The Startup Defense
The Startup Defense explores the intersection of commercial technology and defense innovation. Callye Keen (Kform) talks with expert guests about the latest needs and trends in the defense industry and how startup companies are driving innovation and change. From concept to field, The Startup Defense covers artificial intelligence, cybersecurity, mission computing, autonomous systems, and the manufacturing necessary to make technology real.
The Startup Defense
Near-shoring in Mexico, Southern California Manufacturing Renaissance, and SEACOMP with Terry Arbaugh
This conversation explores the shift from manufacturing in China to Mexico, particularly in the context of the Southern California manufacturing renaissance. The guest, Terry Arbaugh, discusses the benefits of manufacturing in Mexico, including proximity to the US market and the ability to work closely with customers. The conversation also touches on the opportunities in defense tech and the potential for regulation changes to support domestic sourcing. The importance of getting people excited about manufacturing and the impact it can have on communities is highlighted.
Takeaways
- Manufacturing in Mexico offers benefits such as proximity to the US market and the ability to work closely with customers.
- The Southern California region is experiencing a manufacturing renaissance, with increased investment and growth in the industry.
- Opportunities in defense tech are expanding, and near-shoring in Mexico can provide a strategic advantage.
- Regulation changes may support domestic sourcing and encourage the growth of manufacturing in the US.
- It is important to get people excited about manufacturing and showcase the impact it can have on communities and the world.
Chapters
00:00 Introduction and Background
03:23 The Shift from China to Mexico
09:14 Benefits of Manufacturing in Mexico
12:20 The Southern California Manufacturing Renaissance
19:46 Participating in the Growing Ecosystem
23:32 Opportunities in Defense Tech
27:21 Regulation Changes and Near-Shoring
29:17 The Long-Term Impact of Manufacturing
32:27 Getting People Excited About Manufacturing
38:49 The Importance of Marketing Manufacturing
Welcome to the startup defense. My name is Cali Keen. Today I have my friend, terry. So, terry, we have this story about sea comp and manufacturing, which, of course, is near and dear to my heart manufacturing all things, learning how and where things are made. But Currently you're a global manufacturer. You make really high volume, great things and I do want to dive into what those are. But you're building a new facility in Mexico, so near shoring that capability and you and I have talked about getting more involved in the startup scene, which I know you're. You're west coast, you're embedded in anyways, but then in defense tech, which is now really at the core, things that I love. But before I spoil it, can you tell? Can you tell the audience, like, who you are, what do you do and, most importantly, what are you passionate about right now?
Speaker 2:Well, yeah, cali, great to be with you and thanks to the intro and terry arbaugh, vp of sales and marketing at sea, cop in here Sixteen and a half years, which just seems insane. I always say it seems like it's you know, kind of six different two to three year stands at different startups. You know we kind of started this one thing, done some acquisitions with that from services and you know what a factory in China and I work in the factory in Mexico like you mentioned. So it's it's been a completely different journey every couple years, so it doesn't feel like one One sixteen years. But Seacoff is.
Speaker 2:You know we design a manufacturer, industrial, medical, consumer electronics, so everything we do has some electronic content. And then we do a lot of ejection molding, we do a lot of turnkey assembly and full box builds kind of around those electronics for our customers around the world. Generally we're, you know we were working with startups or you know kind of the scale up, right, if you have Not a job shop, not really low volume, but if there's potential to, you know, grow into some. You know something that's going to be in a ten, twenty thousand ish. You know type volumes and have the potential to go up from there. We're a great partner right, most of our customers are spending, say between you know, two and fifteen million dollars a year per project, you know, with us. But we got some outliers on either side of those numbers, depending on what industries and how long it might take to ram.
Speaker 2:So I'm sitting here in San Diego, kelly, we got a product and all the engineering team here. We only do engineering for things that we're going to manufacture, so we're not a engineering services company, but we do have the means to take, you know, all the way from a napkin sketch all the way into a full, many batch of products with, you know, testing and certifications and packaging and everything else. We have a factory, as you mentioned, in don't want, china, which we've been operating poor oh gosh, you're not tennis years, you know as a factory owner in China, the electronics manufacturing capital the world. Like you mentioned, we're just opening up T want to Mexico. Smt lines are going in this week. We got some trials for next week and really expect production to begin in March, which is really exciting.
