A robotic hand in Shenzhen. We saw a lot of robots.

2) Understanding Shenzhen’s role in the global hardware ecosystem

A short history of Shenzhen

Today, Shenzhen is at the very heart of the global production (and increasingly, design) of connected products: If we wanted to point at the origin of most of today’s consumer-facing Internet of Things, it mainly boils down to two places: Silicon Valley for the service/software side. And Shenzhen for the device/hardware side. Naturally there are other influential regions, but these two have the lead in their respective areas, with a large margin.

The hazy Shenzhen skyline as seen from our hotel in November 2016. Image: Peter Bihr (CC by-nc-sa)
The hazy Shenzhen skyline as seen from our hotel in November 2016. Image: Peter Bihr (CC by-nc-sa)
Population growth in Shenzhen since 1979. Blue shows the population with permanent registration, red population with non-permanent registration. Image: Wikipedia.
Population growth in Shenzhen since 1979. Blue shows the population with permanent registration, red population with non-permanent registration. Image: Wikipedia.
The factories tend to be a short ride north of Shenzhen proper. Image: Google Maps.
The factories tend to be a short ride north of Shenzhen proper. Image: Google Maps.

Shenzhen: The world’s most mature and integrated hardware ecosystem

If you want to learn about how Shenzhen really work — what makes this most integrated hardware manufacturing ecosystem of the world tick — you want to talk to David Li, founder of the Shenzhen Open Innovation Lab (SZOIL).

We get a demonstration of an industrial-grade 3D printer. The plastic bottle contains powder to print stainless steel. Image: Peter Bihr (CC by-na-sa)
We get a demonstration of an industrial-grade 3D printer. The plastic bottle contains powder to print stainless steel. Image: Peter Bihr (CC by-na-sa)
Innovative practices aren't just applied as a service, but also to in-house products. This photo shows how 3D printed molds can include cooling channels that will cool the final molded plastic piece 20% faster, which increases the production output significantly compared to traditional molding. Image: Peter Bihr (CC by-nc-sa)
Innovative practices aren’t just applied as a service, but also to in-house products. This photo shows how 3D printed molds can include cooling channels that will cool the final molded plastic piece 20% faster, which increases the production output significantly compared to traditional molding. Image: Peter Bihr (CC by-nc-sa)

Shenzhen as a hub for innovation & design

Shenzhen is best known for its manufacturing chops. However, this doesn’t do it justice — not anymore. As the ecosystem here keeps maturing, the services offered move upstream. Increasingly, manufacturing is complemented by engineering, design, and consultancy.

  • More involvement leads to better results. In order to build better products it helps to be involved earlier on rather than just executing someone else’s design decisions.
  • As the ecosystem matures, more skills evolve over time. Design school up their game, more Chinese companies grow their design expertise.
  • Self-developed products help diversify the revenue stream. As we learned in conversations with factory owners, the global financial crisis starting in 2008 led to a slump in revenue from manufacturing. Factory owners started looking into diversifying their revenue streams, and developing their own products was one way to do so. This meant also building up design capacities.

Shenzhen Industrial Design Fair

Some of the best results of local design can be seen at the Shenzhen Industrial Design Fair. We spent a day at the 2016 fair, an expo aimed to display Shenzhen’s design output. This might easily be one of the most concentrated meetings of maker of IoT products globally. It’s very accessible, easy to navigate. It’s not huge, not very dense, but all the big players in the IoT design world are here. (When we were there, alongside Chinese exhibitors there were a few European guest exhibitors, like a maker of handmade-in-Germany furniture and a Dutch designer of cups, of all things. They could not have looked more out of place in this context.)

A design house showcased robot hands. Shenzhen Industrial Design Fair, Nov 2016. Image: Peter Bihr (CC by-nc-sa)
This smart mirror analyzes your skin and recommends make-up and skin care treatments. Shenzhen Industrial Design Fair, Nov 2016. Image: Peter Bihr (CC by-nc-sa)
This smart mirror analyzes your skin and recommends make-up and skin care treatments. Shenzhen Industrial Design Fair, Nov 2016. Image: Peter Bihr (CC by-nc-sa)

Micro innovation: A special Shenzhen strength

Shenzhen’s approach of innovation through evolution — trying out all mutations of and combination of features and shapes — provides an edge for incremental innovation, or “micro innovation” as it’s often referred to in China.

Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)

Other examples of innovative or explorative tech in Shenzhen

Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)
Image: Peter Bihr (CC by-nc-sa)

This is where the magic happens: Huaqiangbei electronics market

Without exception, first-time visitors to Shenzhen have one item on their must-see list: Huaqianbei market, the dense labyrinth of electronics suppliers.

