Shenzhen trip report – visiting the world's manufacturing ecosystem

One anecdotal story: One summer I went back to Shenzhen and decided to get a PlayStation 2 with a mod chip installed so I can play pirated games (I was a poor student).<p>Now, there was this one mod chip that was really good but requires a bit of soldering work to get it installed right, and me, being an EE student, was no stranger to a soldering iron, so I planned to do it myself after buying the chip.<p>So I bought a brand new PS2&#x2F;mod chip combo from this small electronics store and the shirtless owner actually offered to solder it for me for free. I took up on the offer since I get to test the chip on the spot as well.<p>He opened up the PS2 case, with one hand took up a soldering iron, while the other hand holding a cigarette, started working. I nervously watched him tapping around my brand new PS2&#x27;s motherboard with just one hand while paying most of the attention to the live soccer game on TV at the time. 5 minutes later he was finished and 8 years later that PS2 is still working and reads all pirated discs with absolutely no problems.<p>Throughout college I&#x27;ve never met anyone who&#x27;s as good at soldering as this shirtless electronics shop owner I met in Shenzhen.

&gt; In an interesting twist, the factory boss suggested that we could build the precision molding tools in China and then send these tools to a US shop for running production.<p>&gt; This role reversal is an indicator of how the technology, trade, and know-how for injection molding has shifted to Shenzhen. Even if US has the manufacturing capacity, key parts of the knowledge ecosystem currently exist only in Shenzhen.<p>This is what really saddens me about outsourcing manufacturing from America, is that we lose the knowledge about manufacturing technology. Although we may be at the forefront of software development, in many areas of manufacturing technology the cutting edge development happens in China now.<p>I&#x27;d really like if we could bring about a revival in manufacturing engineering in the US. Other than the ecosystem effect, the main way that China has an advantage is labor cost, so I propose that we could build up a &quot;Shenzhen of America&quot; in the San Diego &#x2F; Tijuana free trade zone. The repetitive work that takes a lot of hours would be done on the Mexico side, where labor is now almost as cheap as China. The manufacturing engineering and tool-making would both happen on the American side, bringing these jobs back to the USA from China.<p>San Diego &#x2F; Tijuana are shipping ports on the Pacific, facilitating importing electronic components from China, Japan, and Korea, and then we could do all of the PCB fab, PCB assembly, injection molding, and final device assembly (as well as all tooling for all of these processes) over here in the Americas.<p>I&#x27;m very supportive of China&#x27;s development but competition is good and as American citizens we can&#x27;t just throw in the towel, we have to build our manufacturing knowledgebase back up and be willing to actually compete.

I’ve lived in Shenzhen for almost 10 years (native New Yorker).<p>This article was a bit better than most for Shenzhen- it was at least willing to speculate that a lot of Shenzhen’s advantage now comes from talent and infrastructure. It’s still pretty common for people to attribute it entirely to lower labor costs- which is just not the case.<p>Shenzhen, like New York is an immigrant city. People come from all over China to get ahead, and get rich. Unlike New York it’s only a bit over 30 years old- and back then it was basically a fishing village. This is important because of the Hukou system: <a href="http://en.wikipedia.org/wiki/Hukou_system" rel="nofollow">http:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Hukou_system</a> It’s a bit long to go into (check the link) but basically it ties people to their birthplace and gives them a significant “home field” advantage.<p>If you are in Shanghai or Beijing and have a local Hukou you have access to the best education system, the highest paid jobs in both the public and private sector, and often a large network of friends and family members in local government. People from Shanghai or Beijing rarely immigrate to Shenzhen because they lose that advantage and are forced to compete with what they would consider the rabble. People from other provinces can rarely compete on even ground with locals- both for legal and cultural reasons. The rivalry is less like US States and more like countries within the EU- but worse.<p>A “local” in Shanghai may feel perfectly entitled to cut to the front of a line if those people are &quot;Waidiren” (outer province people- 外地人). It’s considered perfectly reasonable for migrant children not to get the same healthcare or schooling. The local dialog about them in every city is a familiar one- basically “damned dirty immigrants taking our jobs and committing crimes”. Needless to say the Central Government is quite keen to keep the provinces deeply prejudiced against each other- because it distracts their attention from the real culprits.<p>Shenzhen on the other hand is by far the most egalitarian city in China. The city is so young that no one really has an &quot;Uncle&quot; etc. in local government willing to “investigate” competitors or send some easy government contracts their way. There is little difference between those few born in Shenzhen and those who came a few years ago. There is no local dialect that is used to subtly determine who’s “local”- everyone basically speaks Mandarin.<p>So for people in relatively poor provinces (Hunan, Hubei etc), with brains and education but little in the way of prospects due to their Hukou, Shenzhen represents the best possible opportunity to compete in a first tier city almost purely on merit. Success here is based largely on hustle, brains and hard work- while in other cities at least 50% is simple corruption (well placed relatives in banking and government). Most Chinese would place the number even higher.<p>So Shenzhen gets a lot of China’s best and brightest, but also those who are inherently ambitious- because they were willing to leave their hometowns and family (a much bigger deal here). A huge amount of the slow grinding machinery of legacy corruption does not exist here (massive numbers of bureaucrats given comfortable jobs doing basically nothing as a form of social welfare). It happens occasional sure- but not to the point that it does in other cities where merit and hard work is almost meaningless next to the right connections.<p>The result is a giant magnet for talent and a massive, well funded playing field where that talent competes with significant rewards reserved for the most skilled, clever and hardworking.<p>There are a lot of incredibly smart highly motivated people here- and that, more than just simple labor costs is responsible for Shenzhen’s market position.