Speaker 1:Yeah, it is super exciting because for so long China really has been the de facto. If I want to make thousands and thousands of something, particularly in the commercial space, you could try to avoid it, or, if the volume is very high, maybe build your own factory. But most likely that's the manufacturing floor of the world, at least for consumer goods. Right, I'll lump some medical goods and some tech goods in there as well. Obviously. I, you know iPhone, ipad, it just it is what it is. But we start to see this changing one in my space because there's New opportunities and there's new regulations around where we can source. But then also because we see Mexico kind of coming up more and more online and making more and more sophisticated parts.
Speaker 1:I guess traditionally I would have thought of some power components and then a lot of automotive things being built in Mexico, not so much complex electronics. I know that that's probably holistically incorrect, but me, as somebody that sources product from all over, that hasn't been as successful up until recently to say, hey, I want to get a board made and I want an injection molded plastic and I want box build and I want to get it and I want it, you know, like a very sophisticated product, all done right across the border and or as, or Tijuana or what have you. But what were kind of the components for you At secomp that drove that decision? Because this is a big investment. I you're not just saying, hey, we're going to use a Mexican, you know we're not good, we're not just gonna go visit and I use a factory, we will be the factory. So there's probably a lot of factors involved in that.
Speaker 2:Yeah, a whole lot and a lot with what you just said. Right, historically, you know, mexico's been been manufacturing for a long time, even in the border. You know regions and Tijuana by California. There's been a lot of television manufacturing there for a long time. There are a lot of large products that are being made there. You know appliances and spring of irrigation control systems and so there's a. There's a really robust manufacturing base down there.
Speaker 2:But, just like you mentioned, historically it wasn't for the consumer electronics or industrial medical type. You know smaller electronics that are typically coming from China. So there's this, there's this whole base and you know, as most of us know, the, the terrace that were implemented five, six years ago, really worthy. You know the, the starting point of this conversation for us. You know, as a manufacturer in China, suddenly almost every product we make, you know a good, a good high percentage of the products that we manufacture for customers. Were suddenly subject to a point about percent import, right, so that started the discussion where it's really customer driven demand. You know a lot of the products we make Cali in the volumes that we make them in. You know, in the tens or hundreds of thousands typically. You know not iPhone volumes and things like that, a lot of those customers in those size projects it didn't make sense for them to put the resources of the money towards retooling and moving production. So a lot of customers you know in these mid, small and mid volumes just haven't bit the bullet and absorb the terror for head to pass on their costs to their, to their customers. But for their next product, why not? In those conversations were OK, how do we start this one outside of China so we can avoid the terror? Right, so that was the. That was the starting point.
Speaker 2:You know you started throwing in when, when covid hit, you had the global supply team crisis. You had all the shipping. You know issues, so you know you've got geothermal tensions, people concerned about. You know potential conflict in the area no-transcript. You know you can't keep layering on all these things and a lot of our customers here in the US just kind of started thinking, yeah, we'd like to not manufacture in China.
Speaker 2:What are our other options? Southeast Asia, thailand, vietnam, taiwan, singapore picked up a lot of manufacturing that was leaving China. We were originally looking at the Philippines. We've got a whole Hong Kong team. We've got sourcing in China. We spend a lot of money over there, right. So we have a good amount of buying power and the Philippines is a couple of hours flight away. They speak English. We thought, okay, that will be our non-China option.
Speaker 2:Well, covid and supply chain and everything else kind of created some additional complexities that drove our owner, our CEO, who's an American guy he was living in Alkalit for 10 years dropping back to San Diego. So with that move we moved from Hong Kong, you know kind of the finance group and our operations group, and we ended up changing our strategy for our non-China. We called our plus one to just down the street, right. So now Tijuana is an hour from where I'm standing. We could be at the factory, which is amazing, right.
