Contributor Wade Shepard
Shenzhen has risen to become the predominant epicenter of high-tech
design and manufacturing in the world. Variously called the “world’s
factory,” “the new Silicon Valley,” and the “maker’s dream city,”
Shenzhen has a complete ecosystem that contains everything needed for
all stages of electronics production all in one place. This has turned
the city into a staging ground for large high-tech companies, rising
startups, and independent innovators from all over the world looking to
get their stuff made as efficiently as possible. Tech giants like
Huawei,
ZTE
, and Tencent all got their starts here, and many more companies seem to be on the way up.
Shenzhen is the place where China's first forays into Reform and
Opening — the experiment that sparked China’s particular brand of
capitalism — was first deployed. Hardly 35 years ago the place was
nothing but a string villages and rice paddies, with 30,000 peasants
peaking across the border at an economically rollicking Hong Kong. Now,
it is a 12 million person megalopolis that can rival its more
established neighbor in almost every way. No city in history has ever
grown so large so quickly.
It is said that 90 percent of the world’s electronics are made in Shenzhen. With tens of thousands of factories, 5,000 product integrators, and thousands of design houses, this city has become a one-stop-shop for anything consisting of circuits, chips, LEDs, and touchscreens. Shenzhen is also home to 20% of China’s P.h.Ds, has the country’s highest rate of business owners, and has produced more billionaires than anywhere else in China. In 2014, The Economist declared Shenzhan to be the best place in the world for a hardware innovator to be.
“In the old days, if you wanted to be innovative, if you wanted to have the latest technology, you would go to Silicon Valley for electronics. . . But today, it’s Shenzhen,” declared David Li, the co-founder of China’s first makerspace.
The big break for Shenzhen’s electronics industry came with the global popularity of the cellphone. In 2003,
Nokia
and Motorola were kings. They were producing a product
that was almost universally taken to be premium, and their feature
phones were selling in the $600 to $800 range. Then Shenzhen took over.
Being able to design, produce, and ship their phones around the world
vastly cheaper,
Shenzhen’s manufacturers undercut the incumbents’ hold on the market with phones that sold for under $100. This made cellphones accessible to a larger swath of people, opened new markets, and ignited the fire of demand for this device that is still spreading today.
Few people know Shenzhen’s electronics ecosystem better than Bunnie Huang, the high-tech innovator who brought us the the world’s first open source laptop, the Chumby, regular doses of authoritative commentary on his blog, and is the star of Wired's recent documentary about Shenzhen's electronics manufacturing empire.
“It was like 2006, 2007 and everybody was like, 'If you want to build something cheap you're going to have to go to China.' So I bought some tickets,” Bunnie, who is originally from Michigan, told me as we sat together at a cafe in Singapore, where he is currently based. “We were like ‘Good idea, seems legit, here we go. There's a place called Shenzhen. Oh, we never heard of it. Let's pull up a map and look around and see what's there.’”
The market
“Actually it wasn't until like my second or third trip out that I
went to Huaqiangbei. One of my friends over beer was like, 'Hey, there's
this place called Huaqiang-something-or-other and it's full of phones
and people taking them apart and all this weird stuff.' Then I went
there for the first time and I was like 'What!?! How did I not know
about this for the first thirty years of my life?!?’”
With over 20 electronics malls covering a combined 21 million square meters, Huaqiangbei is the heart of Shenzhen’s electronics industry. It is made up of giant old industrial buildings that are packed full of electronics markets which showcase what’s being made in the city and provide the city's hardware innovators with the materials to build their own products.
“It used to be off to the edge of the city,” Bunnie explained. “No one wanted it. The center of Futian was like, ‘’Yeah, go ahead and put a market there. Like, who cares?’ Then the tech boom happened and Nanshan grows out of nowhere as a software center and Futian grows out of nowhere as a hardware center and now all of sudden they are valuable real estate and everybody wants to put their stuff there.”
It is in these markets that many of Shenzhen’s electronics producer sell their products, source materials, and exchange ideas.