Visiting Shenzhen is highly recommended if you have any interest in electronics at all --- I&#x27;d say it&#x27;s definitely an eye-opening experience, and can change your perspective on the manufacturing costs of all the things we usually take for granted.<p>bunnie has organised another trip there near the end of this month, if you&#x27;re interested: <a href="http://www.bunniestudios.com/blog/?p=4087" rel="nofollow">http:&#x2F;&#x2F;www.bunniestudios.com&#x2F;blog&#x2F;?p=4087</a>

As an embedded linux hacker I am very happy to see articles like this. I just opened my small firm in Shenzhen to do hardware and embedded linux software. The ecosystem there is just unbeatable and the willingness of engineers there to get job done is hard to find here at US at the moment.<p>USA, by all means, is under attack in this regard. Unless one day the kids here put education first, I somehow feel the future is hopeless.

The most interesting thing to me about China&#x27;s capitalism is the massive amount of small firms. I think there&#x27;s a tendency among western firms to use cheap financial capital to acquire smaller firms. I&#x27;m not sure if this is the case in China where the government is more directly involved in directing lending and not focused on mergers and acquisitions.

If anyone is interested in the aspects of reuse and recycle touched on in this article, I highly recommend Junkyard Plant, a book about recycling largely but not exclusively focused on China. There are a couple of chapters on electronics and Shenzhen, as well as other chapters ranging from paper &amp; cotton, steel, plastics, aluminium, etc, and the entire sourcing chain.<p><a href="http://www.amazon.com/Junkyard-Planet-Travels-Billion-Dollar-Trash/dp/1608197913" rel="nofollow">http:&#x2F;&#x2F;www.amazon.com&#x2F;Junkyard-Planet-Travels-Billion-Dollar...</a>

This is a great write-up about a world into which I normally have no visibility. I didn&#x27;t realize on a that manufacturing capabilities for small-scale operations had advanced that much.

Actually, due to China government policy change and labor shortage, more and more major electronic manufacturers and their suppliers have moved their operations to Eastern China, such as Suzhou in the past 10-15 years and now even inland cities like Chongqing and Zhengzhou. Many of my friends have already moved out of Shenzhen.

if some people are interested in a little bit more details than a reverse culture chock blog post, there is a bunch of interesting videos here about the link Shenzen&#x2F;Hong Kong, shipping your product, finding your factory etc: <a href="https://www.youtube.com/user/iantube/videos" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;user&#x2F;iantube&#x2F;videos</a>

I&#x27;m curious, someone mentioned me about the (lot of ) empty buildings in china (or big cities).<p>Banks lend to people with the right connections (it&#x27;s otherwhise impossible), they get an easy loan with the building as insurance.<p>They invest 25% of the money, leave with 75%. The bank takes the building back and no one can live in it.<p>Is that right (asking to the ones living there)

&quot;What&#x27;s great about AQS is that, with the help of bunnie, they have started working closely with startups and other projects that previously would have had a very hard time finding a partner in China because of the small volume&quot;<p>So I guess that is the secret to getting AQS to respond to your request for an assembly quote.