Speaker 2:So it's not just from a tariff cost standpoint, but from you product development. You know you do manufacturing. Is there any substitute for if you design something and we're going to be your manufacturer, working together in the same building and doing that knowledge transfer and saying, hey, when I built these first 20 pieces in my garage, here's the three areas that gave me the most trouble, right, and collaborating and talking about that. So having a factory an hour away, truly not hard to get people to come to San Diego. Like we said, you know you look behind me outside in January and it's 71 degrees here in San Diego, so not a hard place to get People that are only listening Terry's flexing beautiful mountains in the background perfect weather.
Speaker 1:He's trying to say, hey, come visit me, visit the new factory, that's right. Okay, twist my arm, Terry.
Speaker 2:Yeah, it's not for the S&T equipment, cal. I do it for the weather I've seen.
Speaker 1:SMT equipment. It's winter right now, yeah, so it's really exciting.
Speaker 2:It's really exciting time, I think. Being able, for a whole lot of reasons, being able to offer this, you know, plus one option to our customer base is really exciting. And you know, kind of to the point you're making earlier too, you're never going to fully avoid China in the world and the products that we operate in, right, we usually say industrial, medical and consumer products, small to 10 to another. However, regardless of what you're manufacturing or doing, your final assembly, some of the materials or components are coming from China, right? So there is that piece. So how do we manage that? How do we buy them? How do we ship them? How do we, you know, have the right certifications and processes to avoid terrorist threat, to do substantial transformation in country and change the country of origin, you know? So there is all of those things that we're figuring out. It is a fun time and it's challenging.
Speaker 1:I'm learning about a lot of things that I didn't necessarily think sales dad would have to learn about like I grew up and I mean I'm in a factory right now, so I really it's hard for me to imagine how people get product development done and we develop lots and lots of products. So, to be fair, it would be impossible unless I was in an actual factory, but it really. It always boggles my mind when people put out these products and they can't just walk down and Look at it on a machine or put it together themselves and with their team, because there is such a big gap between designing something and making it and, to be fair, making it. If we had a complete turnkey product and I said, here you go, terry, now I want to make ten thousand of these a month, there's a big gap between making a hundred of something or making a hundred a month and making ten thousand a month. There's it's.
Speaker 1:We worked on some fairly sizable projects with people like J bill or benchmark, and they're on the next size up where they're building a factory to make that product. So helping them bring up and design the layout of a factory or designing the process to make a part or a product, and that cost is just outside of the reach of most People. That would be in my space right. Somebody is probably not going to make a million a year of any products. So when they go in and gauge, bench great company and they're talking about standing up at a factory to make something or apportioning a portion, you know a part of a factory and then, yeah, you know Tens of millions of dollars are going to go into investment of making that product and it.
Speaker 1:So it makes a lot of sense of somebody's nearshoring. How do you make 10,000 or 10,000 a month of something? Well, you need to have Next best fit. See you come back, oh there you go yeah, you need a skip to missing it.
Speaker 1:You need a next best fit option. So being Mexico makes a lot of sense and I mean I wanted to Bring you on to you know, talk about what you're doing and I think this fits in this broader narrative that we're seeing of manufacturing, particularly in San Diego and Los Angeles, that just really a lot of hard tech happening, a lot of startups happening and no-transcript US manufacturing, or say North American manufacturing, really just exploding, right. Yeah. Yeah, part of this I mean part of it is definitely so you can just drive an hour and see, hey, here's this thing being made, but is part of that also so you can jump into the defense market or work with there's some non-defense manufacturing startups that are happening in LA and San Diego are very interesting, but a lot of momentum there.
Speaker 2:Yeah, absolutely. If I can, I want to know that first couple of pages. You said that's really important. The benchmark can build a factory to build your product.
Speaker 2:I think the right size manufacturer for you or your product, not just from a technology standpoint but from a commercial standpoint, is really really critical right. So that's something we talk about quite often. If you are trying to think a product that you're going to make 10,000 of and you're trying to go to a big market or a flex, they're going to kind of laugh you out of building right, and there's some people that we've seen that have come from large companies that have these relationships with these really large manufacturers and they go to a startup and they can use their relationships to get in right and the potential to get into some of those startups or the larger manufacturers. But if your volume doesn't pick up and meter exceed what you've told them or what they plan on, the larger manufacturers have no problem firing smaller customers and using that space and that equipment for higher returns, higher returns probably actually right, they have to yeah.
