July/August 2018

More articles in this issue:

• Pay Dirt
• LiDAR Lights the Way
• Cryptocurrency Is Impacting Traditional Sports/Esports
• iRobot’s Colin Angle
• There’s No Place like a Smart Home

HiberSense is a two-year-old startup based in Pittsburgh. The company began with a professor, two students and incubation funding from the University of Pittsburgh to explore innovative solutions for whole-house temperature control. HiberSense’s system controls the temperature in every room of a home using a network of sensors and vents to ensure maximum comfort and energy savings. HiberSense uses human and machine learning and predictive analytics to heat and cool spaces by controlling the thermostat to user preference. This startup has experienced strong demand and manufactures its core product components – sensors and control devices – in Pennsylvania. HiberSense also conducts all research, design and engineering for its products in the U.S. The company is expanding, and prior to the tariff announcement planned to hire three additional U.S. employees. HiberSense notes that it would like to eventually try manufacturing all of their components in the U.S.

HiberSense

However, this will not be possible until they have established themselves in the market. The administration’s tariffs will place a 25 percent tariff on a single but core component used in HiberSense's product that worries the company about its economic viability. Its system relies on a simple control switch for its thermostat, a product imported from China, an item on the administration’s tariff list that will be taxed as of July 6. HiberSense reports the thermostat is a fraction of its product’s value, but a 25 percent duty will place a significant burden on the small company, its employees and the contract manufacturing it supports in the U.S. Shifting HiberSense’s thermostat supplier will result in compatibility delays, and will complicate the launch of its business. They will need to perform testing and programming on newly sourced thermostats with their sensors and controllers – a process that negates over one year of spending, testing and reforming specs already performed.

None of these options are good for HiberSense, which just last month launched its product. The uncertainty caused by tariffs and burden of switching suppliers could have a dire impact on the company and its ability to deliver on time and on budget. Such a delay would put investments at risk and hamper the U.S. innovation and manufacturing used for the rest of the products, as well as plans for expansion.

Local Motors

Local Motors is headquartered in Chandler, AZ. Including its U.S. headquarters and sales offices, Local Motors employs 106 people in production, design and engineering across six cities in Arizona, California, Colorado, Maryland and Tennessee.

Local Motors is a ground mobility company that uses Launch Forth, a global online design community, to develop vehicles using a network of micro-factories to produce locally. CEO Jay Rogers founded Local Motors in 2007 after serving seven years as an infantry company commander in the U.S. Marine Corps. Local Motors is also working with the U.S. Marine Corps to create new processes for the development of future military vehicles.

The company prefers to use American products and supply networks. However, certain commodities, components and systems cannot be sourced in the U.S. Proposed tariffs could significantly impact their cost of materials and harm Local Motors’ competitiveness on its advanced projects, not only with the U.S. military but also in the global transportation market with Olli, its self driving, electric shuttle. Local Motors is particularly concerned that its two main competitors for Olli – both French companies – would not be subject to the additional costs of tariffs and could undercut Local Motors in the marketplace. Tariff-driven costs could slow Local Motors’ production, reduce its ability to grow its market share and affect U.S. hiring decisions.

Although they were spared from the first round of tariff imposition, questions remain whether autos and automobile parts will receive tariffs. Local Motors estimates the possible 25 percent tariff on aluminum bars, rods and other parts will increase its bill of materials cost compared to its competitors. Projects in early

development, including an unmanned cargo system to deliver supplies to battlefields, and a combat-support vehicle to transport people quickly and efficiently in hostile environments, could be put at risk or, at minimum, have significant added cost burdens.

For trade related questions, email Sage Chandler at schandler@CTA.tech.