Shenzhen: The Tech Capital of the World

Shenzhen surpasses US$338 billion GDP mark in 2017, beats Hong Kong and Singapore’s growth- South China Morning Post.

During my childhood days visiting my grandmother in Shenzhen in the early 2000s, I would never have envisaged how far Shenzhen has come, a clear demonstration of just how far China as a whole has come. During the 2000s, my father even told me stories of his upbringing in Shenzhen in the 1980s and telling me the City have already come a long way. Despite such tremendous feat Shenzhen is still growing day by day, night by night. In comparison to its neighbour Hong Kong, it has already surpassed the City in terms of economic growth. Something that was unimaginable to anyone during the 80s and 90s. The reason for this largely lies in the City’s ‘innovative’ business, such as, internet, biotechnology and telecom. All 3 accumulates to over 40% of Shenzhen’s economic output.

‘The Great Leap Forward’

Source: https://twistedsifter.com/2012/02/picture-of-the-day-shenzhen-china-30-years-later/

35 years ago, Shenzhen was little more than a fishing village beside the coast, peering enviously at wealthy Hong Kong across the water. But then it was chosen to become the first of China’s Special Economic Zones under Deng Xiaoping — an area where entrepreneurial and foreign investment was encouraged.

Since Deng’s inception of Shenzhen as a special region, the town that was once home to just 30,000 residents has grown to a metropolis that boasts an urban population of over 15 million in 2016, subsequently turning the village to one of the largest cities in the world and along the way it has also become the manufacturing heart of the global tech industry. If Silicon Valley is the world’s software capital, then Shenzhen is home of hardware.

From Hardware to Software

The common assumption to many is that Shenzhen is the ‘the worlds factory’ because so many different stuff in made there from home appliances to toys. As a matter of fact, 90% of the world’s electronics is manufactured in Shenzhen, including television and mobile phones.

“When building hardware, all roads leads to Shenzhen”- Cyril Ebersweiler, the founder of HAXLR8R

The heart of Shenzhen’s hardware is located at the Huaqiangbei shopping district, a 1 KM of technology and hardware stores where one can notice every western consumer and newest Chinese technology brand plastered across every small stores. The phenomenon of Huaqiangbei is a standard stopping point in Shenzhen for those attempting to understand the sophisticated ecosystem of tech businesses whether large or small that manufactures millions of gadgets each year.

This being said, Shenzhen doesn’t just only make devices. Thanks to the so-called “Shanzai” open design culture (or in more commonly known terms: copies of originals), there are now also plenty of locally-designed and built devices too. Apple’s “Designed in California” is being replaced by designed in Shenzhen. A number of foreign accelerators are now tapping into that expertise to both get hardware built fast and cheap.

Huaqiangbei, source: https://www.flickr.com/photos

HAXLR8R- which has used the manufacturing ecosystem in Shenzhen to make it possible for entrepreneurs to prototype and manufacture devices for a fraction of the cost — and speed — it would take elsewhere. The accelerator has already grown and developed 118 startups by introducing them to the speed and style of production that can only be found in Shenzhen.

The programme offered by Haxlr8r sends prospective entrepreneurs to live and work on projects in Shenzhen for a few months. While it can cost hundred to thousands or even millions of dollars to build a product in the US, companies on the programme aim to go from an initial draft or idea to build a final product for around $20,000, which also includes airfare and living costs. Something that is inconceivable in the States.

Source: https://hax.co/

Bringing China to the World

Despite popular belief that Shenzhen is the hardware capital of the world. Shenzhen has deep ambitions to become a world leader in technology innovation, rather than as a place where one can buy cheap electronics or toys. A move from “Made in China” to “Designed in China”.

Shenzhen, China is not just a place of cheap low-end smartphones, cheat knock-offs or low quality labor. The city in the last decade has made strides into the hardware industry and recently has became a big hub for companies from Europe, the United States and the rest of Asia.

Already, Shenzhen is home to some of the biggest tech companies in the world, for example, internet and gaming giant Tencent, telecomunications firm Huawei and smartphone maker ZTE, as well as, the world’s largest drone maker DJI and robot kit maker Makeblock.

