Waiting for the Dust to Settle
Back in February I wrote a blog post explaining why we weren't going to make it to Transworld. You can read that here.
I wanted to expand a little on what the plans for IgorBox are in the face of all the uncertainty in the United States manufacturing and trade climate. It's no secret that a majority of our electronics components are made in China and we utilize a manufacturer located in Hong Kong for our circuit board assembly. This is problematic for us given that tariffs are so uncertain right now.
To start, I want to give a small break down of how the tariffs affect us and our products.
Firstly, I want to talk about the manufacture and assembly of our PCBs. This is a bulk of the underlying cost of our devices. To make the numbers easier, I'm going to use some round numbers.
If the PCB costs us $100 to make, with the Tariff rate (currently) at 145%, we would need to pay the government $145 to import that PCB. This means the effective cost of that PCB is now $245. I hope you can see how this is not good for a small electronics business like ours. I can tell you that our margin is not that high so we are forced to increase prices beyond what we are comfortable with if we change nothing.
Based on this first problem, it's clear that we need to move manufacturing out of Hong Kong if the tariffs are going to continue like this. This presents a bit of a challenge for us at IgorBox because we literally just finished tooling and stocking up in the Hong Kong location back in November. We have halted our operations with the Hong Kong manufacturer for the moment while we explore other options. We have been working to identify alternatives and have a few we are working with for samples and test runs.
This brings us to the second issue I mentioned. Most electronic components are made in China. We rely heavily on the Espressif ESP32 micro controllers and many of our other components are manufactured in China. Regardless of manufacturing location for our PCBs, the components are subject to the 145% tariff as well. To try and reduce this cost, we have launched a full review of all of our schematics to find alternative options for some of the more expensive components.
With all this said, I am sure we are not the only electronics company in this situation and I know that many of our friends, colleagues, partners, and competitors also face this same dilemma. I'm also positive that we are all looking at similar options and avenues to ease the retail costs while delivering quality products. I know that paying more for the same thing is not something anyone is interested in doing, and I certainly don't want to raise prices either.
Beyond all of this work we are doing internally to mitigate cost spikes to our customers caused by these tariffs, we are also hopeful that deals will be made and the overall tariff burden from China will go down. We just need the dust to settle out to see where we need to further invest in the short and mid term. Our goal is to provide the best value to our customers, and we will continue to work towards this.
