The Hardware Bankruptcy Crisis: Why iRobot and Rad Power Collapsed

December 2025 will go down in tech history as a slaughterhouse for physical product companies. In a single week, three major players—iRobot, Rad Power Bikes, and Luminar—filed for Chapter 11 protection. This isn't just a series of unfortunate coincidences; it is a systemic hardware bankruptcy crisis driven by tariffs, supply chain rigidity, and the end of easy capital.

For investors, the wiping out of common stock is the headline. But for the thousands of people who own a Roomba J7 or rely on a RadWagon to get their kids to school, the concerns are immediate and practical. Will the app stop working? Can you get a replacement motor? The filings reveal a messy reality of unpayable customs debts, "bricked" features, and fierce overseas competition that legacy brands failed to see coming.

Real-World Fallout from the Hardware Bankruptcy Crisis

Before dissecting the financials, we need to look at what this hardware bankruptcy crisis looks like for the actual people holding the products. The warning signs were visible in user forums and repair shops long before the lawyers filed the paperwork in Delaware.

The Rad Power Bikes Quality Cliff

For owners of Rad Power Bikes, the filing validates years of frustration. Long-term riders have documented a severe decline in build quality that preceded the financial collapse. The experience has shifted from owning a rugged, reliable commuter tool to managing a liability.

A major pain point is the "unfathomable" weight of the bikes combined with a lack of repair support. Owners describe failures in the motor internals that result in quotes upwards of $800 to fix—effectively totaling the bike. Simple components, like display mounts, are snapping, and rear wheel assemblies have had backorder wait times stretching to three years for some customers.

Perhaps the most damning operational failure involves battery compatibility. The new "Safe Shield" batteries, marketed as a safety upgrade, physically do not fit certain older models like the 2020 RadWagon 4 effectively. This backwards incompatibility leaves loyal users stranded. Combined with a customer service department that went from responsive to unreachable, the user experience collapsed well before the corporate entity did.

iRobot’s Smart Home Anxiety

The iRobot restructuring brings a different set of fears. Unlike a bike, which works mechanically without a server, a Roomba is a cloud-dependent device. The immediate panic among the user base concerns the app. If the servers go dark, premium robots become "dumb" bumpers.

Current sentiment from power users suggests that iRobot’s decline was product-driven. The high-end S9+ is frequently cited as a disappointment compared to older, "dumber" models like the 980 series from 2017, which users claim are virtually indestructible.

The market has also shifted underneath them. Former loyalists are flocking to competitors like Dreame and Eufy. These rival brands offer self-cleaning docks, better obstacle avoidance, and combined mopping features at price points iRobot couldn't match. The consensus is clear: iRobot rested on its patent portfolio for too long while agile competitors innovated on the actual hardware functionality.

Luminar’s Technical Drift

For Luminar, the issue wasn't just financial—it was performance promises that didn't materialize in the real world. While the Halo LiDAR platform promised a 4x performance boost, early adopters and observers noted issues with static model demonstrations that felt misleading. More concerning were reports of LiDAR units causing damage to camera sensors and suffering from calibration drift. In the high-stakes world of automotive safety, these technical glitches eroded trust faster than the balance sheet eroded cash.

Structural Causes of the Hardware Bankruptcy Crisis

Why is this happening now? The hardware bankruptcy crisis isn't random. It is the result of specific macroeconomic levers pulling tight around companies that were already operationally weak.

The Tariff Sledgehammer

Trade policy played a massive role in the iRobot restructuring and Rad Power’s collapse. iRobot moved much of its manufacturing to Vietnam to escape improved duties on Chinese goods, only to get hit by a 46% tariff on imports from Vietnam. This wiped out their margin at a time when they could not afford to raise prices due to cheaper competition.

Rad Power Bikes faced a similar reckoning with the U.S. Customs and Border Protection (CBP). Their bankruptcy filing lists an $8.36 million claim from the CBP related to unpaid duties. For a low-margin hardware business, a retroactive tax bill of that magnitude is a death sentence.

The Innovation Trap

The hardware bankruptcy crisis also exposes a failure of adaptation. iRobot spent nearly two years trying to sell itself to Amazon for $1.4 billion. When regulators killed that deal in 2024, iRobot had no "Plan B." They had burned cash waiting for a buyout while their competitors aggressively captured the market with better navigation and mopping tech.

Luminar suffered from the SPAC (Special Purpose Acquisition Company) curse. They went public with massive valuations based on future projections rather than current unit economics. When interest rates rose and the "free money" era ended, they were left with high burn rates and insufficient OEM contracts to sustain the valuation.

