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Even if David Royer hands a detailed design to his manufacturing plant in Shanghai, a great deal of engineering and design still remains to be done before he'll hold a physical product in his hand.
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Love the David Royer example. I would say not. I would say all the component engineering is done by him and his team. What parts to make, their dimensions, materials to use. No doubt, all goods to be manufactured in this fashion are thoroughly prototyped before one piece is mass produced. The Royer people ultimately decide the suitability of the parts (not final assemblies, in this case). This is not different from any of the products you see sold from late night commercials by skilled pitchmen.
I would contend that the factory in China does not do any productization of their product.
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Have you listened to the piece I linked to yet?
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No. I thought it was going to be text. Then I realized, it didn't make any difference what he said, as you are the one espousing this point of view and it's difficult to have a discussion with an mp3.