The ecosystem
Shenzhen has a quasi-underground, decentralized network of tens of
thousands of factories and design houses that have been dubbed
“shanzhai” for their business methods.
“If you look at what happened to Motorola and Nokia, they didn't really get killed by Apple. . . they all got killed by shanzhai,” David Li claimed.
The word shanzhai began being thrown around just prior to the 2008 Beijing Olympics, and was first used to mean “to copy” or “to parody,” and was originally meant to denigrate China’s producers of knock-off goods. However, this translation isn’t exactly accurate.
Shanzhai is a collaborative ecosystem of manufacturers who simply make whatever sells as quickly as possible. If it’s a phone that looks like an iPhone, they make it; if it’s a phone packed inside of a plastic toy race car, they make that too. As designs, material lists, manufacturing methods, etc. are all shared, along with the sheer lack of respect for IP — their own or that of others — they are able to develop, manufacture, ship, and get real-time market feedback on products to an extent that formal brands can’t. This is an extremely powerful force when it’s taken into account that there are upwards of 25,000 shanzhai companies operating out of Shenzhen alone who are producing a quarter of the world’s cellphone supply along with a massive chuck of all other electronics.
“Shenzhen production is super agile,” said Silvia Lindtner, a researcher from the University of Michigan who has studied this ecosystem extensively. “They put on the market small batch production of like 3,000 devices and sees if it flies, and if it goes they produce more of that.”
However, shanzhai isn’t all about copying and undercutting, as even the best iPhone replica often has internal elements or manufacturing processes that are often extremely innovative.
“The thing is these guys were figuring out how to copy premium goods on a shoestring budget,” Bunnie explained. “That's the thing that people are missing about what these guys do. They're like, 'Oh my God, that's a terrible iPhone.' And then they're like, 'Holy shit, he made an iPhone for like five hundred dollars and a ball of string.' These guys were insanely smart to be able to do what they did. But people just saw it as a bad version of a high-end product and not an incredible innovation and the ability to create something out of great adversity.”
Examples of shanzhai-derived innovations include phones with two sim cards, extra loud speakers, built-in UV lights to detect counterfeit bills, compasses which point to Mecca which are marketed to users in Muslim countries, batteries that can last for over a week of use, among numerous other adaptions.
“This whole hoverboard craziness that's going on. That's shanzhai,” Bunnie said. “Everybody is like, 'Who's making the hoverboards?' No one knows, no one can find it, and that's exactly the point: you don't find the shanzhai, they're good at this. They don't want to be found out because they know they are putting stuff out that they can't warranty, they don't want the returns. They are going to make stuff that people want, they are going to do it really good, and they are going to do it faster than the next guy.”
From copycats to global innovation leaders
“The thing is that the shanzhai inside China have turned into
original phone makers,” Bunnie explained. “So Xiaomi and these really
big phenoms have roots in this culture, and there's this emancipation
that you get from being a shanzhai . . . the moment you stop copying
someone else's product and you make something legitimately original.”
Out of Shenzhen’s shanzhai ecosystem have arisen some of the world’s most innovative and dominant brands. Just five years ago, China’s local electronics manufacturers were thought to be little more than cheap impostors whose only advantage was that their products were cheaper. 70 percent of smartphones sold in China at that time came from just three foreign brands. Now, all of that has changed. Eight of the top ten smartphone brands in China — three out of the top six worldwide — are Chinese. Improved quality and better marketing has lead to newfound social-proof, and the stigma of “Made in China” is dissipating fast. The Chinese brand has emerged.
Huawei, Xiaomi, and BBK (Oppo/Vivo/OnePlus) are now selling 108, 70, and 100+ million phones each year, respectively.
The Makers
“There's sort of a pragmatic, can-do attitude that everyone has
toward making a new product that makes the process very efficient, and
everyone's on the hunt for new ideas, products, and markets,” Jackie Wu,
the hardware innovator behind the Rook, said of Shenzhen.
As China transitions to a more developed, more mature high-tech sector, the country is looking to seed innovation and economic growth in new ways. Enter the makers. This diverse segment of do-it-yourself hardware designers, tinkerers, innovators, and entrepreneurs aim, at root, to make things.
