Bunnie Weighs in on Tariffs

[Bunnie] has penned his thoughts on the new 25% tariffs coming to many goods shipped from China to the US. Living and working both in the US and China, [Bunnie] has a unique view of manufacturing and trade between the two countries. The creator of Novena and Chumby, he’s also written the definitive guide on Shenzen electronics.

All the marked items are included in the new tariffs

The new US tariffs come into effect on July 6th. We covered the issue last week, but Bunnie has gone in-depth and really illustrates how these taxes will have a terrible impact on the maker community. Components like LEDs, resistors, capacitors, and PCBs will be taxed at the new higher rate. On the flip side, Tariffs on many finished consumer goods such as cell phone will remain unchanged.

As [Bunnie] illustrates, this hurts small companies buying components. Startups buying subassemblies from China will be hit as well. Educators buying parts kits for their classes also face the tax hike. Who won’t be impacted? Companies building finished goods. If the last screw of your device is installed in China, there is no tax. If it is installed in the USA, then you’ll pay 25% more on your Bill of Materials (BOM). This incentivizes moving assembly offshore.

What will be the end result of all these changes? [Bunnie] takes a note from Brazil’s history with a look at a PC ISA network card. With DIP chips and all through-hole discrete components, it looks like a typical 80’s design. As it turns out the card was made in 1992. Brazil had similar protectionist tariffs on high-tech goods back in the 1980’s. As a result, they lagged behind the rest of the world in technology. [Bunnie] hopes these new tariffs don’t cause the same thing to happen to America.

[Thanks to [Robert] and [Christian] for sending this in]

Making Electronics Just Got 25% More Expensive In The US

As reported by the BBC, the United States is set to impose a 25% tariff on over 800 categories of Chinese goods. The tariffs are due to come into effect in three weeks, on July 6th. Thousands of different products are covered under this new tariff, and by every account, electronic designers will be hit hard. Your BOM cost just increased by 25%.

The reason for this tariff is laid out in a report (PDF) from the Office of the United States Trade Representative. In short, this tariff is retaliation for the Chinese government subsidizing businesses to steal market share and as punishment for stealing IP. As for what products will now receive the 25% tariff, a partial list is available here (PDF). The most interesting product, by far, is nuclear reactors. This is a very specific list; one line item is, ‘multiphase AC motors, with an output exceeding 746 Watts but not exceeding 750 Watts’.

Of importance to Hackaday readers is the list of electronic components covered by the new tariff. Tantalum capacitors are covered, as are ceramic caps. Metal oxide resistors are covered. LEDs, integrated circuits including processors, controllers, and memories, and printed circuit assemblies are covered under this tariff. In short, nearly every bit that goes into anything electronic is covered.

This will hurt all electronics manufacturers in the United States. For a quick example, I’m working on a project using half a million LEDs. I bought these LEDs (120 reels) two months ago for a few thousand dollars. This was a fantastic buy; half a million of the cheapest LEDs I could find on Mouser would cost seventeen thousand dollars. Sourcing from China saved thousands, and if I were to do this again, I may be hit with a 25% tariff. Of course; the price on the parts from Mouser will also go up — Kingbright LEDs are also made in China. Right now, I have $3000 worth of ESP-12e modules sitting on my desk. If I bought these three weeks from now, these reels of WiFi modules would cost $3750.

There are stories of a few low-volume manufacturers based in the United States getting around customs and import duties. One of these stories involves the inexplicable use of the boxes Beats headphones come in. But (proper) electronics manufacturing isn’t usually done by simply throwing money at random people in China or committing customs fraud. These tariffs will hit US-based electronics manufacturers hard, and the margins on electronics may not be high enough to absorb a 25% increase in the cost of materials.

Electronics made in America just got 25% more expensive to produce.

Global Resistor Shortage, Economics, and Consumer Behavior

The passive component industry — the manufacturers who make the boring but vital resistors, capacitors, and diodes found in every single electronic device — is on the cusp of a shortage. You’ll always be able to buy a 220 Ω, 0805 resistor, but instead of buying two for a penny like you can today, you may only get one in the very near future.

Yageo, one of the largest manufacturers of surface mount (SMD) resistors and multilayer ceramic capacitors, announced in December they were not taking new chip resistor orders. Yageo was cutting production of cheap chip resistors to focus on higher-margin niche-market components for automotive, IoT, and other industrial uses, as reported by Digitimes. Earlier this month, Yaego resumed taking orders for chip resistors, but with 15-20% higher quotes (article behind paywall, try clicking through via this Tweet).

As a result, there are rumors of runs on passive components at the Shenzhen electronics market, and several tweets from members of the electronics community have said the price of some components have doubled. Because every electronic device uses these ‘jellybean’ parts, a decrease in supply or increase in price means some products won’t ship on time, margins will be lower, or prices on the newest electronic gadget will increase.

The question remains: are we on the brink of a resistor shortage, and what are the implications of manufacturers that don’t have the parts they need?

