We've learned a few things about buying parts. First of all, as a startup, you aren't going to be getting your product built by the big, well-known manufacturers. It's going to be a small factory or a mom-and-pop shop. They will work super hard and can do amazing things, but they also need to watch their bottom line. You give them a schematic and a BOM (Bill of Materials) and they give you a cost to make it, and one of the places they can pad their margin is on parts. That's great for them, but it can cause problems for you.
When you give your BOM to a Chinese manufacturer, you have to be very specific about the part you want - not just the type, but also physical properties, materials and list of approved vendors. Otherwise, the manufacturer will use the cheapest part that complies with your specs. If that part fails, you'll have no one to blame but yourself. You specified X, and you got X!
If you require high-end parts for a critical application, you have to worry about being given counterfeits or rejects. Remember, your manufacturer is going for the lowest price part he can get, and in most cases, you get what you pay for. To ensure that you get genuine parts (or if a component is in short supply), you can import them from the US to be assembled in China. Guess what? You have to pay 20% Chinese import tax on those parts. Combine this with the cost of shipping the part, and the economics of manufacturing here might look different. Don't assume that China is always cheaper.
The above comments only apply to a full-scale manufacturing run. If you are still in the prototyping phase (as we are) Shenzhen is an amazing place to be, and the price and availability of small orders of parts can't be beat. We'll show you the ordered chaos of the famous Huaquingbei electronics market in another post.