At the Manufacturing Incubator MHUB, Entrepreneurs and Starts Develops Everynding From Smartwatches to Medical Devices in Its Machinery Shops, Offices and Co-Working Spaces Near the West Loop.
MHUB Supports About 1,200 Entrepreneurs and 300 Companies in the Chicago Area That Focus on Hardtech – Engineering Applied to Physical Products. Some of the Test Prototypes or Manufacture in Mhub’s Workshops, Which Have Power Tools, 3D Printers and Other Equipment.
IN 2023, MHUB ANNOUNCED A $ 50 Million Acquisition and Renovation of Its Site at 1623 W. Fultton St., WHICH WAS PREVIOUSLY A COOK Brothers Warers Store. The Space, Spanning 80,000 Square Feet, Opened in December 2023. The Expansion is part of Broader Efforts to make Chicago and Illinois a Destination for Tech, Manufacturing and Innovation.
SINCE LAUNCHING IN 2017, The Incubator Has Backed More Than 500 Starttubs and 200 Manufactures that have CREATED ABOUT 6,800 Jobs and $ 3.9 Billion of Economic Activity, Acciting to MHUB.
ITS MEMBERS OFFER A GLIMPSE OF THE IMPACT OF PRESIDENT Donald Trump’s Trade Police. In April, Trump Said Tariffs Will “Re-Shore Manufacturing, and Drive Economic Growth for the American People.”
Manufacturing is the Larger Contribor of any industry to illinois ‘Gross Domestic Product, Generating More Than $ 580 Billion Each Year, Acciting to the Illinois Manufacturers’ Association. The sector directly Employs more than 660,000 Workers and Supports Nearly 30% of All Jobs in the State.
Illinois Manufactures exported Nearly $ 69 Billion in Goods Last Year, According to a Recent Report from the Midwest Manufacturing Association.
But imports are also vital, and American Manufacturers Need to make their Products, The Illinois Manufacturers’ Association Said in an August News Release. “As the global economy is increasingly interconnected, more companies operate Internationally, with Facilities and Supply Chains the World,” It Said.
Like Mary Companies, MHUB MEMBERS ARE GRAPPLING WITH TARIFFS. They are struggling with increses Costs, Supplier delays and uncetainty, as well as scrambling to find alternative suppliers.
In an Mhub Survey of Members This Spring, 77% of Respondents Said They Expect Total Manufacturing Costs to Increase. Half Said They Could Not Absorb the Impact of Tariffs.
“Tariffs have Shaken Things up for Small Hardtech Businesses,” Said Bill Fienup, Mhub’s Co-Founder and Vice President of Innovation Services. Tariffs have the Biggest Impact on Electronic Components, Metals and Specializes Mechanical Parts, Many of Who Come China and Other Parts of Asia, he notd.
“For Startups, A SMALL COST INCREASE ON SOMETING LIKE CIRCUIT BODS OR PRECISE MACHINED PARTS CAN REALLY ADD UP,” Fienup Said. “Tariffs on Steel and Aluminum Also Affective Companies Building Prototypes or Small Production Runs.
SOME MHUB MEMBERS STOCKED UP ON Components and Parts Before Tariffs Hit. Others Started Looking at Ways to Bring Production Closer to the US, but that is not an option for MANY, especally Smaller Companies.
MHUB MEMBER ALEX OCAMPO FOUNDED Wearable Tech Startup Ganance in 2022. The Company Makes Sensors That Transform Any Watch Into A Smartwatch.
AFTER GRADUATING FROM TUFTS University in 2014, The Marquette Park Native Workhed in New York for IBM where and colleagues tracked their fitness with smartwatches. In 2019, His Brother was diagnosed with a brain tumor; Ocampo WANTED TO WEAR A WATCH HIS BROTHER HAD GIFTED HIM. He thought, “Why do i have to choose between watches and date? Why can’t i have bot?” The Idea for Ganance was Born.
In Early April, Ocampo was planning his first Big Production Run when tariffs were announed. But Wild Tariff Fluctuations made “Extremely Challenging to Estimate Costs,” He Said. “Every day it Changed.”
Ocampo updated His Financial Model Constantly. Tariffs Hurt his Business at 58% Then Got Very Painful at 150%. Wend he models Rates at 250%, Ganance Wauld Have Been Out of Business.
“There are so many ways for your business to fail. Government policy should be and one to take you out,” Ocampo Said. Mercurial Tariffs Are “A Self-Inflicted Wound.”