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The Long Tail of DIY Electronics

These are the Golden Years of electronics hacking. The home DIY hacker can get their hands on virtually any part that he or she could desire, and for not much money. Two economic factors underlie this Garden of Electronic Eden that we’re living in. Economies of scale make the parts cheap: when a factory turns out the same MEMS accelerometer chip for hundreds of millions of cell phones, their setup and other fixed costs are spread across all of these chips, and a $40 million factory ends up only costing $0.50 per unit sold.

But the unsung hero of the present DIY paradise is how so many different parts are available, and from so many different suppliers, many of them on the other side of the globe. “The Internet” you say, as if that explains it. Well, that’s not wrong, but it’s deeper than that. The reason that we have so much to choose from is that the marginal cost of variety has fallen, and with that many niche products and firms have become profitable where before they weren’t.

So let’s take a few minutes to sing the praises of the most important, and sometimes overlooked, facet of the DIY economy over the last twenty years: the falling marginal cost of variety.

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The Dubious Claim of a World Helium Shortage

If you’ve been reading the news lately, you doubtless read about the find of a really big new helium gas field in Tanzania. It’s being touted as “life-saving” and “game-changing” in the popular media, but this is all spin. Helium is important for balloon animals, scientists, and MRI machines alike, but while it’s certainly true that helium prices have been rising steadily since 2000, this new field is unlikely to matter all that much in the grand scheme of things.

helium_uses
Source: USGS

The foundation of every news story on helium is that we’re running out of the stuff. As with most doomsday scenarios, the end of the world’s supply of helium is overstated, and we don’t just mean in light of the new Tanzanian field. Helium is the second-most abundant element, making up 24% of the total mass of the universe. And while the earth has a disproportionate amount of heavier elements, helium is in rocks everywhere. It’s just a question of getting it out, and at what price that’s viable.

So while we’re stoked that the era of (relatively) cheap helium can continue onwards for a few more years, we’re still pretty certain that the price is going to continue to rise, and our children’s children won’t be using the stuff for something so frivolous as blowing up party balloons — it’ll be used primarily, as it is now, where it’s more valuable: in science, medicine, and industry.

Let’s take this moment to reflect on the economics of second-lightest element. Here’s to you, Helium!

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Hackaday Links: June 5, 2016

CERN is having a hackathon. It’s in October, yes, but the registration is closing on the 15th of June. They’ve been doing this every year, and the projects that come out of this hackathon are as diverse as infrastructure-less navigation, cosmic ray detectors, and inflatable refrigerators.

Have one of those solder fume extractors? Here’s an obvious improvement. [polyglot] put a strip of LEDs around the frame of his solder fume extractor to put a little more light on the subject.

A few months ago, [Bunnie] started work on a book. It was the Essential Guide to Electronics in Shenzhen. It’s made for hardware hackers to figure out how to buy stuff in Shenzhen, using a neat point-and-understand interface. Those books are now being shipped to people around the globe. I got one, and here’s the mini-review: it’s awesome. Is it a complete travel guide? No, but if you dropped me off at Hong Kong International, I could probably 1) Make it to Shenzhen 2) Buy random LEDs 3) Find a hotel 4) Get a beer 5) Not die. Pics below.

You’re hackers, and that means you’re the people who build stuff for all those ‘makers’ out there. Don’t have an MBA? No problem, [Dave Jones] has your back. He re-did his Economics of Selling Hardware video from several years ago. It’s 25 minutes long, and gives you enough information so you’re not a complete idiot at the business end of design.

Like Raspberry Pis stuffed into things? Here’s a Pi Zero stuffed into a MegaDrive cartridge. Now someone grab a Sonic and Knuckles cart, build a ROM reader, and do a proper cart-reading emulator.

If you’re into R/C, you know about Flite Test. They’re the folks that make crazy, crazy model planes out of Dollar Tree foam board, and have gotten hundreds of people into the hobby. Flite Test is having their own con, Flight Fest, in a little over a month. It’s in Ohio, and from last year’s coverage of the event, it looks like a really cool time.

So, No Man’s Sky is coming out soon. It’s a space game set in a procedurally generated, infinite galaxy. Does anyone have any idea on how to form a Hackaday clan? Somebody should start a Hackaday clan/alliance/thing. I’ll meet you guys at the core.

Retrotechtacular: MONIAC

There is an argument to be made that whichever hue of political buffoons ends up in Number 10 Downing Street, the White House, the Élysée Palace, or wherever the President, Prime Minister or despot lives in your country, eventually they will send the economy down the drain.

Fortunately, there is a machine for that. MONIAC is an analogue computer with water as its medium, designed to simulate a national economy for students. Invented in 1949 by the New Zealand economist [WIlliam Phillips], it is a large wooden board with a series of tanks interconnected by pipes and valves. Different sections of the economy are represented by the water tanks, and the pipes and valves model the flow of money between them. Spending is downhill gravitational water flow, while taxation is represented by a pump which returns money to the treasury at the top. It was designed to represent the British economy in the late 1940s as [Philips] was a student at the London School of Economics when he created it. Using the machine allowed students and economists for the first time to simulate the effects of real economic decisions in government, in real time.

So if you have a MONIAC, you can learn all about spectacularly mismanaging the economy, and then in a real sense flush the economy down the drain afterwards. The video below shows Cambridge University’s restored MONIAC in operation, and should explain the device’s workings in detail.
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