Speaker 2:Right, they have to right. The electronics manufacturing world was not a real high volume, real high margin sorry, real high margin world in these kind of spaces. So yeah, it's really really critical. Flip side of that is we've had some of these cases where a startup is looking to build five or 10 or 20,000, they think if things go really well, and then they actually have a huge hit on their hands. And then it's you know, 100, 150, 200, 1,000 a year and they've picked a manufacturer that can't scale with them right. So also a huge problem, right, when you're losing revenue or you just sunk a bunch of money into designing and tooling and getting started manufacturing something and you've got to do that again somewhere else because this company can't keep up with your volumes. But you can't afford to shut in down a transfer tool and get something else up right In the interim because you'd be lying down for you know, for a while. So choosing the right fit manufacturing partner is absolutely critical in that sense. So that was one thing I wanted to address, what you said earlier.
Speaker 1:So I appreciate that it's one of the main things that we try to push is think about seamless scale, like as your business goes up, what is this going to look like? You might not have this problem with a simple or medium complexity product making thousands of them but in general, the types of products that you and I are talking about. So electronics who's going to put that together? Think if it takes you 15 minutes to put something together and you have to make 10,000 of them a month. That's a lot of people Is that even possible?
Speaker 1:Does that require automation? Really simple questions will make you evaluate who you should be working for. Or do they have? We have all these upstream relationships, like we know you, we know other factories, so it's like do they have experience handing something off to a higher volume manufacturer and what does that look like? Lots of good, really good questions.
Speaker 2:And it's interesting, your level of experience and expertise. Even if you were to design something and hand it off to us to manufacture, you know what you're doing, you've got the experience. You know that kind of design things. Well, we might have some DFM design for manufacturing recommendations for us. We might ask you to make some adjustments to your design, not that your design is wrong or can't be made, but in order for us to make it with our equipment and our processes. If you make these adjustments, it would be better or more efficient, work off effective, higher quality, whatever it is for us to manufacture. So having a manufacturing expert design something is still going to have some back and forth. So if you can imagine and you kind of mentioned this earlier a lot of the customers we deal with that go from small to very large companies. They have varying degrees of manufacturing experience, some none at all. Some startups have just designed things to be 3D printed and tested some prototypes. So things they're 90% done right. Then we just need to clean it out and move on right.
Speaker 2:So the gap between the design and being a manufacturing, a manufacturer of both products at whatever volume you need it to be to your point. You know, how many cavities do you make, how many tools do you make, how many test fixtures for programming, pcdas and end-of-life testing, all of those things you have to consider to get to okay. What is the throughput number we have to reach every month? All of those considerations have to be made. How long is it going to take to get components? How long does it take to get certified for your products to ship into whatever countries with whatever radios you know? So all of those considerations have to go hand in hand and kind of be matched up to be a successful launch.
Speaker 2:Now, we do that without always setting foot in the factory, after one point you made is stopped, especially during COVID, right, one thing we did we did a 3D virtual tour of the factory so we can do a walkthrough of the factory. So if you were, you know, coming to SeaCop, normally we would invite you over. Since you couldn't travel, we'd at least be able to do a walkthrough and show you what its equipment is, what we have, and kind of do a real estate kind of walkthrough on the factory. But having processes, having program managers, having, you know, communication, regular communication, is absolutely critical, right? So our factory in China County, we have. You know, the GM is American. We have an Australian engineering manager, so we kind of operate with English as the primary language at the executive level and people that operate with the same standards that we would have for what good looks like right, what done looks like you know. So that communication is really really critical, but certainly nothing beats being in the room. That's what the things are really excited about, of course.
Speaker 1:Well, let's go back to talking about the Southern California manufacturing renaissance. That's happening and you're right in the thick of things. So you're in between LA and Tijuana and San Diego. We've got a lot of customers in that area, but there's so much activity happening in LA, lots of startups coming out of that how has Seacomp been able to participate in that ecosystem that's bubbling up?
