'Created' in China: Shenzhen is making hardware like Silicon Valley makes apps

Shenzhen has the geographical footprint of Los Angeles, but a population three times its size at 12 million people. It’s part of the Pearl River Delta, which also includes Hong Kong, the global financial capital and port city; Macau, the world’s largest gambling city; Guangzhou, home to one of China’s major ports, trading centers, and factories; and Dongguan, a manufacturing hub. It’s as if the tech talents of Silicon Valley, the big banks of New York, the manufacturing plants of Detroit and Pittsburgh, the casinos of Las Vegas and the shipping ports of Long Beach were all in one small part of the US, and a two hour drive from one another.

MIT Media Lab director Joi Ito wrote of a recent visit: “Just like it is impossible to make another Silicon Valley somewhere else, although everyone tries—after spending four days in Shenzhen, I’m convinced that it’s impossible to reproduce this ecosystem anywhere else.”

The Pearl River Delta has historically served as the world’s factory, producing everything from toys to furniture to electronics. Outside of low cost labor, its scale and expertise are part of why Apple has factories in China. If something is “made in China,” it’s almost certainly made in the Delta, and if that something is technology, it’s likely made in Shenzhen.

Reports from the likes of the World Economic Forum and Siemens have also suggested a change in terminology from “Made in China” to “Created in China.” Local companies now aim to compete not just as producers but creators, and indeed, the government’s recent Made in China 2025 initiative continues to nudge the economy from production to innovation. Shenzhen is now frequently dubbed the “Silicon Valley of Hardware.”

People like Lei Gao are moving to the city not just for its network of factories and producers, but for its emerging values of rapid tech experimentation and DIY creativity. After a few iterations, Gao already has a working product, which he called an exercise toy. But was it any good? His team followed the traditional hardware testing route with a few hallway tests in their coworking space and refined the idea further. They then brought the gripper to the Shenzhen Maker Faire, an event attended by some 50,000 people from around the world. There, they were able to test the idea further and get feedback from Chinese and foreign attendees alike.

The critical moment arrived: they listed the Bluetooth gripper onto hi.taobao.com, one of a few popular crowdfunding sites which bear semblance to Kickstarter and Indiegogo. Nearly 400 buyers across China took to the idea—a $30 exercise toy that grown-ups can play with—and Imlab raised over 100,000 Chinese yuan, or about $16,000 to seed the product. With the idea validated, they could quickly and affordably plug into a factory elsewhere in the city and begin production and shipping while seeking seed money.

Just as important as the investment, Imlab now had a fan base excited to give feedback. They set up a WeChat group, helmed by community manager Tina Yang, and over a hundred users joined from cities as far away as Beijing and Shanghai. Spread across China, these young fans offered more diverse feedback than Imlab’s fellow technologists, and they were happy to share the toy with their friends.

As new models came out of Imlab’s factory in Shenzhen, they placed them in specific online stores on Taobao. Each virtual store functioned like an independent stall in Huaqiangbei’s many markets, with its own marketing strategies and audience. Thanks to analytics provided by Taobao, the stores kept Imlab posted on how quickly the products sold, so they could produce and ship more to meet demand, or make tweaks as needed.

Surprisingly, China’s manufacturing productivity has historically been lower than most developed countries. A 2013 report by McKinsey noted that US labor productivity in manufacturing and communications technology was 10-12 times greater than that of China. As the report argued, much of the inefficiency could be attributed to how Chinese companies were slow in digitizing their production practices.

But that’s changing. Digital platforms like WeChat, Taobao and Amazon have multiplied production and marketing efficiency for big and small players alike. “You can buy everything for do-it-yourself work online,” explained Doris Wang, who co-founded Barcamp in Guangzhou. “Leather for you to make a bag, sensors for you to make your bot, et cetera.”

The tools for sourcing parts, testing ideas, gathering user feedback, raising funds and distributing products can now rely as much on the internet as they do on the Pearl River Delta’s physical network of stalls and shippers. This has taken the form of an informal economy where “Shenzhen speed”—Shenzhen sudu—reigns supreme.