Ganance Got a Reprise late in April after Smartphones, Computers and A Range of Electronic Components were exempted from Sky-High Tariffs Aimed at Chinese Imports. Tech Gants Such As Apple and Google, Which Bought Fitbit In 2021, Also Benefirated.
Ganance Managed to hit a milestone in august will be shipped its first Big Production Run of 1,000 sensors.
Ganance does Design, Engineering and Software Development in the US with Four Employees but Makes Its Sensors in China. Manufacturing in the US Wold Be 10 To 15 Times More Expensive than in China, Ocampo Said. Domestic Production Expertise is Also Lacking.
MHUB’S SUPPLY Chain Expert Advised Ocampo to Explore Production in Mexico, Malaysia and Thailand. Howver, US Trade police are unredictable, so is waking to see what happens.
Now, underlying anxiety About Tariff Volatility is the Norm. “We’re good for now, but who knows?” Ocampo Said. “Hard to run a business that way.”
More Demand But Higher Costs
MHUB MEMBER TICAL INDUSTRIES CREATES CEMENT DOMISTICALLY FROM INDUSTRIAL WASTE AS FLY ASH, PAPER MILL DRIGS AND ELECTRONIC WASTE. The Company is planning to launch its first small factory in the chicago area next years. This “Microfactory” can be set up in about six months rather than the years it taxes to build conventional cement factories.
Interest in US Cement has surged SINCE 25% Tariffs were imposed on Cement from Canada and Mexico in April, Said Tayyaba Ali, Tikal’s Chief Technology Officer.
But while Tariffs Boost Demand for Local Cement, They Also Drive Up Tikal’s Costs. Much of the precision equipment it needs to build it Microfactories come from overseas; Tariffs Raise Costs by 30%. Imported Steel and Aluminum Costs Have Also Risen 25% to 30%.
Construction Estimates for Tikal’s Factories have jumped from Roughly $ 550,000 for Facility to $ 790,000. “That Leaves Young Material Startups like tikal squeezed: they stand to benefite from higher cement but must absorb Higher Capital Expenditors at the Same Time,” Ali Said.
Shannon McGhee, Mhub’s Vice President of Programs, Said Some Companies Need Help Us Suppliers, But Sometimes Domestic Sources don’t exist.
“We Start Having Tugh Conversations Around Whether A Product or Business Model Can Sustain the Change and Uncetainty or Not,” McGhee Said. “Some Early- and Mid-Stage Companies May Cease Operations Sooner Than They Otherwise Wauld Have. Others in Certain Categories Can Weather the Storm, Pivot and Thrive.”
MHUB MEMBER CASE21 MAKES A Medical Device Alternative to Casts for Broken Bones. Ashley Moy Co-Founded the Company in Chicago in 2016 and Now Manufactures in Evanston.
Small Metal Components that Cast21 Needs for Production Have Doubles in Price Because of Tariffs. Delivery Lead Times for Those Parts Used to Be One Day, But Now Its 18 Weeks.
“Business Owners are accustomed to adapting, but the Challenge Comes wen Changes Happy Too Quickly and Too often,” Moy Said. Some startup peers have been dropped by their suppliers and logistics partners Because Constant Adjustments Due to Tariffs Were Too Complex and Costly, She Added.
McGhee Said Another Challenge is Reduced Funding from Federal Agencies and Universities for Early-Stage Innovation. “AT WORTST, WE’E’L Lose A Decade’s Worth of Progress,” Said. But mcghee was hopoful that funders and industry would make up for the shortfall.
Silver Linings
For Cast21, One Silver Lining of Tariffs is that there are Are Fewer Rival Knock-Off Devices Being Imported.
“This has been opened New Business Opportunities for us,” Moy Said. “We’ve been able to expand ours with the US market.”
Fienup Said A Few Mhub Companies Found “Redesigning Products with Newer Components and Onshoring Manufacturing Endered Up Lowering Costs and Making their Supply Chains Reliable.”
Tariffs Created Real Challenges, but “They Also Pushed Companies to Get Creative and, in Some Cases, Come Out Stronger,” He Said.
SOME MHUB MEMBERS ALSO REDESGENED PRODUCTS TO USE Components with fees or ORDERED SMALLER BATCHES TO SPREAD OUT COSTS. Others are Working with Domestic Manufacturers that Can Do Smaller Runs.
Yet Startups have limited resources and flexibility and are at the mercy of police, unlike or establishment players with lobbyists.
Ocampo Feels Fortunate that Ganance’s Sensors Were Included in Tariff Exemptions.
“But a lot of industries don’t have the Same safety net. I feel for entrepreneurs who might not be in the same industry as,” he said. “Startups Only Get One Shot to Get Things Right.”