Speaker 2:Yeah, it's interesting for us being here. We've been a small company. We've been growing right. So it's not like a lot of people have heard of us or knew us in the past One of the things being a small company and being responsible for marketing as you might know, marketing budgets are hard to get.
Speaker 2:Quite often it's hey, we're investing in a factory or you can spend some money in marketing. Well, okay, yes, let's buy the S&T liner, let's get to building right. So you try to figure out ways to do things. So I think when they have met through Clubhouse, they did a year and a half worth of weekly hardware room done on the house, which is just the next thing to be money, just time doing it, trying to build a robust network of partners right, that's been a huge thing. We've really focused on that and selling it out for you.
Speaker 2:So anybody who comes to us and most people that we might talk to are not good for us. Maybe at the time, maybe they're just too early, maybe ever we're not going to get to where they're going to scale production. We just never want to turn anybody away. We want to help people be successful in the hardware world. So we've got a giant, robust network of vendors, partners, industrial design, prototyping, product development, small scale manufacturing, sourcing for things we don't do like soft goods. We don't do industrial design here, we don't do fulfillment right Sometimes inventory, finance and things like that that we don't do. But we have built out this network so we can connect people outwards to partners to be successful and in turn of course that raises our profile a bit. We get those companies sending those same customers back to us when they are ready to see us. So that's been a part of it.
Speaker 2:Participating in things like LA Ethmic, participating in doing some sponsors of events at CES, where a lot of the Southern Californians go up to Vegas for the CES event, so doing a lot of those things, trying to raise our profile, has been really, really important.
Speaker 2:And then I think one of the questions you asked earlier I think that is an exciting new potential area for us being here in San Diego and as soon as we get all of our certs done and get manufacturing started here by the end of the quarter, I think being able to start participating and looking at some products that in the past we've had people reach out to us but we were not able to build, or even defense or for HR reasons. So there are a lot of products that are coming up and opportunities that are coming up with this local startup scene here. I think I introduced you to one of them that I met as a mentor at Techstars. I was doing a leadership as a mentor at Techstars San Diego here just recently and so, yeah, seeing a lot of these types of companies that come up but now we have an opportunity because of our near shore location is really exciting and a new kind of a whole new thing for us. So I can't really make a stick into it.
Speaker 1:Yeah, it's an absurd growth area. I saw a great statistic the other day. Basically, there's been more investment in that specific space and your locale in the last year and a half, two years as there were in the previous 10. And you can look at the space In the general numbers there isn't a ton of growth, but that's because there's very large entrenched companies building really big stuff and so as a startup person running accelerators, looking at markets, you look at this oh, what's the growth of this actual market? And you see that it's low and that turns away or traditionally has turned away some investment because this is a slow growth market. But the reality is, if you take off the top layer of those large companies and you look at the growth of investment in new technology so in startups, it's been an outrageous. Instead of it being a 5% growth market, it's a 200% growth market. It's unreal the market change that's happened in the past couple of years. I'm here for it because this is what I do and.
Speaker 1:I've done forever, but it makes me a little bit jealous, because you're not that far away from LA and there's some really cool companies, there's great companies in your own backyard and, yeah, to your point, you, as a mentor, tech stars we're going to try to have that team come on the podcast. We love plucking those really great tech companies coming out of that ecosystem and say, hey, this is a sticky market and there's a lot of things that you have to do compliance-wise, sales-wise, it's not as straightforward, but what a great opportunity now. And it's exciting to see you build the new facility, because I definitely want to see it once it's a little bit more cooked and go down but to be able to participate in that market. I really think you're going to be able to. You're going to be able to ride this innovation wave that's happening with just across the board. It's very, very exciting to me as a manufacturer, as an innovation person. I'm a little jealous, terry. That's all I'm saying.
Speaker 2:Well, like I said, we'll get you an invite to the grand opening for sure. But, yeah, you're completely right, the investment in these areas in California, also the investment in demand in Tijuana and Baja California, the area of in the manufacturing side, too, right. So you have both from the startup and the business investment, but then also from kind of the manufacturing, like us, the investment that's going into that area to support that growth. The investment in this total region is off the charts and it is a really exciting time for a lot of things. San Diego has been big at biotech right, and that investment continues to see.