“So China is like, ‘We want to keep the economy growing, how do we keep the economy growing? I don't know, let's try to bring in new kinds of innovation,’” Bunnie explained. “No one in the government can claim that it's my KPI that create the shanzhai revolution. . . So when the maker movement came along in the United States they were able to find a very clean brand from the Western ecosystem that they could get behind.”
To these ends, the Shenzhen has offered large amounts of support for grassroots innovation, including the creation of workshops, low interest or no interest loans, equipment, sponsored tech fairs, and a large amount of positive media attention. This is along with accelerators, like Hax, the Shenzhen Open Innovation Lab, and Chaihuo, who support innovators from around the world who come to Shenzhen to get their products made
It is said that 90 percent of the world’s electronics are made in Shenzhen. With tens of thousands of factories, 5,000 product integrators, and thousands of design houses, this city has become a one-stop-shop for anything consisting of circuits, chips, LEDs, and touchscreens. Shenzhen is also home to 20% of China’s P.h.Ds, has the country’s highest rate of business owners, and has produced more billionaires than anywhere else in China. In 2014, The Economist declared Shenzhan to be the best place in the world for a hardware innovator to be.
“In the old days, if you wanted to be innovative, if you wanted to have the latest technology, you would go to Silicon Valley for electronics. . . But today, it’s Shenzhen,” declared David Li, the co-founder of China’s first makerspace.
The Shenzhen skyline is pictured from the
69th floor of the Shun Hing Square building on November 28, 2010 in
Shenzhen, China. (Photo by Daniel Berehulak/Getty Images)
Shenzhen’s manufacturers undercut the incumbents’ hold on the market with phones that sold for under $100. This made cellphones accessible to a larger swath of people, opened new markets, and ignited the fire of demand for this device that is still spreading today.
Few people know Shenzhen’s electronics ecosystem better than Bunnie Huang, the high-tech innovator who brought us the the world’s first open source laptop, the Chumby, regular doses of authoritative commentary on his blog, and is the star of Wired's recent documentary about Shenzhen's electronics manufacturing empire.
“It was like 2006, 2007 and everybody was like, 'If you want to build something cheap you're going to have to go to China.' So I bought some tickets,” Bunnie, who is originally from Michigan, told me as we sat together at a cafe in Singapore, where he is currently based. “We were like ‘Good idea, seems legit, here we go. There's a place called Shenzhen. Oh, we never heard of it. Let's pull up a map and look around and see what's there.’”
The market
This photo taken on April 22, 2015 shows
people selling goods at a shop in the Huaqiangbei electronics market in
Shenzhen. (FRED DUFOUR/AFP/Getty Images)
With over 20 electronics malls covering a combined 21 million square meters, Huaqiangbei is the heart of Shenzhen’s electronics industry. It is made up of giant old industrial buildings that are packed full of electronics markets which showcase what’s being made in the city and provide the city's hardware innovators with the materials to build their own products.
“It used to be off to the edge of the city,” Bunnie explained. “No one wanted it. The center of Futian was like, ‘’Yeah, go ahead and put a market there. Like, who cares?’ Then the tech boom happened and Nanshan grows out of nowhere as a software center and Futian grows out of nowhere as a hardware center and now all of sudden they are valuable real estate and everybody wants to put their stuff there.”
It is in these markets that many of Shenzhen’s electronics producer sell their products, source materials, and exchange ideas.
The ecosystem
Chinese factories are churning out
cheaper alternatives to the Apple watch to the apparent delight of local
consumers. (STR/AFP/Getty Images)
“If you look at what happened to Motorola and Nokia, they didn't really get killed by Apple. . . they all got killed by shanzhai,” David Li claimed.
The word shanzhai began being thrown around just prior to the 2008 Beijing Olympics, and was first used to mean “to copy” or “to parody,” and was originally meant to denigrate China’s producers of knock-off goods. However, this translation isn’t exactly accurate.