Supply Chain Rigidity

Rad Power’s inability to diversify its supply chain left it vulnerable. Despite being a Direct-to-Consumer (D2C) pioneer, they remained locked into a supply chain that couldn't pivot when trade winds changed. The inability to secure parts for warranty claims created a "debt" of customer trust that they could never pay back.

Navigating the iRobot Restructuring and Ownership Changes

The iRobot restructuring is unique because it involves a handover of control, not just a liquidation. The company is set to be acquired by Picea Robotics, a Shenzhen-based manufacturer that was previously iRobot’s supply partner.

What This Means for Privacy and Operations

The restructuring support agreement effectively wipes out existing shareholders. Common stock value is heading to zero. But operationally, this shifts iRobot from a U.S. company to a subsidiary of a Chinese manufacturing firm.

This raises significant questions about data privacy for the millions of cameras roaming American living rooms. While Picea is acquiring the assets to keep the brand alive, the shift in jurisdiction may deter privacy-conscious consumers, further accelerating the exodus to other brands. However, Picea’s direct control over manufacturing could theoretically solve the supply chain inefficiencies that plagued iRobot, potentially lowering costs and stabilizing spare parts availability.

Service Continuity

iRobot has stated that app functions will continue. This is in their interest; the value of the company lies in the user base and the recurring revenue from accessories, not just the metal and plastic. However, the hardware bankruptcy crisis teaches us that "guarantees" in Chapter 11 are fluid. If the restructuring hits snags, non-essential cloud services could be deprioritized.

What Owners Can Do Now

If you are caught in this hardware bankruptcy crisis, you need to take defensive steps regarding your devices and warranties.

1. Verify Warranty Providers

If you purchased an "Extended Warranty" for your Rad Power Bike or Roomba, check who backs it. Many of these plans are underwritten by third-party services like 'Extend' or 'SquareTrade'. These contracts are separate from the manufacturer's balance sheet. If your bike motor fails, you should file a claim directly with the third-party insurer immediately. They are legally obligated to fulfill the contract even if the manufacturer is defunct.

2. Secure Spare Parts

For Rad Power owners, the parts drought will likely get worse before it gets better. If you plan to keep the bike, sourcing a spare controller, display, and brake pads from aftermarket compatible brands now is a wise move. The proprietary nature of some Rad components (like the battery terminal on the Wagon) makes this difficult, but user forums are rapidly developing "hacks" to adapt generic parts to these frames.

3. Don't Bank on Resale Value

The secondary market for these items has crashed. A Rad Power Bike is now difficult to sell because informed buyers know the company is insolvent and parts are scarce. Similarly, used Roombas are flooding the market as people upgrade to newer tech. Unless you are selling for scrap, expect pennies on the dollar.

The Future of Hardware Investment

The hardware bankruptcy crisis has chilled the venture capital climate. Investors are looking at the disaster of 2025 and realizing that hardware carries risks that software does not: inventory overhang, tariff exposure, and massive recall costs.

We are seeing a return to skepticism. The days of funding a hardware startup based on a slick prototype and a "pre-order" list are over. Future hardware companies will be scrutinized for their "tariff resilience" and supply chain agility just as much as their product innovation.

For iRobot, the brand survives, but the independence is gone. For Rad Power and Luminar, the path is messier, likely involving the sale of IP and customer lists to bidders who want the data but not the debt. This week proved that in hardware, you can have a household name and still lose everything if the unit economics don't survive the border crossing.

FAQ: The Hardware Bankruptcy Crisis

Will my Roomba stop working because of the iRobot restructuring?

Likely not immediately. iRobot is being acquired by its manufacturer, Picea, who has an incentive to keep the current user base active. However, privacy policies may change, and long-term cloud support for older legacy models (like the 900 series) is never guaranteed during a transfer of ownership.

Can I still get parts for my Rad Power Bike?

It is currently very difficult. The supply chain for Rad Power has been frozen due to unpaid debts to suppliers and customs agencies. While common parts like tires or brake pads are standard, proprietary electronics (batteries, controllers, displays) are scarce. You may need to look for aftermarket modifications.

Is iRobot stock a good buy after the bankruptcy news?

No. The iRobot restructuring plan explicitly states that common equity will be cancelled and existing shareholders will receive no recovery. Buying the stock now is effectively gambling on an outcome that the legal filings say will not happen.

What happens to my warranty if the company goes bankrupt?

Manufacturer warranties are unsecured debts and often become void or very difficult to claim during Chapter 11. However, if you purchased an extended warranty through a third-party company (like Allstate, Extend, or Asurion), that policy remains valid and you should contact them directly for repairs.

Why did so many hardware companies fail in December 2025?

The hardware bankruptcy crisis was triggered by a "perfect storm" of rising tariffs (up to 46% for some regions), high interest rates preventing easy borrowing, and intense competition from agile overseas manufacturers who undercut prices while offering superior features.