You absolutely could. But many, many startups suck at this step, and get stuck at the "systems integration" phase, able to connect purchased components like Arduinos to other purchased components with wires, but unable to transition to purchasing the raw parts and connecting them using printed circuit boards.

That seems to me rather basic - like being a software startup but not being able to get beyond "hello world" in node.js.

Yes, it's a skill, but surely you hire people or contractors who can actually do it properly?

The difference is that in software, you can go very far into production with an AWS account and a few blog posts on devops. There is no need to hire a specialist in wiring server racks or negotiating traffic peering deals up front.

All the IoT boards have made prototyping hardware accessible to "software people", but unlike AWS there is no smooth scaling curve from 10 to 10k to 10M customers.

I'm also pretty confused here. Are the "startups" in the ancestor threads more like college hackathon projects? Like I put a raspberry pi in my toaster and know nothing else about embedded systems, now how can I sell a million of these?

Kickstarter! You can easily pre-sell a million of them.

Actually shipping them turns out to be harder, but by that time you've got the money.

(I work at an EMS provider)

Yes, that tends to be how startups come off - even the "sophisticated" ones. They tend to have minimal knowledge of the steps necessary to turn their prototype into a mass produced thing: DFM/DFF, supply chain management, identifying/negotiating with component/bare board suppliers, etc. Generally speaking, they need lots of hand holding through the entire process, and that makes it take way longer for everyone.

The nature of stateside electronics manufacturing doesn't help startups much in that regard, in that shops are kinda either set up for NPI and rapid prototyping or not. Sierra Circuits is good for that, but idk how well they'd fit with a startup budget. Beyond that, the low-complexity nature of most IoT products means they're more cost effectively manufactured in China, as most US shops focus on low to mid volume runs of high complexity boards, as opposed to high volume low complexity runs. Figuring out how to manufacture in China can be a big obstacle for any company, especially smaller ones.

If this is a common problem, why isn't there an industry of consulting firms helping startups with that transition?

There are, example: http://charliebarnhart.com/

Yes, but I'd like to add to other's points that unless you get your hardware architecture juuuuust right, you might start getting bugs in your code as you make the transfer. Furthermore, there are difficulties if you don't judge properly your run of production, need to have another go, and find out that maybe some dumb little module is no longer available in exactly that forma, causing you to use a slightly different one, causing another fracture in your code base. Now you're supporting two, and developing on a third, etc. I've never experienced this, but it's come up at iot conferences as I talked with folks.