Speaker 2:All you know, a lot of the projects we do are connected devices, IOT devices right, when people using electronics and sensors to gather data and the hardware as a means to an end, right. The value that they're selling quite often is the data and the analytics and the knowledge that come from what the sensor is gathering and communicating and collecting, right. So the hardware as a means to that end. But yeah, the total investment. You know, when you go LA to TJ is just crazy and it is really exciting to be a part of it. So, yeah, we'll get you out of here soon.
Speaker 1:I really predict that there's going to be regulation change around this, because it's such an obvious move is, with what's happening in your region to then manufacture in the Baja, that it'll be built into what the regulations are for US or domestic sourcing, that there's there's opportunity zones, or whatever that they want to call it, to be able to near shore and produce defense electronics, like in, you know, near border or in certain yeah, just in certain spaces, because it makes so much sense to do so.
Speaker 2:Yeah, and the investment, you know like one of the things that China has always has had for a long time is the advantages, the supply chain and the supply data. You know right. So in China you can get any component material, like within a couple of hour drive of the factory. You need something, you can sit a truck, right, you can go pick it up for the most part if you need it, and so that's been something that's been built over decades.
Speaker 2:And so, to your point, you know, if we see the momentum continue here in this, in this total region, right, the investment from a startup standpoint, from some of the larger companies, you got all. We got some huge, huge players, you know, right down here. So if that continues, you've got companies like future electronics there on the distributors, right. So if that whole momentum continues, then this region is going to have an attractive supply base as well. And so then, if that is combined with the regulation changes that you speak of, specifically the defense world, I think that's that's absolutely critical. Where you can, you know source, procure, build and ship everything from this local geography, right, without any content necessarily coming from you know, coming from China, that at least you're buying directly. So I think it's a, it's a huge opportunity and it's going to be a really exciting, you know, next few years.
Speaker 1:We're tracking the CHIPS Act and they want to really support semiconductors being made in the US so you can decouple from a Chinese supply chain, or in part or in whole. That is a very ambitious project, right?
Speaker 1:It's a multi decade long project to be able to build a very simple board and it to be all US made components. It's quite literally impossible right now to do that, and for that to not be impossible there's a lot of infrastructure that has to happen, but in support of that then there has to be people that will have the SMT lines. They'll have that at scale and for the most part, unless you're making very expensive items, it still doesn't make sense or would never make sense to do that in San Diego, right? So Tijuana makes sense, and so I think you'll see regulations that where it's a US held company that is then operating in specialized opportunity zones in XYZ companies countries which will then meet the TAA and BAA compliance requirements.
Speaker 2:Yeah, totally right. I think that we get asked this a lot like hey, is manufacturing coming back to the US, right? Yes, right, I was thinking of her. So you're a guest, a guest in the past, right, where everything else is as high as it's ever been, but the number of people doing it is lower, much less. Right, so the productivity has gone way up.
Speaker 2:But I don't think people necessarily either realize or remember the move for electronic manufacturing to China wasn't like one policy and everybody left, right, that was millions of individual capitalist business decisions of hey, this makes more sense, we're going to go over here because of the costs and what we can get and how we can increase our margins and all that. So it was a whole bunch of business decisions and some macroeconomic factors driving all those decisions. So the reverse of that is not going to happen with a policy. Right, you're a lost by fiat, right, yeah, and you create the environment. Right, and you create the environment to do that.
Speaker 2:The Chips Act is a great start, right. The tariffs and all these other things that are going on are kind of pushing stuff back. It's not necessarily a pull, but if that continues to happen, if we are going to get more manufacturing here. How are we going to educate a workforce that has the skills to run the sector? Run us the two lines do injection world and do metal stamping. There is a gap in terms of the number of workers in the education and the ability that we have. If suddenly we had all this manufacturing coming back, that would be a problem too, because we don't have the human resources to be able to support that sort of move. So that discussion is long-term and really complex and new odds that the good ones, we're off to a good start in this region, at least to see where it takes us. That's smart.