Shanzhai is a collaborative ecosystem of manufacturers who simply make whatever sells as quickly as possible. If it’s a phone that looks like an iPhone, they make it; if it’s a phone packed inside of a plastic toy race car, they make that too. As designs, material lists, manufacturing methods, etc. are all shared, along with the sheer lack of respect for IP — their own or that of others — they are able to develop, manufacture, ship, and get real-time market feedback on products to an extent that formal brands can’t. This is an extremely powerful force when it’s taken into account that there are upwards of 25,000 shanzhai companies operating out of Shenzhen alone who are producing a quarter of the world’s cellphone supply along with a massive chuck of all other electronics.
“Shenzhen production is super agile,” said Silvia Lindtner, a researcher from the University of Michigan who has studied this ecosystem extensively. “They put on the market small batch production of like 3,000 devices and sees if it flies, and if it goes they produce more of that.”
However, shanzhai isn’t all about copying and undercutting, as even the best iPhone replica often has internal elements or manufacturing processes that are often extremely innovative.
“The thing is these guys were figuring out how to copy premium goods on a shoestring budget,” Bunnie explained. “That's the thing that people are missing about what these guys do. They're like, 'Oh my God, that's a terrible iPhone.' And then they're like, 'Holy shit, he made an iPhone for like five hundred dollars and a ball of string.' These guys were insanely smart to be able to do what they did. But people just saw it as a bad version of a high-end product and not an incredible innovation and the ability to create something out of great adversity.”
Examples of shanzhai-derived innovations include phones with two sim cards, extra loud speakers, built-in UV lights to detect counterfeit bills, compasses which point to Mecca which are marketed to users in Muslim countries, batteries that can last for over a week of use, among numerous other adaptions.
“This whole hoverboard craziness that's going on. That's shanzhai,” Bunnie said. “Everybody is like, 'Who's making the hoverboards?' No one knows, no one can find it, and that's exactly the point: you don't find the shanzhai, they're good at this. They don't want to be found out because they know they are putting stuff out that they can't warranty, they don't want the returns. They are going to make stuff that people want, they are going to do it really good, and they are going to do it faster than the next guy.”
From copycats to global innovation leaders
LONDON, ENGLAND - Henry Cavill attends
the Huawei P9 global launch at Battersea Evolution on April 6, 2016 in
London, England. (Photo by Anthony Harvey/Getty Images for Huawei )
Out of Shenzhen’s shanzhai ecosystem have arisen some of the world’s most innovative and dominant brands. Just five years ago, China’s local electronics manufacturers were thought to be little more than cheap impostors whose only advantage was that their products were cheaper. 70 percent of smartphones sold in China at that time came from just three foreign brands. Now, all of that has changed. Eight of the top ten smartphone brands in China — three out of the top six worldwide — are Chinese. Improved quality and better marketing has lead to newfound social-proof, and the stigma of “Made in China” is dissipating fast. The Chinese brand has emerged.
Huawei, Xiaomi, and BBK (Oppo/Vivo/OnePlus) are now selling 108, 70, and 100+ million phones each year, respectively.
The Makers
Makers working at the Hax accelerator in Shenzhen. Image: Hax
As China transitions to a more developed, more mature high-tech sector, the country is looking to seed innovation and economic growth in new ways. Enter the makers. This diverse segment of do-it-yourself hardware designers, tinkerers, innovators, and entrepreneurs aim, at root, to make things.
“So China is like, ‘We want to keep the economy growing, how do we keep the economy growing? I don't know, let's try to bring in new kinds of innovation,’” Bunnie explained. “No one in the government can claim that it's my KPI that create the shanzhai revolution. . . So when the maker movement came along in the United States they were able to find a very clean brand from the Western ecosystem that they could get behind.”
To these ends, the Shenzhen has offered large amounts of support for grassroots innovation, including the creation of workshops, low interest or no interest loans, equipment, sponsored tech fairs, and a large amount of positive media attention. This is along with accelerators, like Hax, the Shenzhen Open Innovation Lab, and Chaihuo, who support innovators from around the world who come to Shenzhen to get their products made
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