The ‘Shanzhai’ Business Model

The word ‘shanzhai’ is often used pejoratively to refer to Chinese copycat electronic devices, based on copied designs and knock-off brand names. But its literal meaning is “mountain stronghold”, and it refers to outlaws who opposed corrupt rulers and hid in the countryside during the Song dynasty, this has parallels with Robin Hood in English folklore. The Robin Hood spirit is inspiring legitimate, and often innovative, products as the socially progressive maker movement meets with hard-nosed manufacturing.

As aforementioned the “Shanzhai” or open design culture reflects an idea of working that is open, fast and based on the sharing of knowledge and resources. Therefore, the concept of intellectual property does not possess the same weight and implications in China as one might think of in the West.

The Shanzhai culture drives innovation rather than hinder innovation- David Li of China Innovation

After watching Shenzhen: the silicon valley of hardware by Wired UK the documentary explored the deep cultural differences between the West and China and how the Shenzhen business model is in fact encouraging innovation rather than hindering innovation as one might expect. To understand more about Shenzhen’s tech growth, I highly recommend watching the documentary.

The best documentary to understand the tech phenomenon in Shenzhen.

Large multinational companies are also taking advantage of this open design culture. For instance, Intel which invests substantially to develop low-cost goods with Intel processors and specially developed chips for the huge amounts of tablets emerging from China with prices below $50 which is a micro amount when compared to the cost of an iPad, even its very basic model which started around $300.

China’s low cost labour is another a siginifcant factor behind Shanzhai’s rapid growth. Nonetheless, cost savings alone do not explain the whole situation. John Seely Brown and John Hagel of Harvard wrote in their McKinsey Quarterly article, ‘Innovation blowback: disruptive management practices from Asia’, about Chongqing’s motorcycle industry and how the casual social relationship and free flow of information has contributed to competitiveness. To understand more about ‘Shanzhai’, I have linked some useful articles for those that are curious about how ‘open design culture’ can promote competitiveness and the phenomenon surrounding the concept.

Useful articles to understand ‘Shanzhai’:

Both articles above are well worth a read for those interested.

Driver’s of Success in Shenzhen

Amidst a range of reasons, two major factors contribute to the success of Shenzhen’s technology boom. One, the shear size and scale of products and skills available. For the former, Huaqiangbei is a huge electronics market with traders selling pretty virtually every component necessary to make the world’s gadgets, including circuit boards, LEDs, microchips and crystal oscillators. For the latter, Shenzhen’s special administrative area helps to attract skilled workers and innovators across China and globally. With a high concentration of skilled workers and innovators, there is always room for innovation to occur.

The second factor lies in the attitude to design. Competition is demonstrated through openness and the share of information rather than to copyright everything. Something that is quite a deviation from Western business models. The key aspect here is, the concept is working tremendously well. For instance, Xiaomi emerged from the the pipelines of underground production to mainstream marketing. Already, it is one of the largest supplier of mobile phones in China. In a more ambitious move, the company has expanded its operations to emerging markets in Africa and India.

This Liam Casey (CEO of Wall Street Journal), said “The shanzhai culture is really important. It has this disruptive culture of wanting to be different, of wanting to be fast, wanting to show what’s possible.”model of design innovation reflects the wider ethos amongst the city’s people and workers.

China is open for Business

Technology and the solutions amassed from its should be visible open platforms. This notion was epitomised by the passing of the legendary British Physicist Stephen Hawking. His death was mourned throughout China, with the news of his death being at the top trending topic on Weibo and Baidu. The point here being that science and technology partnership transcends politics and national borders. Nonetheless, in the mainstream media of many Western nations stereotypes and mistrust of Chinese companies is still very much evident. For example, ‘ZTE poses risk to UK security’ as reported by the BBC and ‘Six top US intelligence chiefs caution against buying Huawei phones’ as reported by CNBC News. They all believe that all these companies work deceptively with Beijing to undermine Western democratic order. On a much lighter note, the emergence of Shenzhen and its technology hub is assisting to reverse many misconceptions and stereotypes, and will start a new era of collaborative and transparent international technology community.