We’ve seen this story before: as cost of production and distribution go down, the range of creativity goes up. For example, the ingredients that make video successful online are digital cameras, editing tools, broadband internet, and YouTube. Before the advent of digital tools, video was extremely costly to produce, edit and distribute. Cameras and editing tools have gotten cheaper, and as they are now on our phones, production is easier and more fun. Broadband has cut the time and effort to upload videos, and platforms like YouTube have solved the distribution problem with stable software, good compression, and access to viewers. In this new world of video, YouTube hasn’t replaced the big players—its most viewed videos are almost all commercial musicians—it’s just made room for everyone else to do their thing too. And now there’s an avenue for smaller producers to build an engaged audience.

In China, big companies like Huawei, one of the world’s largest smartphone makers, and DJI, the world’s largest drone maker, operate a lot like Beyoncé. They have massive user bases, global marketing reach, and an army of professionals working for them, so it’s no big surprise when they do well on the internet. But after a Beyoncé video comes out, think of all the fan responses, covers and remixes that get posted on YouTube. A quick search for “Beyonce cover” yields some 2.3 million results, some of them flat out copies and others redone in trap, afrobeat and orchestral styles.

This world of remixes and covers is like the culture of shanzhai—often translated to “bootleg”—in Shenzhen. It’s easy to look down upon, but the shanzhai practice includes open, templatized systems for hardware. V&A Gallery curator Luis Mengioni has likened it to creating an ecosystem of ingredients—circuit boards, cases—for an infinite range of recipes. This iterative, remixable mode of production helped create, for example, the dual SIM phone, which took years to become a feature with mainstream manufacturers.

Online platforms like Taobao, Jindong, WeChat and others are doing for hardware what platforms like YouTube and Vine did for video. Then, efficient shipping services make transporting products easier for everyone. Together, they’ve created a pipeline for experimental hardware to “go viral” and quickly adapt to user feedback and demand. “Ideas come from anywhere,” says technologist David Li. “It might be a distributor or customer. It might be a conversation.” As hardware ideas spread and get remixed, they start to look a lot like internet memes. From there, some products become a sustainable business supported by active input from fans, performance analytics, and outside institutions.

The danger in this model is that of all Darwinist markets: individuals shoulder the risk in a nonstop cycle. More established companies can invest in a few lucky products and bring in the legal and financial muscle to kill off competitors. Structural inequalities can make it harder for women and working class people to get investment or feel empowered to try their hand as founders. Those in urban areas have distinct advantages, like access to coworking spaces and mentorship networks. And especially if companies can’t afford a satellite office outside the country, language barriers and strictures on accessing online platforms outside China can limit their ability to reach global buyers.

Of increasing concern to businesses—as if the Silicon Valley comparisons are not enough—rising rents have made Shenzhen’s housing market the most expensive in China. Some companies are thinking about leaving the country altogether to other parts of Asia and even North America. Intellectual property violations run high, safety standards are lax, and electronic waste can reach dystopic levels. Products developed in the Pearl River Delta eventually make their way back to dumping and recycling grounds in China, where they join the ranks of e-waste from Western technology companies. As regulations increase and labor costs rise, the economic and environmental sustainability of the Pearl River Delta’s production ecosystem remains an open question.

Makers in Shenzhen nevertheless continue to fail fast. Like any startup, Imlab has seen its ups and downs, and Gao recently dissolved his team because of flagging revenue on the exercise toys. He is now working on improving circuit board quality with external partners, and exploring blood pressure and even sexual health monitoring as use cases. Of Shenzhen and the future of hardware production that uses the internet, Gao continues to remain optimistic. “It offers a good opportunity for Chinese people to make their own brand, from ‘Made in China’ to ‘Created in China,'” he says. “We don’t know what it will look like, but we know it will be very different.”

An “An Xiao” Mina leads the product team at Meedan, an organization building tools for global journalism and translation, and she co-founded The Civic Beat, a research collective looking at the creative side of civic technology. Mina has spoken at venues like the Personal Democracy Forum, the Microsoft Social Computing Symposium, Creative Mornings, and the Aspen Institute, and she has contributed writing to publications like the Los Angeles Review of Books, Hyperallergic, and the Atlantic. She can be found online at @anxiaostudio.