Blueprints that were once tightly controlled are now shared freely, creating a new wave of innovation. Open-source hardware is changing the game by turning collaboration into a powerful advantage. For businesses, this means faster product development and lower costs. As this movement gains momentum, it opens up exciting new investment opportunities. 

In this article, we will explore why open-source hardware is becoming a key driver for many industries, and an underexplored sector for investors.

What is Open-Source Hardware 

The open-source hardware movement has been quietly revolutionizing the way we design, create, and share physical objects for over two decades. Inspired by open-source software, this movement took off in the late 1990s. Pioneers like Bruce Perens and organizations like CERN paved the way, while the internet's growth and falling production costs fueled its expansion. Notable projects like Arduino and RepRap 3D printers emerged, showcasing the power of collaborative design. Today, open-source hardware spans from electronics to scientific instruments, driving innovation through shared knowledge and accessibility.

The open-source services market is painting a vibrant picture of growth, with global market size going from $34 billion last year (2023) to a projected $76 billion by 2029. This represents a sizzling CAGR of 16.80% during the forecast period. What's fueling this rocket? A mix of digital transformation, cloud computing fever, and businesses hungry for flexible, customizable tech solutions. 

Sectors Poised for Disruption by OSH

  • Consumer electronics - Open-source platforms such as Raspberry Pi and Arduino have already revolutionized how individuals build and modify their own gadgets, from home automation to entertainment systems. With growing consumer interest in repairable and long-lasting electronics, OSH offers a solution by enabling users to fix or upgrade devices with open design blueprints.

  • Telecommunications - Open-source hardware is beginning to influence the design of network infrastructure. With community-developed networking components, operators can reduce costs and avoid vendor lock-in while accelerating the rollout of 5G and future technologies. Major telecom operators like AT&T, Verizon, and Deutsche Telekom are participating in open-source projects such as CORD (Central Office Re-architected as Datacenter) and Carrier OCP (Open Compute Project). 

  • Industrial automation - Open-source hardware in robotics allows manufacturers to create customized and adaptable systems for automation at a lower cost, making it accessible to smaller enterprises and driving innovation in factory settings. Distributed and open-source manufacturing platforms allow global collaboration on product design, enabling quicker market entry for innovations across industries. 

Key Drivers

  • Cost reduction - By leveraging open designs and freely available blueprints, organizations can avoid the high costs associated with proprietary hardware solutions. This allows startups, smaller enterprises, and educational institutions to innovate without needing access to large capital investments. 

  • Collaborative innovation - Open-source hardware thrives on a model of collective development, where engineers, developers, and enthusiasts from around the world contribute their ideas and improvements. This collaborative ecosystem leads to faster innovation, as issues can be addressed and improvements can be made through community input. 

  • Accessibility - Open-source hardware democratizes access to advanced technology, allowing individuals and organizations of all sizes to participate in innovation. Unlike proprietary hardware, which is often inaccessible due to high costs or restrictive licensing, OSH makes advanced designs available to a wider audience. 

Investment Opportunities in Open-Source Hardware 

  • Processors - Open-source processors and microcontrollers form the backbone of many open-source hardware platforms. Projects like RISC-V have pioneered open-source processor architecture, allowing developers to design custom processors without the constraints of proprietary intellectual property (IP). 

  • Development boards - Development boards are one of the most visible and popular areas of the open-source hardware market. These boards are widely used in education, research, and hobbyist communities, as well as for commercial product development. Their accessibility and ease of use make them ideal for experimenting with robotics, sensors, home automation, and more. 

  • IoT devices - Open-source hardware plays a critical role in the development of Internet of Things (IoT) devices, enabling the creation of customized and affordable solutions for connected systems. Projects like ESP8266 and ESP32 provide low-cost, open-source wireless microcontrollers that are widely used in IoT applications. Open-source IoT devices foster rapid innovation and are ideal for prototyping new ideas in fields like agriculture, healthcare, and smart cities.

Emerging Frontiers: Where X Marks the Spot

  • Smart cities - Smart cities are one of the most promising applications of open-source hardware, with significant investment potential. Open-source hardware platforms like Arduino and Raspberry Pi are widely used in smart city applications for building low-cost sensor networks that monitor traffic, pollution levels, energy consumption, and public safety systems. 

  • Autonomous systems - The development of autonomous systems, including self-driving vehicles, drones, and robotics, is another area where open-source hardware is rapidly gaining traction. Projects like OpenPilot (an open-source autonomous driving system) and ArduPilot (an open-source platform for drones and UAVs) allow developers to build and customize autonomous systems for a wide range of applications. Market for autonomous navigation software expected to reach $5.68 billion by 2033.

  • Edge computing - Open-source hardware plays a crucial role in edge computing by providing low-cost, customizable solutions that can be deployed at the edge of networks, reducing latency and bandwidth consumption. Platforms like BeagleBone and ESP32 are commonly used in edge computing applications, from smart cameras to industrial sensors, enabling data processing closer to where it is generated. 

Strategic Insights for Investors 

Key Private Players in OSH

  • ZeroRISC - ZeroRISC is an important player in the open-source hardware ecosystem. The company provides tools and platforms that help organizations and developers build custom silicon solutions for a variety of industries, including telecommunications, automotive, and industrial automation. ZeroRISC's mission aligns with the core values of the open-source hardware movement, offering flexibility, transparency, and the ability to innovate without the restrictions of proprietary architectures.

  • SiFive - SiFive is a leading player in the RISC-V ecosystem, designing and producing RISC-V-based processor cores and SoCs (System on Chips). Founded by the inventors of RISC-V, SiFive has raised a total of $365.5 million over multiple funding rounds, with their latest Series F round valuing the company at over $2.5 billion. SiFive's products range from low-power embedded processors to high-performance computing chips, serving diverse markets including automotive, data centers, and consumer electronics.

  • Arduino - Arduino is perhaps the most well-known name in open-source hardware. Arduino's open-source development boards are used by hobbyists, researchers, and companies to build electronic systems ranging from robotics to IoT devices. The company recently closed an additional $22 million in funding, bringing their total Series B financing to $54 million.

Risk Factors 

  • Intellectual property concerns - One of the key risks associated with open-source hardware is the potential for intellectual property disputes. Unlike software, where open-source licenses like GPL and MIT are well-established, the legal frameworks for open-source hardware are still evolving. This creates ambiguity around the protection of designs, components, and even manufacturing processes.

  • Lack of standardization - The lack of standardized frameworks and protocols in the open-source hardware ecosystem can be a significant barrier to widespread adoption. Unlike the software world, the hardware space is more fragmented. This fragmentation can lead to compatibility issues, making it difficult for developers and companies to integrate different open-source hardware components into a cohesive system. 

  • Competitive landscape - The competitive landscape in the open-source hardware space is both a risk and an opportunity. While OSH allows for collaborative innovation, it also opens the door to intense competition, particularly from larger companies with more resources.

The Bottom Line

Open-source hardware offers a strong investment opportunity with potential to disrupt industries from consumer electronics to industrial automation. As adoption grows, early investors stand to benefit from its innovation and cost-efficiency. The technology's flexibility, scalability, and collaborative nature will drive future hardware development, supporting growth across various sectors.

At Acquinox, we are committed to identifying groundbreaking opportunities in emerging fields like open-source hardware. By focusing on underexplored areas with high potential, we provide our clients with insights that keep them ahead of the curve. Our expertise lies in strategically investing in niche markets, helping our partners capitalize on innovation and future-proof their portfolios. Whether it's quantum computing, open-source hardware, or other cutting-edge technologies, Acquinox is dedicated to guiding you through the next wave of technological advancement.