Shenzhen, China “the world factory” and “new Silicon Valley”
- Annual GDP worth 280 Billion Dollars with 10% annual growth
- 90% of world electronic’s are made
Where is this place?
Not prevalently known area, but very famous amongst business leaders, Shenzhen (China) is one of the fastest growing cities in the world. My startup is closing working with Japanese government to build a strong ecosystem in Tokyo and the hottest topic right now is about understanding Shenzhen. As a country that is highly focused on manufacturing, Japan fears Shenzhen’s rapid innovation and dying to understand the ingredients that enable the city to grow at an enormous speed.
This post will briefly touch on some unique aspects of Shenzhen as an emerging giant ecosystem. This information will be based on the interview conducted to Chinese press who is a friend of my strategic advisor for my startup company.
Power of Government
Chinese government plays an enormous role in Shenzhen’s startup ecosystem. These are some of the major roles they play in this ecosystem.
- Gather as many Chinese young talented engineers from the world
- In order to attract them, government force subsidies companies and force them to pay extremely high salary that exceeds the current paycheck
- There are many government funded incubators that support startups
As a result of these measures, Shenzhen’s demographic became very unique; its population is mainly composed of 20-30’s young adults and only 2% is over 60. A quite different from Japan’s aging society.
Affluent venture funding, as well as talented human resources, is a key for any startup ecosystem. What is becoming an important role, especially for hardware, is prototyping speed (i.e. the physical speed of manufacturing low quantity prototype), rapid test marketing (i.e. start selling on the actual market) and high quantity manufacturing at low costs. These can all be accomplished in a single city, Shenzhen, whereas in Silicon Valley, there are not many manufacturing facilities that enable the speed Shenzhen has.
Harnessing Silicon Valley
Shenzhen also has many interactions and collaboration with Silicon Valley ecosystem. Tsinghua University, which is based in Beijing, has joint ventured fund with Chinese government and invest enormous amount on Shenzhen’s startups. Not only that, but also, they have partnered with Plug and Play Tech Center, the world largest accelerator, based in Sunnyvale to get state-of-art insights as well as gain networks with US startups, then scale their businesses in Shenzhen. In other words, this is one of the cases that other country leverage Silicon Valley ecosystem to grow its own ecosystem.
Quality Issue (Not quantifiable, more of a subjective opinion)
As I mentioned earlier Shenzhen’s core competence is its speed and low mass production costs. I have talked to many startups in Silicon Valley and one downside of Shenzhen would be its quality. Many defects were found in their products and there are some startups who expect Shenzhen to manufacture higher quality products. Japan’s manufacturing is still famous for its quality. How Japanese manufacturing companies adapt to a current fast-paced economy without losing the quality has become an important element for Japan’s breakthrough. Or Shenzhen might improve their quality without having to dramatically increase their price. It will be interesting to see what will happen in the future.
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