At the manufacturing incubator mHUB, entrepreneurs and startups develop everything 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 and software applied to physical products. Some of them 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. Fulton St., which was previously a Cook Brothers warehouse 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 startups and 200 manufacturers that have created about 6,800 jobs and $3.9 billion of economic activity, according to mHUB.
Its members offer a glimpse of the impact of President Donald Trump’s trade policies. In April, Trump said tariffs will “re-shore manufacturing, and drive economic growth for the American people.”
Manufacturing is the largest contributor of any industry to Illinois’ gross domestic product, generating more than $580 billion each year, according 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 manufacturers 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 them 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 across the world,” it said.
Like many companies, mHUB members are grappling with tariffs. They are struggling with increased costs, supplier delays and uncertainty, 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 specialized mechanical parts, many of which come from China and other parts of Asia, he noted.
“For startups, even a small cost increase on something like circuit boards or precision machined parts can really add up,” Fienup said. “Tariffs on steel and aluminum also affected companies building prototypes or small production runs. These aren’t always easy items to source locally.”
Some mHUB members stocked up on components and parts before tariffs hit. Others started looking at ways to bring production closer to the U.S., but that’s not an option for many, especially 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 worked in New York for IBM where he 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 data? Why can’t I have both?” The idea for Ganance was born.
In early April, Ocampo was planning his first big production run when tariffs were announced. But wild tariff fluctuations made it “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%. When he modeled rates at 250%, Ganance would have been out of business.
“There are so many ways for your business to fail. Government policy shouldn’t be the one to take you out,” Ocampo said. Mercurial tariffs are “a self-inflicted wound.”
Ganance got a reprieve later in April after smartphones, computers and a range of electronic components were exempted from sky-high tariffs aimed at Chinese imports. Tech giants such as Apple and Google, which bought Fitbit in 2021, also benefited.
Ganance managed to hit a milestone in August when it shipped its first big production run of 1,000 sensors.
Ganance does design, engineering and software development in the U.S. with four employees but makes its sensors in China. Manufacturing in the U.S. would 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. However, U.S. trade policies are unpredictable, so he is waiting to see what happens.
Now, underlying anxiety about tariff volatility is the norm. “We’re good for now, but who knows?” Ocampo said. “It’s hard to run a business that way.”
More demand but higher costs
MHUB member Tikal Industries creates cement domestically from industrial waste such as fly ash, paper mill dregs and electronic waste. The company is planning to launch its first small factory in the Chicago area next year. This “microfactory” can be set up in about six months rather than the years it takes to build conventional cement factories.
Interest in U.S. 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 its 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 per facility to $790,000. “That leaves young material startups like Tikal squeezed: They stand to benefit from higher cement prices but must absorb higher capital expenditures at the same time,” Ali said.
Shannon McGhee, mHUB’s vice president of programs, said some companies need help finding U.S. suppliers, but sometimes domestic sources don’t exist.
“We start having tough conversations around whether a product or business model can sustain the change and uncertainty or not,” McGhee said. “Some early- and mid-stage companies may cease operations sooner than they otherwise would have. Others in certain categories can weather the storm, pivot and thrive.”
Former mHUB member Cast21 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 doubled in price because of tariffs. Delivery lead times for those parts used to be one day, but now it’s 18 weeks.
“Business owners are accustomed to adapting, but the challenge comes when changes happen 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 worst, we’ll lose a decade’s worth of progress,” she said. But McGhee was hopeful that funders and industry would make up for the shortfall.
Silver linings
For Cast21, one silver lining of tariffs is that there are fewer rival knock-off devices being imported.
“This has opened new business opportunities for us,” Moy said. “We’ve been able to expand our presence within the U.S. market.”
Fienup said a few mHUB companies found “redesigning products with newer components and onshoring manufacturing ended up lowering costs and making their supply chains more 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 redesigned products to use components without tariffs 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 government policies, unlike large or established 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 me,” he said. “Startups only get one shot to get things right.”