The main market street was under construction when we visited in November 2016. One side of the street focused more on traditional retail like fashion, the other on electronics. Image: Peter Bihr (CC by-nc-sa)
The main market street was under construction when we visited in November 2016. One side of the street focused more on traditional retail like fashion, the other on electronics. Image: Peter Bihr (CC by-nc-sa)
When we visited Huaqiangbei again in spring 2017—only half a year after our first trip— we hardly recognized the main street. Gone was the construction site and the broad street, and in its place was a friendly, ultra-clean pedestrian area that looked like straight out of an architectural rendering. Image: Peter Bihr (CC by-nc-sa)
When we visited Huaqiangbei again in spring 2017 — only half a year after our first trip — we hardly recognized the main street. Gone was the construction site and the broad street, and in its place was a friendly, ultra-clean pedestrian area that looked like straight out of an architectural rendering. Image: Peter Bihr (CC by-nc-sa)
This is roughly the market area. Image: Google maps
This is roughly the market area. Image: Google maps
Huaqiangbei market can be quite overwhelming. This photo shows just one of dozens of floors. Image: Peter Bihr (CC by-nc-sa)
Huaqiangbei market can be quite overwhelming. This photo shows just one of dozens of floors. Image: Peter Bihr (CC by-nc-sa)
Looking for buttons? Here's a whole factory's worth. These are just a few hundred samples to test and tinker with, of course. Once you found the one you like, the negotiations can begin. Image: Peter Bihr (CC by-nc-sa)
Looking for buttons? Here’s a whole factory’s worth. These are just a few hundred samples to test and tinker with, of course. Once you found the one you like, the negotiations can begin. Image: Peter Bihr (CC by-nc-sa)
Main business hours are from noon to maybe 4 in the afternoon, then the whole city switches to fulfillment mode. Then, all back alleys are visually dominated by cardboard boxes and ubiquitous yellow packing tape. Image: Peter Bihr (CC by-nc-sa)
Main business hours are from noon to maybe 4 in the afternoon, then the whole city switches to fulfillment mode. Then, all back alleys are visually dominated by cardboard boxes and ubiquitous yellow packing tape. Image: Peter Bihr (CC by-nc-sa)
Vendors can help you get exactly what you need. In fact, often they don't sell off what's in stock but just take orders to manufacture on spec. Image: Peter Bihr (CC by-nc-sa)
Vendors can help you get exactly what you need. In fact, often they don’t sell off what’s in stock but just take orders to manufacture on spec. Image: Peter Bihr (CC by-nc-sa)
Huaqiangbei at night as seen from Huaqiang Plaza Hotel. Inside the market, shop keepers are busy restocking their inventory after a long day of tranding. Image: Peter Bihr (CC by-nc-sa)
Huaqiangbei at night as seen from Huaqiang Plaza Hotel. Inside the market, shop keepers are busy restocking their inventory after a long day of tranding. Image: Peter Bihr (CC by-nc-sa)

How to interface with the Shenzhen ecosystem

It’s common, but not at all recommended, to just drop into Shenzhen with a ready prototype and try to find someone to make 500.000 units from that prototype. This approach is extremely tricky and most likely to cause severe issues.

Design houses

Painting in broad strokes, design companies play a slightly different role in this ecosystem than in Europe or the US. Rather than focusing on concept work and refinement of products, the value here is in getting you all ready to ship.

At the Shenzhen Industrial Design Fair (Nov 2016), a design house showed the components that make up some connected products. Image: Peter Bihr (CC by-nc-sa)
At the Shenzhen Industrial Design Fair (Nov 2016), a design house showed the components that make up some connected products. Image: Peter Bihr (CC by-nc-sa)
Artop is a Shenzhen-based design house. This chart shows the range of their offerings. Note how many areas are integrated, from supply chain management through protoyping, UX design and IP protection. Image: Peter Bihr (CC by-nc-sa)
Artop is a Shenzhen-based design house. This chart shows the range of their offerings. Note how many areas are integrated, from supply chain management through protoyping, UX design and IP protection. Image: Peter Bihr (CC by-nc-sa)

Technical solution houses

Shenzhen is full of so-called technical solution houses. Solution houses build very specific technical solutions, help you solve specific issues, like finding, building, or adapting a certain board. Most customers don’t ask for exclusivity, so these solutions can usually be re-used. There are somewhere between 5–10K of them. They can help you source. How do you find a technical solution house?

Consultants

Asking about consultants, this is joking the response we got from David Li: “There are no consultants in Shenzhen. No shipping, no money.”

Ideation vs shipping

Ideation does not seem to be as big a concept here as it is in the West. “This is business,” we’re told. Why, it seems to be the thinking, hire a design consultancy to run a workshop that defines the minimal viable product or core features if you can just build variations of the product and test them in the market under real-life conditions? It’s a fundamentally different approach to figuring out market fit, one that only works in this ecosystem.

Real-market A/B testing

Having access to cheap and fast manufacturing means you can do real world A/B testing. After 3 months you know what works. This is also a way to hedge your bets. For a product design company, the risk and investment of a new product is high, the model is similar to VC funding. Maybe one in ten products is really successful. Raising the level of experimentation, by lowering the barrier to market testing, the overall risk is lowered.

Design vs design for manufacturing

There’s not really a distinction between “design” and “design for manufacture”. It’s all designed with manufacturing in mind, from the very first moment.

