I'm convinced that you are going to see a resurgence in Western entrepreneurial activity in hardware, and it's all due to Android's supposed fragmentation.

For the last 20+ years, developing hardware in the West has been a challenge. Android is poised to break that trend. To understand why, it's helpful to take a look at the history of the PC. Others have drawn parallels between today and the early 1980's in the PC's evolution, but the discussion is often focused on the religious war between Android and Apple. But that view is missing the point.

In the early 80's, the personal computer diverged into two different camps: IBM's and Apple's. Both effectively resulted in the opening of the closed word processors, but Apple's strategy was vertical integration, whereas IBM — mostly by accident — followed a more open approach. Much has been discussed about the fact that IBM outsourced the operating system of the PC, most famously to Microsoft; less, perhaps, about the significance of IBM's off-the-shelf hardware.

The existence of open standards then, as now, was not new. IBM's decision to use off-the-shelf components meant it didn't need to invest in creating new standards, technically superior or no; instead, by using existing standards, it pushed their rate of adoption past a tipping point. This kicked off plenty of entrepreneurial activity, both among hardware and application developers. Once IBM adopted an architecture that others could plug into, it allowed entrepreneurs to focus on one small piece of an emerging supply chain, without removing the potential to expand their role as they grew.

As more and more entrepreneurs raced into this ecosystem it started a reinforcing cycle: new hardware added features and drove down costs. This in turn, attracted more application developers, integrators and PC companies. Within a few short years, developing a PC — which used to cost millions — became something Michael Dell could do in a dorm room. Throughout the entire supply chain, barriers to entry were eliminated, and entrepreneurs entered the industry in force, driving the greatest explosion of innovation and creativity in the history of man.

The App Store Revolution

This explosion of innovation, however, was not repeated in the consumer electronics and embedded systems markets. In the long period since the PC ecosystem began to thrive, electronics have largely remained closed, much like the word processors which predated the PCs. A handful of pioneering outfits have made various attempts to open this market, some through open source software and others through proprietary platforms, but none found considerable adoption — until, of course, Apple's iPhone. The App Store became hugely successful, bringing a radical new form of interaction to the public and creating new ideas, markets, and entrepreneurs in its wake.

It's tempting to look at this as a point in favor of Apple's vertical integration strategy, saying that this ecosystem could only have been first created with a closed model. However, there's an assumption in that sentiment — that the App Store is indeed closed. Sure, it's like Fort Knox compared to the web, or even to traditional software publishing. But the iPhone wasn't a computer; it was a smartphone. Apple cut away most of the traditional barriers to entry into the smartphone market — poor programming environments, crap APIs and hardware, expensive and absurdly slow code-signing requirements. If openness is the ability to create, the App Store was at its introduction the most open platform the market had ever seen.

It was possible to create apps — or whatever they were called — before the App Store. Apple made it practical. They pushed apps past the tipping point.

Of course, the iPhone hardware and OS remained as closed as ever, subject to a vertically-integrated manufacturing process and vendor lock-in which left Apple in sole control. Which brings us to Android. The significance of Google's operating system is less about technology and more about — yet again — barriers to entry, and we are only now beginning to see evidence of the impact Android will have on the electronics industry.

In theory, Android is more open than Apple on the software side; Andy Rubin's point is irrefutable. From a more practical standpoint, however, handset users don't really see much of that freedom. Sure, there are now dozens of Android handset models to choose from, but in most cases the consumer is still locked in to a contract, has uninstallable crapware preloaded, and doesn't have root access to the device they "own".

This is true for Android-based phones, and ultimately stems from the fact that network build-outs are still so expensive, and thus risky, that there's little room for disruption. But phones aren't the only thing using Android. In particular, sales of a very particular device category have exploded in the last few months in a way that makes me tremendously excited about the future of Western electronics entrepreneurs: iPad knockoffs.

Cloning is the most sincere form of product development

The reason why a bunch of clumsy attempts at duplicating another Apple product have me excited is the remarkable diversity of the efforts. Even on eBay, you can find a surprising variety of Android-powered devices, and that represents only a fraction of the different hardware specs and price points coming from dozens or perhaps hundreds of small Asian manufacturers.

This explosion of cheap Asian clones after a product release by a major manufacturer is far from unique, and the wave of iPad knockoffs was forseeable well before Apple even announced its device. What makes this round of clones unprecedented is not that these clones were created, or even that so many configurations continue to pour out, but that they're all running the same software platform.

This happened because Google and the handset manufacturers have been spending millions getting Android to run smoothly on dozens of different hardware implementations, and this has been slowly rippling throughout the entire electronics industry. The scent of blood — or, rather, million-plus volumes for handset components — has convinced the biggest microelectronics manufacturers that a few engineers should go figure out how they could get Android to work well with their components. Embedded systems integrators, used to taking a crapshoot on whether they could get hardware and drivers for different components to talk to each other, found that when they used Android, the IC vendors were focusing on compatibility like never before. All this work on Android compatibility meant more engineers are learning the platform because more jobs are available, and since Android engineers are easier to find, businesses are looking for them.

At first, Android was popular with hardware manufacturers because Google was investing in it. Now, Android is popular because Android is popular. Blamo, tipping point.

