The concept isn't new but they seem to be getting closer to becoming a meaningful reality.

In June, Local Motors will officially release the Rally Fighter, a $50,000 off-road (but street-legal) racer. The design was crowdsourced, as was the selection of mostly off-the-shelf components, and the final assembly will be done by the customers themselves in local assembly centers as part of a “build experience.” Several more designs are in the pipeline, and the company says it can take a new vehicle from sketch to market in 18 months, about the time it takes Detroit to change the specs on some door trim. Each design is released under a share-friendly Creative Commons license, and customers are encouraged to enhance the designs and produce their own components that they can sell to their peers. . .

The tools of factory production, from electronics assembly to 3-D printing, are now available to individuals, in batches as small as a single unit. Anybody with an idea and a little expertise can set assembly lines in China into motion with nothing more than some keystrokes on their laptop. A few days later, a prototype will be at their door, and once it all checks out, they can push a few more buttons and be in full production, making hundreds, thousands, or more. They can become a virtual micro-factory, able to design and sell goods without any infrastructure or even inventory; products can be assembled and drop-shipped by contractors who serve hundreds of such customers simultaneously.

Today, micro-factories make everything from cars to bike components to bespoke furniture in any design you can imagine. The collective potential of a million garage tinkerers is about to be unleashed on the global markets, as ideas go straight into production, no financing or tooling required. “Three guys with laptops” used to describe a Web startup. Now it describes a hardware company, too.

“Hardware is becoming much more like software,” as MIT professor Eric von Hippel puts it. That’s not just because there’s so much software in hardware these days, with products becoming little more than intellectual property wrapped in commodity materials, whether it’s the code that drives the off-the-shelf chips in gadgets or the 3-D design files that drive manufacturing. It’s also because of the availability of common platforms, easy-to-use tools, Web-based collaboration, and Internet distribution.

We’ve seen this picture before: It’s what happens just before monolithic industries fragment in the face of countless small entrants, from the music industry to newspapers. Lower the barriers to entry and the crowd pours in.

The academic way to put this is that global supply chains have become scale-free, able to serve the small as well as the large, the garage inventor and Sony. This change is driven by two forces. First, the explosion in cheap and powerful prototyping tools, which have become easier to use by non-engineers. And second, the economic crisis has triggered an extraordinary shift in the business practices of (mostly) Chinese factories, which have become increasingly flexible, Web-centric, and open to custom work (where the volumes are lower but the margins higher).

The result has allowed online innovation to extend to the real world. As Cory Doctorow puts it in his new book, Makers, “The days of companies with names like ‘General Electric’ and ‘General Mills’ and ‘General Motors’ are over. The money on the table is like krill: a billion little entrepreneurial opportunities that can be discovered and exploited by smart, creative people.”

A garage renaissance is spilling over into such phenomena as the booming Maker Faires and local “hackerspaces.” Peer production, open source, crowdsourcing, user-generated content — all these digital trends have begun to play out in the world of atoms, too. The Web was just the proof of concept. Now the revolution hits the real world.

In short, atoms are the new bits.

I hasten to add that this change will not be limited to hardware, it also will apply to wetware - biological products - which is a whole different can of worms - possibly literally.

Read the article for a wealth of detail and a good bit of fun as well. It may be useful to think about the issues previously discussed regarding cultural products such as audio, video and print; and the scramble by older businesses to survive the opening up of markets for creation and distribution of competing products.