Software has become easier to customize in the past decade, but hardware, for the most part, remains closed: Apple’s battle to keep people from hacking the iPhone is a case in point. Although most consumer electronics are collections of smaller devices–cell phones typically include cameras and voice recorders, for example–users can’t swap out the devices or modify the way they work. Bug Labs, a startup based in New York City, is hoping to change that with its new device, the Bug, scheduled to start shipping late this year.

The Bug would allow users to design their own electronics and customize them however they want. CEO Peter Semmelhack explains that the foundation of the device is the Bugbase, a minicomputer running Linux that users can program. It has ports for up to four device modules, which snap in and out of place. Among the first modules the company expects to offer will be a GPS system, a camera, a motion sensor, and an LCD screen. But it also plans to offer new modules at a rate of about four per quarter, and it’s encouraging other manufacturers to follow suit. “We think we’re an enabler company,” says Jeremy Toeman, who handles marketing for Bug Labs. He says that he sees the company serving as manufacturer and resource for many smaller companies that could grow up around it.

Users of the Bug can put modules together as they see fit and then write or download code to make them operate as required. They are then free to share designs and programs with other users.

The Bugbase will be about the size of an iPhone, and its modules will be about two and a half square inches. Semmelhack says that the product will be truly open source: not only will source code for the software interface be freely available, but so will device schematics.

Semmelhack, who was a hardware hacker in the 1970s, says that he founded the company out of his own yearning for particular devices that, while technologically feasible, weren’t on the market. For example, he says, in October 2001, he found himself, as a New York City resident in the wake of September 11, wishing for a GPS device with a wireless modem that could help him keep track of his wife and baby. At the time, he says, there was nothing technologically daunting about such a device; it just wasn’t for sale. “It was frustrating,” he says. “I couldn’t buy it, and I couldn’t build it.” Nor was this an isolated example: he had a chronic hankering for devices that were situation specific and thus unlikely to produce enough demand to warrant mass manufacture. So, Semmelhack says, he found some engineers and set to work on a prototype of the flexible piece of hardware that he wished he could buy, a device that would empower users to design their own devices. “We don’t want to solve all the problems [for them],” he says. “We want to make as many tools as we can.”

Semmelhack says that the Bug’s design was inspired by the Lego set. Users, he says, should be able to snap pieces in and out without worrying about the device freezing up, and the pieces should be attractive and fun to play with. To that end, the company has developed the Bug module interface, open-source software designed to recognize modules when they are snapped into ports, keep the system from crashing as modules are plugged in or unplugged, and respond to the different power-supply needs of different modules. Because the base has such a sophisticated management job to do, Semmelhack says, “it really is a minicomputer.”

Limor Fried, an engineer who operates Adafruit Industries, and who is involved in the open-source-hardware movement, says that the Linux computer running the Bug is the key to the device’s beauty. “Your camera, your toaster, and your car have tightly integrated computers that you can’t get into,” she says. “[Bug Labs] is saying, let’s put a real computer inside your camera or your PDA or your GPS. Because it’s just like a laptop, it’s really simple and easily understandable how you can get in there and modify it.”

Bug Labs’ Toeman says that at first, the product will be aimed primarily at engineers. While the average consumer is welcome to tinker with it as well, Toeman expects that most will wait until they learn of specific applications that are useful to them. The company plans to make its profit from the manufacture and sale of the Bugbase and modules.

Eric von Hippel, head of the innovation and entrepreneurship group at MIT’s Sloan School of Management, says that Bug Labs is part of a general economic trend toward letting users do things for themselves. Von Hippel expects that early adopters will come up with useful innovations, encouraged by the Bug’s relatively cheap modular components and the community spirit that Bug Labs is trying to foster. “Ordinary users can benefit from the hacking efforts of the leading edge,” he adds.

Toeman says that the company hopes to start shipping Bugbases in late November. The Bugbase itself should cost several hundred dollars, and modules will be priced according to the cost of components.