned, said the modular redesign added about $2.50 to his $25 BOM. But it also let him switch suppliers in three days when his primary module went out of stock. He told me that one event alone saved him about four months of potential delay — which, for a startup burning cash, is huge. Luna: That’s the key — it’s an insurance premium. You’re paying for optionality. And there’s another benefit: modularity makes it easier to do field upgrades or offer different SKUs without redesigning the whole product. Lucas: Absolutely. I’ve seen startups use modular sensor boards to sell a base model and then offer higher-accuracy or different-wavelength sensors as add-ons. That’s a whole go to market angle that’s harder with a monolithic board. Luna: But engineering complexity goes up. You need to define the interface — the connector pinout, the mechanical alignment, the firmware driver compatibility. That’s not trivial. Lucas: No, it’s not. And if you’re a two-person team, that overhead can be a distraction. Some founders I’ve talked to say they’d rather keep the design simple and take their chances with the supply chain. Luna: And sometimes that’s the right call. If your product has very low margins or you’re pushing for the cheapest possible unit cost to hit a price point, paying extra for modularity might not make sense. Lucas: Right. But I think the calculus shifts after you’ve raised a Series A and you’re scaling to thousands of units. At that point, the cost of a supply chain interruption — lost revenue, angry customers, missed shelf space — really dwarfs the per-unit premium. Luna: So when should a startup start thinking about modular design? At prototype stage? Or can you retrofit later? Lucas: Retrofitting is painful — you’re essentially redesigning the PCB and the enclosure, which can cost $50,000 to $100,000 depending on complexity. It’s much cheaper to plan for it in the first layout. Even if you don’t implement all the modules right away, just leaving space for a connector and a standard footprint can save you later. Luna: Speaking of standard footprints, there’s a push in the industry to standardize module interfaces — like the M.2 connector for wireless cards or the mikroBUS standard for click boards. That way you can pick from a catalogue of modules rather than designing a custom one. Lucas: Exactly. And contract manufacturers are catching on. I know a few CMs in Shenzhen that now offer 'modular design services' as a standard package. They’ll help you partition your design, source compatible modules, and even pre-qualify alternative suppliers. Luna: That’s smart. It lowers the barrier for smaller startups who don’t have a dedicated hardware engineer. Lucas: It does. And it aligns incentives — the CM wants to keep your production running, so they’re motivated to give you options. One CM told me they’re seeing about 30 percent of their new IoT projects request at least one modular sub-assembly. Luna: Let’s talk about a concrete example. Can you walk us through a real modular design decision? Lucas: Sure. Take a smart thermostat. The core functions: temperature sensing, user interface, connectivity, and power. If you design the connectivity as a separate module — maybe a small board with a Wi-Fi or Thread chip on it — you can test that module independently, certify it separately, and swap it out if a new protocol becomes dominant. Luna: And you don’t have to recertify the whole product for FCC or CE each time you change the radio? That’s a huge time saver. Lucas: Huge. Pre-certified modules are a thing — you can buy a radio module that’s already passed FCC testing, and then your product only needs to pass the unintentional emissions part. That can cut certification time by weeks or months. Luna: So modular design actually helps on two fronts: supply chain agility and regulatory speed. Lucas: Exactly. And if you ever want to launch in a new region with different frequency bands, you just swap the radio module. No new PCB layout, no new enclosure tooling. Luna: That’s a compelling argument for any hardware startup with global ambitions. Lucas: Which is most of them, at least eventually. I think we’re going to see modularity become a standard design practice, not a niche strategy. The supply chain shocks of the 2020s taught a painful lesson. Luna: And on that note — we keep these conversations ad-free because we believe they’re valuable for builders and operators. If you find them useful, supporting the show at buy me a coffee dot com slash fexingo helps us keep it that way. No pressure, just an option. Lucas: Yeah, we’re grateful for everyone who listens and particularly those who chip in. It lets us focus on topics like this without any sponsor influence. Back to modular design — I think the key takeaway for a hardware founder is: don’t wait for a crisis to think about flexibility. Even a small modular decision early on can pay dividends. Luna: And if you’re in the prototype phase, ask your design partner or CM about modular options. It might cost a little more upfront, but it’s an insurance policy you hope you never need — until you do. Lucas: Exactly. I’d rather pay 10 percent more for a BOM that can weather a storm than build a perfect, cheap product that’s one shortage away from a six-month delay.