This is a tiny part of the materials and color library of a design house. No design house would even dream of just delivering a rendering when they can also show the real thing in a prototype. Photo: Peter Bihr (CC by-nc-sa)
This is a tiny part of the materials and color library of a design house. No design house would even dream of just delivering a rendering when they can also show the real thing in a prototype. Photo: Peter Bihr (CC by-nc-sa)

Trust local talent

It’s possible and highly recommended to tap into the local knowledge and expertise. Folks here know how to build things highly efficiently and cost-effectively. Engineers most likely know how to reverse engineer hardware products, too, and hence can quickly assess how it might be possible to improve them.

Relationships are key

Shenzhen works through personal relationships. Developing personal relationships and establishing trust is absolutely essential. Introductions through shared acquaintances are priceless. Allow for time to build these relationships as for without them your efforts are likely not going to work out. Especially don’t just try to throw more money at something rather than fostering trust and respect. As we learn in our conversations this is culturally inappropriate and unlikely to yield desirable outcomes.

What is it you want?

Entrepreneurs can ask for anything to be made, in any way they want it made. Chances are Shenzhen can make it work — or so we’re told. It helps to specify exactly what it is you need and why. This empowers partners to make better choices in their customers’ and partners’ interests. It’s also essential to do the research to be aware of the tradeoff these requests might entail. For example, asking for fair wages might up the labor costs, while pushing for lower prices is likely to negatively impact wages. This is not on the manufacturer but on the customer specifying their priorities and putting their money where their mouth is.

Openness rules

There’s a clash between the traditional, restrictive Western model of intellectual property (IP) and the much more open, knowledge sharing-oriented approach of both the open source community and the Shenzhen hardware ecosystem.

Involve local experts

Without local experts with an eye on the ground trouble is unavoidable in a context as fluid and fast-moving as the Shenzhen hardware ecosystem.

Organizations that can help you get started in Shenzhen

Choosing the right partners to work with can be overwhelming, especially remotely and through a language barrier. However, you might not have to start from scratch: There are organizations in place to help.

Visiting a bike lock manufacturer

Some first hand impressions from a product meeting with a manufacturer. Please note that details are deliberately vague and names unmentioned. The questions and answers are reflected as best as quick notes allow; some are paraphrased.

Harm holds an early prototype of Velocracy (Image: Peter Bihr, CC by-nc-sa)
Harm holds an early prototype of Velocracy (Image: Peter Bihr, CC by-nc-sa)

Ethical considerations when designing data-driven products to manufacture in Shenzhen

Building connected products and services comes with its own set of particular challenges. This holds especially true when working with sensitive data — like in the case of many connected products — and when designing for manufacture in China.

What about security?

Security and the internet of things are not, historically, on good footing. Most of the time when IoT makes the headlines it is because of a security breach.

Open practices & knowledge sharing

The Shenzhen ecosystem is characterized by integration and openness.

During a visit to the market we sampled a wide range of 'Arduino friendly' boards. Samples sold for a few dollars, a larger order would presumably have been much cheaper. Image: Peter Bihr (CC by-nc-sa)
During a visit to the market we sampled a wide range of ‘Arduino friendly’ boards. Samples sold for a few dollars, a larger order would presumably have been much cheaper. Image: Peter Bihr (CC by-nc-sa)
At Shenzhen Industrial Design Fair we saw this smart spoon. Note how it's transparent (and hence possible to see the inner workings), and the brochure shows a list of parts. Image: Peter Bihr (CC by-nc-sa)
At Shenzhen Industrial Design Fair we saw this smart spoon. Note how it’s transparent (and hence possible to see the inner workings), and the brochure shows a list of parts. Image: Peter Bihr (CC by-nc-sa)

Shanzhai & Gongban

Two key concepts you need to know about in order to navigate Shenzhen and that we highly recommend you embrace if you ever want to do any business here:

This smart watch is fully white label. Most likely it is built from Gongban and Gongmo parts. It's a fully functional Android phone including a SIM card slot and camera with object tracking. It sells far under USD 100. Image: Peter Bihr (CC by-nc-sa)
This smart watch is fully white label. Most likely it is built from Gongban and Gongmo parts. It’s a fully functional Android phone including a SIM card slot and camera with object tracking. It sells far under USD 100. Image: Peter Bihr (CC by-nc-sa)

“Made in China”

China is trying to shed the image that had for decades been associated with the Made in China label.

The 'immersive' VR experience turned out a little too immersive: This shows the bridge after I crashed right through it. Image: Peter Bihr (CC by-nc-sa)
The ‘immersive’ VR experience turned out a little too immersive: This shows the bridge after I crashed right through it. Image: Peter Bihr (CC by-nc-sa)

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An exploration of the Shenzhen hardware ecosystem & the importance of creating a responsible Internet of Things. To download the full text (PDF) just head on over to http://thewavingcat.com/viewsource-shenzhen & learn more about creating a responsible #IoT at ThingsCon.com

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Peter Bihr

Peter Bihr

What’s the impact of emerging tech, IoT, AI? @thewavingcat: Research & strategy. Co-founded @ThingsCon for a responsible #IoT. Mozilla Fellow. @ZephyrBerlin:👖

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