Hardware Makes a Comeback in Silicon Valley

In recent years, Silicon Valley seems to have forgotten about silicon. It's been about dot-coms, Web advertising, social networking and apps for smartphones.

But there are signs here that hardware is becoming the new software.

It is an expansion of a trend that began a few years ago with the Flip videophone, a sleeper hit, and has recently accelerated with Nest, the smart thermostat; Lytro, a camera that refocuses a photo after it is taken; and the Pebble smartwatch, a wristwatch that can interact with a smartphone.

Although the hardware is not manufactured in Silicon Valley, it is being conceived, designed, prototyped and financed here, usually by small start-ups.

What has changed? Each of those steps is speeding up, which cuts the costs and lowers the risks of developing new things.

It's not that software is any less important in Silicon Valley. One reason for the rise of hardware is that it is now so tightly integrated with software. has taught a generation of product designers that an electronic device isn't much without specially designed software that makes it a joy to use.

Instead, any designer now has the ability to quickly experiment with new product designs using low-cost 3-D printers. These printers can churn out objects to make prototypes quickly - a fork, wall hooks, mugs, a luggage clasp - by printing thousands of layers of wafer-thin slices of plastics, ceramics or other materials. Products can be made quickly in contract assembly plants overseas, usually in China.

All of this has given designers and engineers a fast-forward button advancing this technological flip-flop.

“Something that once took three months to make now takes less than a month,” explained Andre Yousefi, co-founder of Lime Lab, a product development firm based in San Francisco that works with start-ups to create hardware products. “With 3-D printers, you can now create almost disposable prototypes,” he said. “You queue it up at night, pick it up in the morning and can throw it away by 11 a.m.”

The rapidly falling cost of building computer-based gadgets has touched off a wave of innovation that is starting to eclipse the software-driven world that came to dominate the Valley in the dot-com boom of the late 1990s.

“If we look hard over the last 10 or 15 years, people don't realize how different the world is now compared to 1996,” said Sean O'Sullivan, a venture capitalist who splits his time between the United States, Ireland and China. “Products like the have driven down the cost of components. You can now easily make connected devices that transform lives in the way we have only been able to do with software before.”

To prove his point, Mr. O'Sullivan recently took teams from nine small start-up companies to Shenzhen, China, for 111 days in which each group developed and began manufacturing new products. He calls his investment firm, based in San Francisco, Haxlr8r (pronounced hak-CEL-erator), and in June the first group of fast-to-market hardware products was unveiled. The companies included Shaka, which makes a simple device for measuring wind for sailboard and kite surfers, and Kindara, maker of an iPhone accessory to help women determine when they are ovulating. (The system automatically generates a text message to the husband at the appropriate time.) There is also Bilibot, a project to build an inexpensive open-source robot.

THE shift away from the Valley's obsession with dot-com services and Web-based social networks is a return to the region's roots. The Valley began as a center for electronics hardware design in the late 1930s, when Bill Hewlett and David Packard built an audio oscillator that Walt Disney used in the production of the movie “Fantasia.” At the start of the 1970s, the label Silicon Valley was coined because of the proliferation of semiconductor companies. In the mid-1970s, a group of computer hardware hobbyists started the Homebrew Computer Club here, which gave rise to several dozen start-ups, including Apple Computer.

Today some of the most successful hardware start-ups in Silicon Valley have been formed from the diaspora of former Apple employees who want to try their hand at companies that pair hardware and software - which is an integral part of Apple's DNA.

Tony Fadell, a former Apple executive who led the design teams on the and iPhone, recently started a company called Nest, which makes a beautifully designed smart thermometer for the home. It is one of the hit home electronics products of the year. Hugo Fiennes, the Apple hardware manager for the first four iPhones, started a company called Electric Imp, which plans to connect everyday objects, like wall outlets and household appliances, to the Internet.

And Andy Rubin, who now heads Google's phone business, worked as an Apple engineer before leaving to help create a series of start-ups, the most recent of which was acquired by Google in 2005. The Android software, tightly integrated into smartphones, has come to rival that of Apple's iPhone.

Hosain Rahman, C.E.O. of Jawbone, a hardware start-up that makes slick Bluetooth speaker systems and headsets, said Apple's influence on design set a standard for who could enter the hardware start-up world. “The bar for great hardware experiences has been set so high by our friends in Cupertino,” he said, referring to Apple's home. “They've raised the overall goodness of hardware.”

“You can come up with a new concept or idea and you can really efficiently figure out if it's a viable product,” Mr. Rahman said. “Now you can test a lot of ideas for a lot less capital and intensity.” But, he warned, “the scaling and supply chain, marketing and distribution is still quite hard.”

Yet even distribution has been simplified by technology. Online marketplaces like Etsy, Amazon and Google's Marketplace allow people to set up shop on any street corner of the Web and begin hawking their latest hardware ideas.

Because of the excitement around hardware, start-ups in New York and Silicon Valley are now vying for venture capital investments. Electric Imp recently closed an $8 million financing round from big-name venture firms. LittleBits, a New York company, just signed a deal for $3.65 million in financing to start mass-producing its tiny tech toys. Mr. Yousefi's company, Lime Lab, was acquired this year by PCH International, headquartered in Cork, Ireland. PCH is a manufacturer that works with start-ups and technology companies in Silicon Valley to build hardware products that just a decade ago would have cost millions of dollars and years to realize.

Liam Casey, founder and chief executive of PCH International, said the ease of making hardware prototypes had contributed to the rise of a new genre of financing with Kickstarter, a Web site that has raised impressive sums for a number of hardware start-ups. Entrepreneurs pitch their idea on the site and ask for donations - often promising the product, or at least a promotional T-shirt, for the cash.

“The money has always been the barrier for hardware,” Mr. Casey said, “and by showing the amount of interest from consumers, start-ups can now create a space that makes V.C.'s feel comfortable investing in their hardware project.”

Ouya, an open-source game console for the television built using Google Android, just raised more than $8 million through Kickstarter. Pebble, the smartwatch that connects to iPhone and Android smartphones, raised more than $10 million after asking for just $100,000.

THE collapsing cost of hardware can be seen in its revival of a hobbyist ethos in the so-called Maker subculture. That ethos is thriving on the easy availability of low-cost computers and sensors.

One of the best examples of that movement is a full-blown $25 computer system the size of a credit card. Designed by a small team led by Eben Upton, a chip designer at Broadcom, the computer is known as Raspberry Pi, and the Valley's hobbyists and start-up fans have seized on it as a breakthrough in innovation. So far, 100,000 computers have been sold, and the Raspberry Pi Foundation is making 4,000 daily - enough to reach almost 1.5 million dreamers in a year.

When Raspberry Pi is almost as cheap as a raspberry pie, the impact on future hardware development will be profound. “People are using this as a catalyst to get new designs to the market more quickly,” said Kevin Yapp, chief of marketing and strategy for Element 14, an international online community for engineers backing the project.

Stewart Brand said that information like software “wants to be free,” said Mr. O'Sullivan, the venture capitalist. “Now hardware is almost as cheap as software.”