“One week of work in Shenzhen is equal to one month at the Silicon Valley”.
The rapidity of prototyping and manufacturing is the main strength of the Chinese metropolis according to all the startups, incubators and companies we met during our learning tour in what is considered already as the hardware capital of the world.
We organised this tour in November to expose our participants, a semi-dozen of innovation and IT directors from large French groups, to the innovation ecosystem of a city which is already compared to the Silicon Valley, at least for electronics.
“Shenzhen, it’s like the Mecca for us. We are at 30 minutes from the factories” explained Emmanuel Peype, Marketing director of the fast growing smartphone startup OnePlus, which has its headquarter and factories in Shenzhen.
What was a fishing village 30 years ago has transformed into the world main factory and is now considered as the “heart of innovation” as said Elise Then, CEO Asia of the French drones manufacturer Parrot, which has its production center in Shenzhen. “Here we can go easily from the concept to reality and launch our product on the market at the right time” she adds.
No other place on earth is bringing together all the players of the electronic supply chain
The whole supply chain of electronic is located here: retailers, component suppliers, factories, and in the last 2 years many makers, hardware startups and around 200 incubators which have popped up all around the city. No visit to Shenzhen can be complete without a visit to the impressive Huaquiang bei market from where you can buy, repair or make almost any electronics parts or products, copies or originals.
“Having these players around allowed us to reduce the production costs by five“, according to an engineer from the startup FeetMe, currently following the acceleration program of Haxlr8r with their connected sole for diabetic people. “People think that the main advantage of China is the low costs but the real advantage is the speed and scalability” explains Benjamin Joffe, partner at Haxlr8r. “The ecosystem in Shenzhen allows our startups to reduce the R&D cost by 33.3%” adds Mercy Wong, Operation Director at the incubator Stargeeks.
Among the most important players in the ecosystem, SeeedStudio is helping makers and startups to keep focusing on their projects while they are handling everything for them, including manufacturing, promotion and distribution services. They are a key partner for all the makers in Shenzhen. They are also offering the access to an open parts library to lower the barrier to do a prototype. “So many products use the same common parts. We provide open source hardware so that our makers don’t have to worry about buying the parts in the market” explains Grissom Dong, Secretary of the Board of SeeedStudio.
Haxlr8r, launched in 2011 by the French tech savvy Cyril Ebersweiler, is an accelerator specialised in hardware startups. They are accelerating 30 startups each year in Shenzhen, mostly startups coming from US and Canada. Most of them have known success stories, such as the open source robot building platform Makeblock that we visited as well during our tour, with already over 10 million dollars sales and 40 million dollars valorisation.
What does the Chinese government think about this?
The government is embracing and supporting financially this new movement of innovation as it improves the image of Shenzhen and the whole China, previously considered as a factory and copycat place. “A few years ago, innovation was not a good word in the Chinese culture because it means that you are not following the rules. You didn’t get hired if you said during an interview that you liked innovation. But for the last 2 years there has been a big change” explains VanNess Lee from Shenzhen Open Innovation Lab. As we noticed during the trip and the visit of many Chinese startups, innovation in Shenzhen remains mostly incremental, as confirmed by Benjamin Joffe from Haxlr8r. “We have only 10% of Chinese startups in our accelerator. Their innovation is more incremental because things are going very fast in China. So, instead of making something complicated, they start with something simple and improve it step by step. They are very good engineers, very fast to go from prototyping to production but bad with marketing and management, deadlines and quite isolated because of the language barrier. That’s because they have different needs that we are planning to start a new program next year for 10 Chinese startups” explains Benjamin Joffe.
Fast doesn’t mean innovative and high quality
The quality of manufacturing in China has bad reputation but, as Benjamin reminds us “iPhones are produced in China”. Foxconn, the factory manufacturing the famous smartphone and many others is indeed located in Shenzhen as well. When manufacturing your products in Shenzhen, “monitoring remains essential“, according to Elise Tchen whose company Parrot is built with a “fabless” model, which means they are subcontracting the production to factories in Shenzhen. “It’s hard to get exactly what you want and get it done within the deadlines. Our factory went into bankruptcy just before we started manufacturing. The ecosystem is very fast but on the counterpart it is not stable” explains the engineer from the French startup FeetMe. “We always hear the good stories but in reality there are not many international companies which have been through the manufacturing process in China successfully. Big part of the problem is how to go from the idea on the napkin to the manufacturing” explained Greg Fisher, founder of Berkeley sourcing group during the conference “Industrial Design for Hardware Startups” at the Shenzhen International Industrial Design Fair, which we visited during our tour. The group is a sourcing partner to hardware startups and established business who wish to take advantage of the China-based manufacturing.
More than inspiration, the tour brings business opportunities for our customers
Shenzhen is very strong on the hardware but is also the city hosting one of the largest internet companies in the world: Tencent. We had the chance to meet the business development team of this Chinese company producing WeChat, a social network equivalent of Facebook, but integrating as well online gaming and mobile payment. The company recorded almost 50% growth in revenue this year and monetises mainly through online games and mobile payment.
Our tour has allowed our clients to understand better the success of Shenzhen ecosystem, to meet and discuss with several incubators and accelerators as well as selected startups and companies with IoT products (smart homes, connected cars and many other connected objects) related to their industries.
“This tour allowed Accor Hotels to see what Shenzhen can bring to our company. It’s a good source of inspiration to speed up all our projects in IoT and brought a lot of new opportunities” explains Eric Wyttynck, CTO of Accor Hotels. “We met a lot of different actors and it’s interesting to see how they can work together to deliver a final product to the market” explains Marie-Laure Henry, from the incubator Innovation Factory in France. “The tour met our two objectives : to discover new innovations and to find people able to develop, prototype and produce a platform for our specific needs” explains Nathalie Lundqvist, Strategy Manager at Korian, the leader in nursing homes in Europe.
If you are interested to onboard our next learning tour in Shenzhen next year or in other interesting parts of the world, stay connected! We will announce our next learning tours on this website 🙂