Hard times come to gadget Mecca of Huaqiangbei

Sagging consumer demand and counterfeiters' failure to keep up has driven many dealers out of business in Shenzhen's famous tech district

PUBLISHED : Saturday, 08 December, 2012, 12:00am
UPDATED : Saturday, 08 December, 2012, 4:41am

Many avid consumers of the latest technology must have been shocked by recent reports of double-digit increases in vacancy rates for shops and offices in Shenzhen's Huaqiangbei commercial area - the mainland's best place to shop for electronics, digital products and hi-tech knock-offs.

Average rents in several commercial buildings in the area have halved in the past year as vacancy rates have hit close to 30 per cent, the Shenzhen Economic Daily reported.

Worries about Huaqiangbei's decline have spread quickly throughout the delta, especially among the digital product traders and manufacturers who made the place globally famous. Poor market demand, on the mainland as well as overseas, was mainly to blame for its plight, industry insiders said.

A boom in sales of branded smartphones has also led to tough times for the area's thousands of counterfeit mobile phone traders.

For the past two decades, Huaqiangbei - 1.45 square kilometres in the heart of Shenzhen - was the city's most prosperous area. The latest mobile phones - genuine, smuggled or knock-off - could be found there and shipped all over the world.

During its peak between 2009 and 2010, the area saw annual turnover top 120 billion yuan (HK$148 billion), the Shenzhen Economic Daily reported. In May 2010, monthly rent for a ground-floor shop rose to more than 3,000 yuan per square metre - at a time when the city's top luxury malls could only charge a few hundred yuan per square metre.

Things have changed. Rents in SEG Plaza, the big daddy of Huaqiangbei's commercial buildings, have fallen dramatically, from 300 yuan per square metre to 100 yuan, real estate agent Chen Jinquan said.

"I signed a two-year contract and paid 3,500 yuan per month for a counter of two square metres last year," said Wu Sheng , a trader of Nokia and Apple lookalike products at Mingtong Digital City. "The business became so bad this year. I had to sublet the counter at 3,000 yuan a month. It's just like a bad dream."

Huaqiangbei's slide started last year, matching a decline in exports from the delta and falling sales for its factories.

"My business is declining day by day," said one woman who rents a counter at Mingtong Digital City. "Traders from the Middle East were all over Huaqiangbei before. Now they've just gone."

John Kou, a veteran consultant for Shenzhen's electronic industry, said more than 3,000 counterfeit mobile phone manufacturers and traders - a third of such outfits - had quit the market.

Since the early 2000s, Huaqiangbei has been the centre of the mainland's shanzhai industry, which churns out electronic goods that imitate well-known brands, mostly mobile phones, and reportedly employs 1.8 million people in the city.

"Before 2004, there were no counterfeit phones in the market," Kou said.

"Counterfeiting and off-brand knock-offs started to flourish in 2005 when MediaTek, a semiconductor design company from Taiwan, offered chips integrated with software, which makes counterfeit mobile production easy. The only other things needed are a battery and a cover to make a phone look like a Samsung or a Sony."

But the business has declined in the past few years because MediaTek's chips could not match the technical prowess of the latest smartphones.

"The copycat business will die away, unless MediaTek or other companies can replicate the high-end technology and sell it cheaply," Kou said.