Speaker 1:I'd like to think of this as a long-term forcing function. So where the funding is, that's where the energy goes, where the focus goes, that's where the energy goes. So we've seen this in climate tech, with a 10-20x change in federal funds and investment. We've seen this now in defense, where there's a lot of money going into that area, whether it's private capital or it's better funding vehicles. So then, with those opportunities, more people get involved, more smart people get involved, more people that are skilled become more skilled or they become more knowledgeable about that industry or that problem set. But it's still a long-term problem.
Speaker 1:To your point, if I'm in China and I go to see an injection molding factory, high probability that inside that same little car park industrial park, I can just walk to a place that does machining and walk to a place that makes their tooling and walk to a place that does box build and then a place that does pretty much anything that I would need to make an IoT product. They might even be in the same building, on just on different floors, and I could just walk from one company to the next and get the whole thing done, whereas here it might take me a month or so to connect all of those dots to find the right fit relationships for all of those pieces. It might take a lot of documentation back and forth. It's actual, real work. It is somebody's job.
Speaker 1:Building supply chains and building resilient supply chains is not just super easy. But in China there are so many people being involved in it. If I need a engineer to look at an injection molding tool, I can hire one that day, no problem. I can find five. If not, the factory has a staff of five or 50 of these experts.
Speaker 2:Experts too.
Speaker 1:Whereas here I'm the expert I'm like okay, I want to find another person like me that can take apart from 3D print to machine to injection, mold or die cast or some other exotic manufacturing right fit for volume process. Those people already have jobs or they run companies that run back.
Speaker 2:Right, right. They're not just loose running around being like oh, I'll help you, Terry.
Speaker 1:Yeah, that's right, I'll give you two hours of my time. There just isn't enough of those people. They already work for Apple, or they already work for GE, or they already work for some. They already work for themselves.
Speaker 2:That's right. The extension of that in our world, from the manufacturing standpoint, that we're starting to plan for and weigh out is in China. If you were doing 10,000 a month then, like I said, you hit a sales spike and now you need 100,000 a month In China. We can do that pretty quickly. We could wrap up, whether it's extra shifts, whether it's capacity in the neighborhood, if you needed to borrow some ejection molding, there is ways and there is a workforce available to be able to be hey, I need 100,000 a month for three months, then ramp it back down, cool, no problem. It's not going to be that way in Tijuana. It's not going to be.
Speaker 2:Just to your point about the availability, I think the expertise is there. There's a lot of great people. The team that we're putting together I'm extremely impressed with in Tijuana. Their knowledge and their experience is world-class. There's just not as many of them. I've seen that to the workforce. We certainly plan on being a little bit more stable, not quite as flexible or as nimble as we are in China, as we're going to have to be in Tijuana To that point.
Speaker 2:I think it's a choked-down version of what a lot of people see in China the same thing China compared to the rest of Southeast Asia, like we talked about when the Paris hit and then a kit and all these companies were moving production outside of China. China has more workers, by factors, than the rest of the Southeast Asian countries combined. It's not just the quality of workers, it's the skill and the experience. It's not just that they're cheap, they're very, very good. The expertise that's available in volume of people is unreal. Over there A lot of people think China is just cheap and low-cost and low-quality. I don't know. There is that. There is a great deal of expertise there and just more people generally than are going to be available. It'll be an interesting dynamic. It'll be something we contend with and we'll have to communicate with our customers about it. We are not going to be as nimble as China has allowed us to be in the pie.
Speaker 1:I think if we were having this conversation closer to when we met a year and a half, two years ago, I would be like Terry how do we get people interested in making physical products and going for innovation? Of course, for me that means tech and it means defense. How do we get people excited about this? I think we're a little bit past that. People are getting progressively more and more excited right now. I think the next question, the forcing function of this, is now how do we get people excited about making the innovation? If you control manufacturing, you essentially control the pathway to innovation. As that comes back to your point, there's nobody to make it. There's not enough people right now. That's why you're building the factory. How do we get more people to look at that problem and get really excited about going into whether it's engineering or it's just the sales aspect of it or whatever is the facilitation of that innovation to market? How do we get people excited about it?