That's why the Android tablets are so exciting. The fact that they're available in such a variety of configurations, from so many manufacturers, and that they're closing in on the $99 mark, is strong evidence that Android has indeed passed that tipping point throughout the ecosystem. As for why this matters to Western firms making electronics, imagine you are a lone developer with a concept for a handheld device to support some vertical or niche market, say a device for museum tours, a patient education system for waiting rooms, a video screen for exercise equipment at health clubs... you get the idea. Sure, all those devices were plenty possible before Android, but they just got hugely easier. For starters, the technical challenges decreased considerably: you wouldn't have to sift through reference designs, debug kernel issues, port drivers, GUI toolkits, or any of the low level tasks associated with bringing up such a product from scratch. Furthermore, when looking for software engineers, Android is a great benefit beyond any of its technical benefits. The ability to find Android engineers is just a lot easier than finding general embedded firmware engineers, and because Android applications use the higher-level Java framework, developers can iterate more quickly and, with any luck, be closer to the end user.

Even more importantly, instead of having to deal with a distended and largely opaque supply chain buried in China's hinterlands, our entrepreneur has a single point of contact who manages the whole thing, who has already negotiated pricing, terms, quality, inventory management and such. Now, finished goods coming out of Asia are nothing new. What's new is that the finished goods, in this case, are built on an open platform that allows customization at a variety of levels. A closed MP3 player doesn't provide much opportunity for an innovator regardless of how perfect the price or hardware otherwise is, whereas an Android device, even if imperfectly spec'd, can provide a world of opportunity to that innovator. In fact, it is this seemingly subtle difference that I believe will reverse the trend of the last 20 years which has stymied western innovation in electronics. The hypothetical closed MP3 player above not only didn't help the innovator, it hurt them. Sure, most of the innovators used Asian manufacturing, at least ultimately, but that's only one piece of the equation. To understand this distinction, we'll have to rewind thirty years.

Innovators Working With Asian Manufacturers Instead of Competing Against Them

Thirty years ago, prior to the rise of Asian ODM or design factories, US electronics and computer hardware boomed. We made all kind of electronics and computer parts. But gradually, all the manufacturing moved to Asia, and the design followed. Today, it's hard to find a US electronics brand that's anything more than just a marketing company. The increased sophistication of Asian factories' designs over the last 30 years has been a dominant factor in the decline in Western innovation in this space.

To understand the mechanism by which Western innovators lost, imagine two scenarios. In the first, our innovator designs a proprietary new digital audio player (a process I have intimate first hand knowledge of). He works with silicon manufacturers, picks out the best chipset, reference design, and customizes that design to fit his special needs and features. After 6-12 months, he launches his innovative new player. During that same period, hundreds, probably thousands of Asian design factories have been going through that same exact process with commodity, largely undifferentiated players. They have the advantage of experience, of being proximate to more of the suppliers, of not needing to worry about any new unique features, and often with existing relationships with many of the "brand" customers referenced above. As a result, they are likely faster, cheaper and less mistake prone than the innovator. Their product is a known quantity and they and their customers are willing to make larger inventory bets up front in the face of lower product acceptance risks. Their sheer number means that someone of the group is likely to come with some surprising cost/feature solution. If the above disadvantages manifest as they typically do, the innovator reaches market later, with a more expensive solution, and less inventory. Even worse, even if he's done well and is in the 90th percentile, he's still in trouble, the 10% of those that beat him are a huge force to compete with. Further, many of the 90% will be a nuisance too as they reduce margins or close out goods in an attempt to recover the investments they've made. His innovative new features are suddenly saddled with a device with a lot of shortcomings, and the likelihood of being successful in the marketplace went down a lot. I watched this happen early on with Neuros and many other companies that I advised or watched from afar. It was not pretty.

Now let's look at a second scenario, in which we use an Android tablet as a base for our new innovative Android based portable video player. In this case, we work with Asian design manufacturers, commonly known as ODMs. These folks take responsibility for the device design decisions, we communicate with several of them, view their roadmaps, and evaluate them as suppliers. We receive prototypes from several, choose the best one, and layer on our customizations once we've seen enough to be confident we've picked the right horse out of the hundreds or thousands competing. Contrast this scenario with the one above. In this case we show up to market with our innovative features and designs instead of being saddled with a less competitive device, we've had the benefit of choosing the winner of the Asian design scramble, so our device is very competitive. Further we haven't had to bear the cost, risk, and distraction from the base design cycle that had nothing to do with our innovative features. Sure, there will continue to be folks closing out goods at rock bottom prices, but our competitive position is pretty strong now.

Virtually overnight, new innovators, most without even realizing it, will wake to find that the Asian design infrastructure, the bane of innovators for 20+ years, has suddenly become an asset (at least in certain categories). Android as a platform has now dramatically reduced the link that produced the "as manufacturing goes overseas, so will design" axiom. Dell has happily demonstrated this is possible in PCs, and I believe that with Android we have a real shot at bringing the innovation and entrepreneurship back to US shores in electronics.

This is not a new idea

These lessons can be gleaned easily from the PC trends in the 80's, which leads one to wonder why it took so long for this to happen. The Linux kernel itself certainly swept through the embedded systems market years ago, and it's the de facto choice for small-run hardware designs (and a lot of big-run ones, too), but no good platform, spanning all the way from system libraries to user interface, has ever taken hold of the electronics industry before Android.

But that's beside the point, which is this: saying that Android is fragmented as a phone platform by comparing it to the iPhone is like saying the iPhone App Store is closed by comparing it to the PC. It's the wrong comparison. Instead, think of it this way:

Android is the most unified electronics device platform in the industry's history.

The fact that so many vendors have been taking Android and sticking it in places where Google didn't intend it to go is evidence that the platform is flexible and open enough to support new applications. I'm confident that you'll start seeing Android everywhere — even in places where most of the platform will never be used — because the question engineers are asking now is not "Why would we use Android?", but "Why wouldn't we?" And from there, it's a short wait until Western entrepreneurs discover that their novel ideas are suddenly practical ones.

In fact, don't wait for it. Go out there right now and make something.

Edited by Steven Robertson .