Speaker 2:That's a great question. I didn't know this career or kind of this industry really existed when I was younger. That's the best part of it is awareness. I think the way to answer it, Callie, is showing people. I think what I'm really excited about of having the factory it gives us an opportunity to do some events. I think we can bring some people down, we can do some video, we can show people what land use actually looks like. Then I think, explaining the impact One of the things to me that is always just really profound.
Speaker 2:I guess it's never lost on me every time I go to the factory. I sit here in San Diego. I've got a family that I take care of with this job. We've got engineers, we've got sourcing, we've got finance. We've got all these people here, program managers, that also do the same thing. We're working with our customers. We have a factory, a whole staff, executives down to the line leaders, line workers that all of them are taking care of their family.
Speaker 2:If we are talking to you about an early stage project and we get it into engineering and product development and tooling and we go through MPI and we are in production, if you start thinking about the number of people that that process, that product has impacted, not only from you, the customer side, and your employees and your families, but your in-customers and their enjoyment of the product, our team here, the workers that are building it. When you think of the ripple effects of the impact of just a single customer interaction a single product development interaction can have, it is absolutely incredible and I think quite often people want to make an impact with your career choice or with your life. You want to feel like you're doing something valuable and if we can maybe tell that story, we can show them that story and say, hey, if you do this, it's not just interesting for yourself but, man, you can really have an impact across the world. I think Columbus, where hopefully it gets people interested that's the best answer I've got. I don't know.
Speaker 1:That's it. That's fantastic. No, manufacturing in general and, up until recently, defense in general very large, quiet industries, Right? No, the reason that it's hard to get that marketing budget is most manufacturing companies don't market at all. I know people that have $100 million plus manufacturing businesses. They barely have a website. They don't need one. Marketing would do nothing for them because they're so heavily invested in capital equipment. There's so much that has to be spent to go to the next level. They're like okay, well, we have 300 employees now to go to the next level of profitability, we would need to have 700 employees, so we already can get that work. But we need to plan this out and this is going to take three or five years.
Speaker 1:They're not like oh, if I could run Facebook ads, we could just really blow this company up and so they're just quietly working, and I grew up in the industry so I know this is like people in manufacturing talk to other people that are in manufacturing but not necessarily out of that, and that really hasn't worked out for the industry as a whole for the past 30, 40 years. We need to open up our doors and show people like there's good jobs, there's really high impact things that you can do, you can get paid very significantly or you can work with your hands. There's really there's an opportunity at every level. Right, if you want to make a million dollars a year whatever crazy thing people are thinking like, the opportunity is there. Or if you want to just have a very reasonable job that's very stable, the opportunity is there. But yeah, traditionally it's like I'm a manufacturer, I'm busy working.
Speaker 2:I'm not really trying to impress anybody. My job is very hard and it's very detail oriented.
Speaker 1:I'm going to keep my focus on what is important, not impressing a lot of people. And I think that, yeah, just showing. Hey, here's what an SMT line have you ever thought of, like what makes the guts that's in everything that you touch and play with? Yeah, everything you touch.
Speaker 2:Yeah, yeah, no, absolutely it is. Yeah, it is. It's interesting and, again, the impact you can have. We do some ESG activities, right. We support an organization that helps send young women to college in third one countries, right, and the statistics around what value educated women bring to their communities on a per dollar investment basis, the return is so much greater than the men, right, and the men in a lot of those countries are generally the ones that have the opportunities, and so funding whether they have the opportunities, like we're having that sort of an impact, right. So, like you said, it could work with your hands. They can actually have motivation. Maybe it's learning and solving complex problems. Maybe that's your motivation. Maybe your motivation is to reduce waste in the world. So how can you work as a designer to create more sustainable packaging? There are a hundred different interesting ways or hooks that could make people involved in this world and considering this world as a career path, as a future, if we tell the story better, and I think that's something we can try to do with this closer crisis.
Speaker 1:Wow, that's amazing. Terry, thank you so much for taking the time to be on the startup defense. Awesome Thanks for the conversation. I really appreciate it, Kelly. I'm Kelly Keen and this has been the startup defense.
